nep-pub New Economics Papers
on Public Finance
Issue of 2022‒02‒21
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax and pollution in a vertically differentiated duopoly: when consumers matter. By Giulia Ceccantoni; Ornella Tarola; Cecilia Vergari
  2. Presumptive taxation and firms’ efficiency: an integrated approach for tax compliance analysis By ferrara, giancarlo; campagna, arianna; bucci, valeria; atella, vincenzo
  3. Constraints on the executive and tax revenues in the long run By Antonio Savoia; Kunal Sen; Abrams M.E. Tagem
  4. Financial Regulation, Interest Rate Responses, and Distributive Effects By Christian Loenser; Joost Röttger; Andreas Schabert
  5. Efficient Regional Taxes in the Presence of Mobile Creative Capital By Batabyal, Amitrajeet; Nijkamp, Peter
  6. The Macroeconomic Effects of Funding U.S. Infrastructure By James Malley; Apostolis Philippopoulos
  7. CBO’s Model for Estimating the Effect That Federal Taxes Have on Capital Income From New Investment: Working Paper 2022-01 By Paul Burnham; Dorian Carloni
  8. Tax policies in a transition to a knowledge-based economy: The effective tax burden of companies and highly skilled labour By Fischer, Leonie; Heckemeyer, Jost H.; Spengel, Christoph; Steinbrenner, Daniela
  9. Income distribution in Uganda based on tax registers: what do top incomes say? By Markus Jäntti; Milly Isingoma Nalukwago; Ronald Waiswa

  1. By: Giulia Ceccantoni (Memotef, Sapienza University); Ornella Tarola (Department of Social Sciences and Economics, Sapienza University of Rome); Cecilia Vergari (Department of Economics and Management, University of Pisa)
    Abstract: taxes can drive a more sustainable European market. However, unilateral mitigation measures can reduce the competitiveness of carbon-intensive industries, thereby inducing relocation. In this paper, we wonder whether a tax can effectively curb emissions without hurting firms. Our analysis entry point is that the level of emissions in a region is jointly determined by (i) the number of consumers buying dirty goods and (ii) the environmental quality of these products. Thus, to curb emissions, on the one hand, firms have to reduce their goods emissions intensity. On the other hand, consumers have to reduce the consumption of dirtier goods. This leads to defining a tax whose burden depends on the number of consumers buying the brown products and the relative quality of these products. We show that under this tax, lower emissions do not come at the expense of lower profits.
    Date: 2022–01
  2. By: ferrara, giancarlo; campagna, arianna; bucci, valeria; atella, vincenzo
    Abstract: Presumptive taxation methods are policy tools widespread adopted by fiscal authorities with the aim to improve voluntary tax compliance and to fight tax evasion. Such methods allow authorities to uncover firms’ under-reporting, but face several limits. In particular, presumptive taxation methods do not allow to disentangle when the presence of under-reporting is ascribable to tax evasion behaviour or to the lack of managerial skills and inefficiency. To overcome the main presumptive taxation weakness, we propose combining presumptive frameworks with a measure of technical efficiency, thus developing an integrated approach for tax evasion analysis able to support the audit activities of fiscal authorities. Further, we provide some considerations in terms of tax compliance and support our approach with evidence obtained from an empirical application based on Italian firms.
    Keywords: Tax Compliance, Presumptive Taxation, Efficiency, Stochastic Frontier, Business Sector Studies
    JEL: C14 D24 H26 H32
    Date: 2021
  3. By: Antonio Savoia; Kunal Sen; Abrams M.E. Tagem
    Abstract: We argue that tax revenues and political institutions placing constraints on the executive power may reinforce each other over time and so co-evolve in the long run. This may also bring a shift in the composition of revenues, from taxes levied on a narrow base to broadly levied taxes. To test these hypotheses, we use historical cross-country data covering 31 countries for 1800-2012 and panel time series methods allowing for different forms of country-specific heterogeneity and cross-section dependence. The results offer three main findings.
    Keywords: Constraints on the executive, Tax revenue, Institutions, SDG17, Government tax revenue
    Date: 2022
  4. By: Christian Loenser (University of Cologne); Joost Röttger (Deutsche Bundesbank); Andreas Schabert (University of Cologne)
    Abstract: This paper examines financial regulation and distortionary taxes in a heterogeneous-agents economy with pecuniary externalities induced by a collateral constraint. Limiting of the loan-to-value benefits only few unconstrained borrowers and reduces ex-ante social welfare. A Pigouvian-style symmetric debt tax (that subsidizes savings) raises collateral prices and lowers interest rates, which stimulates borrowing and generates welfare gains for almost all income groups. A Pigouvian-style asset subsidy induces a wealth appreciation, while an asset tax particularly benefits low-wealth borrowers and enhances social welfare. Overall, collateral effects are of minor importance and interest rate rather than asset price responses are decisive for welfare effects.
