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on Public Finance |
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Issue of 2021‒12‒13
eleven papers chosen by |
| By: | Daly, Stephen; Hughson, Helen; Loutzenhiser, Glen |
| Abstract: | This paper considers the scale and prevalence of valuation issues under a wealth tax. Valuation issues are frequently cited in the literature as the most difficult aspect of wealth taxes. We examine some of the most problematic asset types from a valuation perspective. We also consider a range of solutions to manage these concerns, drawing on international experience and the approaches already taken for other taxes within the UK system. We conclude that satisfactory options for arriving at a value for wealth tax purposes are available even for the most problematic assets. We also estimate that the absolute number of taxpayers likely to pay substantial valuation fees is small, and that, in aggregate, valuation costs could be contained to around 0.1 per cent or less of total chargeable assets, even if they are substantial for some individual taxpayers. |
| Keywords: | agricultural property; artwork; banding; business assets; net wealth tax; open market value; pension assets; residential property; tax policy; valuation; ES/L011719/1; ES/V012657/1; International Inequalities Institute AFSEE COVID‐19 fund |
| JEL: | E6 J1 |
| Date: | 2021–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112696&r= |
| By: | Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw); Goran Vukšić |
| Abstract: | This paper investigates how corporate income taxes affect international trade, and identifies the underlying channel. Using data on 33 NACE sectors, for 34 EU and OECD economies, over the period 2005-2014, we find that corporate income taxes reduce exports and imports only when the stock of foreign direct investment (FDI) is high. The effect is present primarily in the service sector and in countries with low corporate taxes. We interpret these findings as evidence that multinational enterprises reduce their operations in countries that raise their corporate taxes. The effect has been found to be small on aggregate, implying that the expected increase in corporate taxes in the future, arising from the global minimum tax, is unlikely to hurt international trade. |
| Keywords: | taxation, profits, international trade, exports, imports, FDI |
| JEL: | F14 F23 H25 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:212&r= |
| By: | Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This policy note summarises the main findings of our recent research on the effects of labour and corporate taxation on international trade, and discusses their policy implications. The first major finding is that labour taxes do not seem to affect imports, while their effect on exports is likely to depend on how much domestic labour contributes to total value added. If the contribution of domestic labour is low, as has often been the case recently, changes in labour taxes are unlikely to have a major impact on exports. This is an important finding, because it challenges the established view in the literature and policy making, that by lowering labour taxes, authorities can improve the trade balance. The second major finding is that the effect of corporate tax on exports and imports depends on the stock of FDI. Corporate taxes are unlikely to affect international trade in general, but only when the stock of FDI is large. This means that corporate taxes affect international trade through multinational enterprises, which reduce their activity in countries with higher taxes and increase it in countries with lower taxes. Both labour and corporate taxes have seen a downward trend in recent decades, but we find that the contribution of this to the expansion of international trade has been small. |
| Keywords: | abour taxes, corporate taxes, international trade, exports, imports |
| JEL: | F14 F16 F23 H24 H25 J32 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:wii:pnotes:pn:54&r= |
| By: | David M. Brasington; Marios Zachariadis |
| Abstract: | We estimate the impact of plausibly exogenous changes in taxes and government spending on income by utilizing regional data and a regression discontinuity design. More specifically, we identify an exogenous cut in local taxes accompanied by an equivalent reduction in local government spending by exploiting voting on renewals of tax levies of local governments in Ohio from 1991 to 2018, using a unique database that tracks city and village-level incomes and local election outcomes over time for the complete census of cities and villages in the state. We find that such “balanced budget†reductions in taxes and spending cause a drop in local incomes. The effects persist for two or three years before petering out. |
| Keywords: | Fiscal policy, balanced budget, exogenous, income, fiscal multiplier |
| JEL: | E62 H72 R11 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ucy:cypeua:06-2021&r= |
| By: | Bernhard Hammer (TU Wien and Wittgenstein Centre); Michael Christl (European Commission - JRC); Silvia De Poli (European Commission - JRC) |
