nep-pub New Economics Papers
on Public Finance
Issue of 2021‒10‒18
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. How to Tax Different Incomes? By Laurence JACQUET; Etienne LEHMANN
  2. Second-Best Source-Based Taxation of Multinational Firms By Johannes Becker
  3. Do robots dream of paying taxes? By Rebecca Christie
  4. Taxation of Multinationals: Design and Quantification By Sébastien Laffitte; Julien Martin; Mathieu Parenti; Baptiste Souillard; Farid Toubal
  5. Organization of Knowledge and Taxation By Marek Kapicka; Ctirad Slavik
  6. Media negativity bias and tax compliance: Experimental evidence By Fisar, Milos; Reggiani, Tommaso; Sabatini, Fabio; Spalek, Jirí
  7. Labor Supply Responses to Income Tax Free and Bracket Expansions By Panayiota Lyssiotou; Elena Savva
  8. Tax Reforms and Political Feasibility By Felix Bierbrauer; Pierre Boyer; Andrew Lonsdale; Andreas Peichl
  9. The mitigating role of tax and benefit rescue packages for poverty and inequality in Africa amid the COVID-19 pandemic By Jesse Lastunen; Pia Rattenhuber; Kwabena Adu-Ababio; Katrin Gasior; H. Xavier Jara; Maria Jouste; David McLennan; Enrico Nichelatti; Rodrigo C. Oliveira; Jukka Pirttilä; Matteo Richiardi; Gemma Wright

  1. By: Laurence JACQUET; Etienne LEHMANN (CY Cergy Paris Université, THEMA)
    Abstract: We study the optimal tax system when taxpayers earn different kinds of income by supplying different inputs. Imperfect substitution between inputs allows for general equilibrium effects. We consider any type of cross-base responses to tax changes such as income-shifting. Formalizing the tax schedule as the sum of many one-dimensional schedules, we express optimal marginal tax rate on any kind of income in terms of sufficient statistics, including new ones for cross-base responses and general equilibrium effects. We also identify the conditions under which making the personal income tax marginally more schedular is socially desirable. The comprehensive and schedular (dual, in particular) income taxes being recurring proposals in the public debate, we derive sufficient conditions under which each form of tax is optimal. We stress how empirically restrictive these conditions are. Using a new algorithm on French tax return data, we characterize the optimal combination of a nonlinear tax schedule on personal income and a linear tax rate on capital income. We find that one should include, without any deduction, all income sources in the personal income base and subsidize the source of income which is more elastic. We find that crossbase responses have little effects on the personal nonlinear income tax schedule but increases by 5.9 to 6.9 percentage points the capital tax rate. General equilibrium effects also increases this tax rate by around 4.5 percentage points.
    Keywords: nonlinear income taxation, several income sources, cross-base responses, endogenous prices, dual income tax, comprehensive income tax
    JEL: H21 H22 H24
    Date: 2021
  2. By: Johannes Becker
    Abstract: I consider a continuum of multinational enterprises (MNEs), which differ in profitability. MNEs employ capital, shift profit to tax havens and may relocate their production facilities to other countries. Source countries provide public inputs and levy taxes. I derive optimal policy choices for different government objectives (to maximize tax revenue, national income or the representative household’s utility) allowing for an unrestricted set of tax policy instruments — in contrast to most existing work on corporate taxation. With observable productivity types, source governments set type-dependent lump-sum taxes and attain the first-best allocation. With unobservable productivity types, the optimum source-based tax system consists of a small lump-sum tax (driving low-profit types out of the market) and positive marginal taxes on reported profit. Optimal marginal tax rates on capital inputs are positive if more profitable firms employ more capital. Optimal public inputs are lower than in the first best if they are of higher value to more profitable firm types. I use a sufficient statistics approach (following Saez 2001) to express optimal tax and input choices as functions of elasticities of observable choice variables. Finally, I use the model to evaluate tax policy measures, e.g. the introduction of an effective minimum tax on profits in tax havens, and to derive the welfare properties of tax competition with an unrestricted set of tax instruments.
    Keywords: corporate taxation, multinational firms, optimum taxation, tax competition
    JEL: H25 H71 F23
    Date: 2021
  3. By: Rebecca Christie
    Abstract: Robot taxes embody the more futuristic challenges of managing automation and legacy workers. As machines and artificial intelligence take on more roles that used to be performed by humans, policymakers and technologists are assessing the costs this transition imposes and what parts of society will pay them. A robot tax on companies that replace employees with automated systems is easy to dismiss in its most simplistic forms but should be...
