nep-pub New Economics Papers
on Public Finance
Issue of 2021‒07‒12
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Functional income distribution, inequality and the effectiveness of fiscal redistribution: evidence from OECD countries By Bruno Bises; Francesco Bloise; Antonio ScialÃ
  2. How Much Multinational Corporations Pay in Taxes and Where: Evidence from their Country-by-Country Reports By Tommaso Faccio; Sarah Godar; Patr Jansky; Oliver Seabarron
  3. Taxpayer's Compliance: Towards Voluntary Compliance By Dian Purnama Sari
  4. Intrahousehold inequality and the joint taxation of household earnings By Alves, Cassiano Breno Machado; Costa, Carlos Eugênio da; Moreira, Humberto Ataíde

  1. By: Bruno Bises (Università Roma Tre); Francesco Bloise (Università Roma Tre); Antonio Scialà (Università Roma Tre)
    Abstract: Using panel data on 34 OECD countries followed from 2000 to 2015, we analyse the extent to which the labour share plays a role in mitigating the link between market and disposable income inequality in the non-comprehensive personal income tax hypothesis (i.e. when some or all capital income items are excluded from the personal income tax base). We find that one standard deviation increase of labour share is significantly related to a 9-percentage points reduction in the elasticity of disposable income inequality with respect to market income inequality. This important result obtained after controlling for country and year fixed effects, country-specific linear trends and several variables capturing the characteristics of the taxbenefit system in terms of overall progressivity, suggests that labour share could be considered as an “automatic stabilizer†of income inequality. Relevant implications for tax policy concern the role of the tax base of the personal income tax for the overall redistributive effect of the public budget.
    Keywords: Labour share, personal income inequality, redistribution, personal income taxation.
    JEL: D31 D33 H24
    Date: 2021–07
  2. By: Tommaso Faccio (Nottingham University Business School); Sarah Godar (Charles University & Berlin School of Economics and Law); Patr Jansky (Charles University, Prague, Czech Republic); Oliver Seabarron (University of Sheffield and Tax Justice Network)
    Abstract: By exploiting country-by-country reports (CBCRs) prepared according to the OECD BEPS Action 13´s minimum standards and voluntarily published by multinational corporations (MNCs), we show that the CBCR data can be used to identify how much MNCs pay in taxes and where, as well as how important tax havens and profit shifting are. The largest, hand-collected sample of these CBCRs combines global information from ten MNCs, which are special not only in terms of tax transparency, by being the only MNCs to publish their CBCR, but also in terms of industry composition, with a half of them in the extractive industries, and - perhaps, therefore - the observed tax characteristics. Specifically, we observe that the worldwide effective tax rates of our sample MNCs are higher on average than our comparison estimates based on the aggregate data for large MNCs published in 2020. We also find that the sample MNCs report slightly more profits in tax havens on average than many large MNCs, although most of the sample MNCs are far below that average. We further find some indication of profit shifting as the sample MNCs´ profits in tax havens are much higher than their economic activity suggests and we estimate a non-linear relationship between profits and effective tax rates, which is negative up to effective tax rates of around 30%. We highlight the differences across countries and MNCs by presenting country-level results, both for the whole sample and for specific MNCs, but CBCR data for even more individual MNCs would be needed to test for any systematic, MNC-specific determinants behind these differences.
    Keywords: multinational corporation; country-by-country reporting; effective tax rate; profit shifting; tax haven
    JEL: F23 H25 H26
    Date: 2021–06
  3. By: Dian Purnama Sari (Faculty of Business, Widya Mandala Surabaya Catholic University, Indonesia Author-2-Name: Novrida Qudsi Lutfillah Author-2-Workplace-Name: "Malang State Polytechnic, Soekarno Hatta Street no. 9, 65144, Malang, Indonesia " Author-3-Name: Sri Rahayu Author-3-Workplace-Name: University of Jambi, Raya Jambi – Muara Bulian Street KM 15, 36122, Jambi, Indonesia Author-4-Name: Yudi Author-4-Workplace-Name: University of Jambi, Raya Jambi – Muara Bulian Street KM 15, 36122, Jambi, Indonesia Author-5-Name: Rahayu Author-5-Workplace-Name: University of Jambi, Raya Jambi – Muara Bulian Street KM 15, 36122, Jambi, Indonesia Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: " Objective - This study aims to criticize the meaning of taxpayer's compliance. Methodology – The paradigm used in this study is a qualitative design through dramaturgy theory. Findings and Novelty – The result of the study indicates that the present taxpaying compliance is still equivocal with multi-interpretation. The term ""less compliant"" implicating compliance by a condition, neither completely compliant nor completely incompliant. The voluntary compliance targeted in taxpaying is purely determined by the morality of each taxpayer. The novelty of this research is the topic very interesting since there have been many topics talking about tax planning, self-corruption by taxpayers (an effort to reduce the reported amount of income tax), or some efforts to analyze influencing factors on the taxpayer's compliance, but does not study the definitions form taxpayer perspective. Type of Paper - Empirical"
    Keywords: Tax; Taxpayer; Compliance; Voluntary Compliance; Awareness; Morality.
    JEL: H1 H20
    Date: 2021–06–30
  4. By: Alves, Cassiano Breno Machado; Costa, Carlos Eugênio da; Moreira, Humberto Ataíde
    Abstract: We study the optimal design of nonlinear labor income tax for multiperson households. Each household consists of two workers with different productivity levels and unequal access to the family’s economic resources. We show how intrahousehold inequality, together with individual-oriented utilitarianism, generally leads to a misalignment between the household’s and government’s objectives, a state known as dissonance. We handle the multidimensionality that plagues the Mirrlees model by restricting preferences to be identical and iso-elastic and by focusing on taxes characterized by incomesplitting. This approach allows us to provide a complete solution for the screening problem, incorporate different degrees of assortative matching, and assess the role of dissonance in shaping the optimal tax schedule. We also investigate the welfare gains from gender-based policies.
    Date: 2021–07–02
  5. By: Riccardo Lucchetti (Dipartimento di Scienze Economiche e Sociali; Facolta' di Economia "Giorgio Fua'; Universita' Politecnica delle Marche); Luca Pedini (Dipartimento di Scienze Economiche e Sociali; Facolta' di Economia "Giorgio Fua'; Universita' Politecnica delle Marche); Claudia Pigini (Dipartimento di Scienze Economiche e Sociali; Facolta' di Economia "Giorgio Fua'; Universita' Politecnica delle Marche)
    Abstract: Propensity Score Matching is a popular approach to evaluate treatment effects in observational studies. However, when building the underlying propensity score model practitioners often overlook the issue of model uncertainty and its consequences. We tackle this problem by Bayesian Model Averaging (BMA) with an application to the 2014 Italian tax credit reform (the so-called "Renzi bonus"). Model uncertainty has a great impact on the estimated treatment effects. BMA-based estimates point towards a significant effect of the rebate on food consumption only for liquidity constrained house- holds; conversely, model selection procedures sometimes produce results incompatible with the consumption smoothing hypothesis.
    Keywords: 2014 Italian Tax Credit Reform, Bayesian Model Averaging, Model Uncertainty, Propensity Score Matching, Reversible Jump Markov Chain Monte Carlo, Tax Rebate Policies
    JEL: C11 C52 D12
    Date: 2021–06

This nep-pub issue is ©2021 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.