| Abstract: | Governments face a potential trade-off between provision for the growing population in retirement and the support of working-age households with low income. Using EUROMOD-based microdata from 28 countries, we (a) quantify the redistribution to the pensioner and non-pensioner populations, (b) study the position of net beneficiaries in the overall income distribution and (c) analyse how taxes and benefits affect the working-age population with low income. Our results provide novel insights into the distributive role of tax-benefit systems across Europe. Interestingly, a strong overall redistribution between households is associated with generous pensions for a portion of the retirees but negatively related to support for low-income households. |
| Keywords: | Redistribution, Welfare state, Inequality, Microsimulation, EUROMOD |
| JEL: | H11 H23 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202114&r= |
| By: | Jenkins, Stephen P. (London School of Economics); Herault, Nicolas (Melbourne Institute of Applied Economic and Social Research) |
| Abstract: | We apply the Kakwani approach to decomposing redistributive effect into average rate, progressivity, and reranking components using yearly UK data covering 1977-2018. We examine cash and in-kind benefits, and direct and indirect taxes. In addition, we highlight an empirical implementation issue – the definition of the reference ('pre-fisc') distribution. Drawing on an innovative counterfactual approach, our empirical analysis shows that trends in the redistributive effect of cash benefits are largely associated with cyclical changes in average benefit rates. In contrast, trends in the redistributive effects of direct and indirect taxes are mostly associated with changes in progressivity. For in-kind benefits, changes in the average benefit rate and progressivity each played the major roles at different times. |
| Keywords: | Kakwani decomposition, inequality, redistributive effect, progressivity, reranking, benefits, taxes |
| JEL: | D31 H24 H50 I38 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14819&r= |
| By: | Pesko, Michael (Georgia State University); Warman, Casey (Dalhousie University) |
| Abstract: | In 2016, the Surgeon General used longitudinal cohort studies to conclude that youth e-cigarette use is strongly associated with cigarette use. We re-evaluate data from the period of time before the writing of the Surgeon General report, using quasi-experimental methods, and reach the opposite conclusion. We study contemporaneous and intertemporal effects of e-cigarette and cigarette price and tax changes. Our price variation comes from 35,000 retailers participating in the Nielsen Retail Scanner data system. We match price and tax variation to survey data on current use of e-cigarettes and cigarettes for over 94,000 students between grades 6 to 12 in the National Youth Tobacco Survey (NYTS) for years 2011 to 2015. We find evidence that e-cigarettes and cigarettes are same-period economic substitutes. Coefficient estimates (while imprecisely estimated) also suggest potentially large positive effects of past e-cigarette prices on current cigarette use, indicating inter-temporal economic substitution. Our findings raise doubts about the conclusion of government-sponsored reports that e-cigarettes and cigarettes are strongly positively associated. We recommend revisiting and possibly amending this conclusion. |
| Keywords: | tobacco control, cigarette use, e-cigarette use, tax policy |
| JEL: | I18 H71 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14751&r= |
| By: | Hannes Fauser (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Sarah Godar (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper estimates income tax underreporting for the case of Germany, by income category and along the income distribution. Comparing weighted samples of survey and tax data, we find patterns that are in line with the literature: Average income from self-employment and from rent and lease in the survey is higher than in the tax data, increasing in upper quintiles. Income underreporting to the tax authorities may be one of several possible explanations for these descriptive findings. We therefore expand our analysis with the Pissarides & Weber (1989) approach that has been applied to a range of countries and data sources before. We use the German Socioeconomic Panel and the Taxpayer Panel, estimating food, housing cost and donation regressions. Results indicate that self-employment is associated with higher housing cost but not with higher food expenditure in the SOEP. In the TPP we find more robust indication of underreporting as self-employment and business incomes are significantly associated with higher donations and even more so for the top-income decile. We use our results to derive tentative estimates of aggregate tax revenue losses due to underreporting of self-employment and other non-wage incomes. |
| Keywords: | tax evasion, income misreporting, personal income tax, self-employment, distributional effects |
| JEL: | D12 D31 H24 H26 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_36&r= |
| By: | D'ANDRIA Diego (European Commission - JRC); DEBACKER Jason; EVANS Richard W.; PYCROFT Jonathan (European Commission - JRC); ZACHLOD-JELEC Magdalena (European Commission - JRC) |