    Date: 2021–10
  4. By: Sébastien Laffitte (CEPS - Centre d'Economie de l'ENS Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay - Université Paris-Saclay); Julien Martin (CEPR - Center for Economic Policy Research - CEPR); Mathieu Parenti (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles); Baptiste Souillard (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles); Farid Toubal (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research - CEPR, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Minimum corporate taxation is the second Pillar of the reforms of international corporate taxation. It is a simple and powerful tool that could curb profit shifting towards low or no tax jurisdictions. Its implementation would allow France to tax the profits that French headquarters have shifted to tax havens, but also to reduce the erosion of its tax base. We estimate the French corporate income tax (CIT) revenues would increase by almost 6 billion euros in the short run after the implementation of an effective minimum tax rate of 15% and by 8 billion euros at a rate of 21%. CIT gains may vary substantially depending on the scope of the tax base, the possibility of headquarters' inversion, and whether it includes domestic corporations or not. CIT gains are relatively higher in France than in Germany or the United States. The expected gains are substantially larger than those to be expected from the implementation of the first Pillar of the reform in its version proposed by the US in April 2021, which opens up rights to tax the 100 largest corporations in the world according to their sales' destination. According to our estimates, Pillar One would bring in about 900 million euros for France.
    Keywords: Tax rate,multinational corporation,reform
    Date: 2021
  5. By: Marek Kapicka; Ctirad Slavik
    Abstract: This paper studies how labor income taxation interacts with the organization of knowledge and production, and ultimately the distribution of wages in the economy. A more progressive tax system reduces the time that managers allocate to work. This makes the organization of production less efficient and reduces wages at both tails of the distribution, which increases lower tail wage inequality and decreases upper tail wage inequality. The optimal tax system is substantially less progressive than the current one in the United States. However, if wages were exogenous, the optimal tax progressivity would be much higher.
    Keywords: inequality; wages; knowledge based hierarchies; income taxation;
    JEL: E6 H2 D8 L23
    Date: 2021–09
  6. By: Fisar, Milos; Reggiani, Tommaso (Cardiff Business School); Sabatini, Fabio; Spalek, Jirí
    Abstract: We study the impact of the media negativity bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are signicantly more compliant than the control group. Instead, the exposure to negative news does not prompt any significant reaction compared to the neutral condition, suggesting that participants may perceive the media negativity bias in the selection and tonality of news as the norm rather than the exception. Overall, our results suggest that biased news provision is a constant source of psychological priming and plays a vital role in taxpayers' compliance decisions.
    Keywords: tax compliance, media bias, taxation game, laboratory experiment.; tax compliance, media bias, taxation game, laboratory experiment.
    JEL: C91 D70 H26 H31
    Date: 2021–10
  7. By: Panayiota Lyssiotou; Elena Savva
    Abstract: This paper contributes to the labor supply literature by focusing on how middle earners respond to financial incentives and whether the responses are different between men and women. We exploit substantial expansions in the level of individual income exempt from taxation and taxed at a lower marginal tax rate while the schedule of marginal tax rates remained the same. These tax revisions improved the financial incentives to work, in particular for individuals in the middle of the income distribution. We find robust evidence that the tax reforms increased significantly the wages of medium and high educated married males and females. They also had a positive impact on work participation that was more substantial for married women, especially the medium educated. We estimate significant positive own wage labor supply elasticities that are about the same for men and women when we condition on the labor outcome effects of inflows of EU and non-EU foreign workers, which changed the skill distribution of the economy and had a more significant impact on female labor outcomes.
    Keywords: labor supply of men and women, income taxation, foreign workers, gender equality; labor market integration
    JEL: H24 H31 J16 J22 J38 J61
    Date: 2021–10
  8. By: Felix Bierbrauer (Université de Cologne); Pierre Boyer (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Andrew Lonsdale (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Andreas Peichl (LMU - Ludwig-Maximilians-Universität München)
    Abstract: Questions linked to the design and implementation of redistributive tax policies have occupied a growing position on the public agenda over recent years. Moreover, the fiscal pressures brought upon by the current coronavirus crisis will ensure that these issues maintain considerable political significance for years to come. In light of this importance, we present novel research on reforms of income tax systems. Our approach shows that tax reforms wherein the changes in individual tax burdens are larger for taxpayers with higher incomes are of particular interest. We denote such reforms as "monotonic" and show that, under this condition, it is possible to determine the "winners" and "losers" of a given tax reform. One can then conclude whether the monotonic reform is politically feasible, depending on whether a majority of individuals will benefit financially from the policy. An empirical analysis of tax reforms with a focus on the United States and France reveals that past reforms have, by and large, been monotonic. Our approach therefore enables us to test whether a given tax system admits a politically feasible reform and has direct policy relevance for the common types of taxation reforms undertaken by government authorities.
    Date: 2021–09
  9. By: Jesse Lastunen; Pia Rattenhuber; Kwabena Adu-Ababio; Katrin Gasior; H. Xavier Jara; Maria Jouste; David McLennan; Enrico Nichelatti; Rodrigo C. Oliveira; Jukka Pirttilä; Matteo Richiardi; Gemma Wright
    Abstract: This paper analyses the distributional effects of the COVID-19 pandemic and related tax-benefit measures in 2020 in a cross-country comparative perspective for five African countries: Ghana, Mozambique, Tanzania, Uganda, and Zambia. We first estimate the impact of the crisis on disposable incomes, how effects vary across the income distribution, and in how far tax-benefit policies stabilized earnings losses. We then evaluate the impact on income-based poverty and inequality and the contribution of discretionary tax-benefit policies in alleviating the shock.
    Keywords: COVID-19, Income distribution, Poverty, Inequality, Africa
    Date: 2021

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