nep-pub New Economics Papers
on Public Finance
Issue of 2021‒09‒20
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Fair inheritance taxation By Decerf, Benoit; Maniquet, François
  2. Does Whistleblowing on Tax Evaders Reduce Ingroup Cooperation? By Philipp Chapkovski; Luca Corazzini; Valeria Maggian

  1. By: Decerf, Benoit (World Bank); Maniquet, François (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: We study the optimal taxation of bequests in a version of the model of Piketty and Saez (2013). Agents have heterogeneous preferences over their consumption and the net-of-tax bequest received by their heir. The bequest left by an individual depends on both her degree of altruism and the bequest received from her parents. First, we study two principles at the heart of the debates on taxing inheritances: 1) children should not be penalized by the lack of altruism of their parents; 2) parents should be free to choose their bequests. Only one social welfare function (SWF) satisfies these two principles, together with Pareto efficiency and a separability principle. Second, we study the shape of the inheritance tax scheme that maximizes this SWF. We show that, in the aggregate, the inheritance tax must collect money (redistributed through a non-negative demogrant). Moreover, small bequests cannot be taxed (they can potentially be subsidized), while bequests larger than that of the most altruistic individuals who did not receive bequests from their parents should be taxed as much as efficiency permits.
    Date: 2021–08–20
  2. By: Philipp Chapkovski (National Research University Higher School of Economics, Russian Federation); Luca Corazzini (Department of Economics, University Of Venice CÃ Foscari); Valeria Maggian (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: Whistleblowing is a powerful and rather inexpensive instrument to contrast tax evasion. Despite the deterrent effects on tax evasion, whistleblowing can reduce trust and undermine agents’ attitude to cooperate with group members. Yet, no study has investigated the potential spillover effects of whistleblowing on ingroup cooperation. This paper reports results of a laboratory experiment in which subjects participate in two consecutive phases in unchanging groups: a tax evasion game, followed by a generalized gift exchange game. Two dimensions are manipulated in our experiment: the inclusion of a whistleblowing stage in which, after observing others’ declared incomes, subjects can signal other group members to the tax authority, and the provision of information about the content of the second phase before the tax evasion game is played. Our results show that whistleblowing is effective in both curbing tax evasion and improving the precision of tax auditing. Moreover, we detect no statistically significant spillover effects of whistleblowing on ingroup cooperation in the subsequent generalized gift exchange game, with this result being unaffected by the provision of information about the experimental task in the second phase. Finally, the provision of information does not significantly alter subjects’ (tax and whistleblowing) choices in the tax evasion game: thus, knowledge about perspective ingroup cooperation did not alter attitude towards whistleblowing.
    Keywords: Tax evasion, whistleblowing, ingroup cooperation, spillover effects, laboratory experiment
    JEL: H26 C90 D02
    Date: 2021

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