| Abstract: | We study a set of tax reforms introducing a budget-neutral tax shift in Italy, from labour income to consumption taxes. To this end we use a microsimulation model to provide the output with which to estimate the parameters of tax functions in an overlapping-generations computable general equilibrium model. In doing so we make marginal and average tax rates bivariate non-linear functions of capital income and labour income. The methodology allows for the representation of the non-linearities of the tax and social benefit system and interactions between capital and labour incomes. The linked macro model then simulates labour supply, consumption and savings in a dynamic setting, thus accounting for behavioural and general equilibrium effects within a life-cycle optimization framework. Our simulations show that a tax shift made by cutting personal income tax rates might bring significant efficiency gains in Italy, with limited regressive effects, notwithstanding the revenue-compensating increase in consumptions taxes. |
| Keywords: | computable general equilibrium, overlapping generations, taxation, microsimulation, Italy, tax shift |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202113&r= |
| By: | Ali Bayar (EcoMode CESifo); Barbara Bratta (Department of Finance Italian Ministry of Economy and Finance); Silvia Carta (Department of Finance Italian Ministry of Economy and Finance); Paolo Di Caro (Department of Law University of Catania Italy - Tax Administration Research Centre University of Essex Business School United Kingdom); Marco Manzo (Department of Finance Italian Ministry of Economy and Finance); Carlo Orecchia (Department of Finance Italian Ministry of Economy and Finance) |
| Abstract: | Reforming the structure of the Value Added Tax (VAT) is an open issue in different countries, mostly for raising revenues and improving the efficiency of the tax system. However, most of the existing analyses do not combine micro- and macro-modelling tools for assessing the welfare and redistributive effects of VAT reforms. Aspects like tax evasion and erosion, moreover, are usually of secondary importance when studying VAT changes. The objective of this paper is twofold. First, we propose an integrated approach, based on the new dynamic multi-sector, multi-household tax computable general equilibrium (CGE) model (ITAXCGE) recently developed at the Italian Ministry of Economy and Finance, to study a uniform VAT rate reform in Italy. Our empirical approach has the merit of including new information when evaluating VAT reforms: tax evasion and erosion, irregular labour, different household groups, and a detailed structure of taxation. Second, we simulate the effects of a uniform VAT rate reform on welfare and redistribution, by taking into consideration the consequences of such reform on VAT gap changes. Our results suggest that the equity-efficiency trade-off deriving from the reform under investigation is reduced when including information on tax evasion in the analysis. The policy implications of our study are finally discussed |
| Keywords: | Microsimulation, CGE-Modelling, integrated approach, VAT, tax gap. |
| JEL: | H31 D58 J22 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ahg:wpaper:wp2021-14&r= |
| By: | Denis Cogneau (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yannick Dupraz (UCD - University College Dublin [Dublin]); Justine Knebelmann (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Sandrine Mesplé-Somps (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, LEDA-DIAL - Développement, Institutions et Modialisation - 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, Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, PSL - Université Paris sciences et lettres) |
| Abstract: | This paper sheds light on the fiscal trajectories of 18 former French colonies in Africa from colonial times to the present. Building upon own previous work about colonial public finance (Cogneau et al., 2021), we compile a novel dataset by combining previously available data with recently digitized data from historical archives, to produce continuous and comparable public revenue data series from 1900 to 2018. This allows us to study the evolution of the level and composition of fiscal revenues in the post-colonial decades, with a special focus on the critical juncture of independence. We find that very few countries achieved significant progress in fiscal capacity between the end of the colonial period and today, if we set aside income drawn from mineral resources. This is not explained by a lasting collapse of fiscal capacity at the time of independence. From 1960 to today, the reliance on mineral resource revenues increased on average and dependence on international commodity prices persisted, with few exceptions. The relative contribution of trade taxes declined after the structural adjustments, and lost trade revenues were not compensated by a sufficient increase in domestic taxes. However, for the most recent period, we do note an improvement in the capacity to collect taxes on the domestic economy. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03420664&r= |