    Keywords: Financial regulation, heterogeneous agents, collateral constraint, pecuniary externalities
    JEL: D31 E44 G28 H23
    Date: 2022–02
  5. By: Batabyal, Amitrajeet; Nijkamp, Peter
    Abstract: We study interregional competition for mobile creative capital between regions A and B. Regional authorities (RAs) in both regions use tax policy to attract the creative capital possessing members of the creative class to their region. The resulting tax revenues help RAs finance other objectives such as the provision of one or more public goods. In this setting, we accomplish five tasks. First, we explain the significance of a parameter ζ that is related to the marginal product of creative capital. Second, we compute the Nash equilibrium tax rates when each RA chooses its tax rate to maximize tax revenue. Third, we discuss how a decline in ζ affects the Nash equilibrium tax rates. Fourth, we determine the two efficient tax rates. Finally, we discuss the implications of our analysis for a policy that raises revenue by taxing creative capital.
    Keywords: Competition, Creative Capital, Efficiency, Mobility, Tax Revenue
    JEL: H20 R11 R50
    Date: 2021–11–13
  6. By: James Malley; Apostolis Philippopoulos
    Abstract: This paper quantitatively assesses the macroeconomic effects of the recently agreed U.S. bipartisan infrastructure spending bill in a neoclassical growth model. We add to the literature by considering a more detailed tax structure, different types of infrastructure spending and linkages between the final and intermediate goods sectors. We find that infrastructure spending cannot fully pay for itself despite public and private capital being underprovided. We further find long-run output multipliers above unity if infrastructure spending and rising public debt are financed by consumption, dividend and labour income taxes and below one for corporate taxes. We also show that except for the consumption tax, the size of the multipliers critically depends on the Frisch labour supply elasticity. Finally, when we compute differences in welfare across different public financing regimes, the net welfare gains and losses are relatively minor.
    Keywords: Infrastructure investment, public capital, fiscal multipliers, taxation
    JEL: E62 H41 H54
    Date: 2022–01
  7. By: Paul Burnham; Dorian Carloni
    Abstract: The Congressional Budget Office has developed a model to estimate the effect that federal taxes have on capital income from new investment; it uses that model to help estimate how changes in tax law would affect the economy. The model follows a well-established analytical framework that involves calculating the difference between the before-tax rate of return required to justify an investment and the after-tax rate of return demanded by savers (that is, individuals purchasing the equity and debt issued by businesses). The calculation of the before-tax rate of return is
    JEL: C63 H25
    Date: 2022–02–09
  8. By: Fischer, Leonie; Heckemeyer, Jost H.; Spengel, Christoph; Steinbrenner, Daniela
    Abstract: Globalisation and the fast-approaching digitalisation increase capital as well as labour mobility fostering tax competition among countries worldwide. Based on a unique dataset, we analyse the development of effective tax burdens on corporations and highly skilled labour for 26 OECD countries over the last decade. The synthesis of both indicators allows us to identify tax strategies of the countries considered and to further elaborate on the scope of future tax competition against the background of current developments. Overall, we find a declining trend in effective tax burdens on corporate investments, whereas we observe increases in the top statutory tax rates for high-income earners and a rather constant average effective tax burden on labour for a disposable income of EUR 100'000. Current developments like the agreement on a global minimum tax or the transition to a knowledge-based economy can set a new lower bound to tax competition on corporate investments and might shift its focus.
    Keywords: effective tax rates,tax competition,location attractiveness,corporate location decision,Devereux/Griffith Methodology,Human Resource Tax Analyzer
    JEL: H21 H25
    Date: 2021
  9. By: Markus Jäntti; Milly Isingoma Nalukwago; Ronald Waiswa
    Abstract: We use income data from tax registers at the Uganda Revenue Authority from 2011 to 2017 to estimate top income inequality, focusing on the very top—the top 1, 0.1, and 0.01 per cent of the income distribution. The focus on the extreme top is facilitated by access to population data on formal sector income. The microdata from tax registries, submitted monthly to the Uganda Revenue Authority by employers, are supplemented by national accounts and population data that are used for control totals.
    Keywords: Top incomes, Inequality, Tax data, Tax administration data
    Date: 2022

This nep-pub issue is ©2022 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.