nep-pub New Economics Papers
on Public Finance
Issue of 2023‒01‒02
eleven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pay for tax certainty? Advance tax rulings for risky investment under multi-dimensional tax uncertainty By Chen, An; Hieber, Peter; Sureth, Caren
  2. Tax provisioning by extractive industry multinational subsidiaries By Khanindra Ch. Das
  3. A Tale of Government Spending Efficiency and Trust in the State By António Afonso; João Tovar Jalles; Ana Venâncio
  4. Carbon Tax and Emissions Transfer: a Spatial Analysis By Rezgar FEIZI; Sahar AMIDI; Thais NUNEZ-ROCHA; Isabelle RABAUD
  5. How to Evaluate Tax Expenditures By Ms. Dora Benedek; Sebastian Beer; Jan Loeprick; Brian Erard
  6. Saving at tax time: Do additional retroactive savings opportunities increase retirement savings? By Blaufus, Kay; Milde, Michael; Schaefer, Marcel
  7. Options for Reducing the Deficit, 2023 to 2032--Volume I: Larger Reductions By Congressional Budget Office
  8. Options for Reducing the Deficit, 2023 to 2032--Volume II: Smaller Reductions By Congressional Budget Office
  9. New Estimate of the Elasticity of Marginal Utility of Consumption for Europe: Implications for the Social Discount Rate By Milan Scasny; Matej Opatrny
  10. Significant costs, limited benefits: A global minimum tax in Germany By Gaul, Johannes; Klein, Daniel; Müller, Jessica M.; Pfrang, Alina; Schulz, Inga; Spengel, Christoph; Weck, Stefan; Wickel, Sophia; Winter, Sarah
  11. A fiscal approach to the social contract in sub-Saharan African countries: Looking for opportunities to strengthen trust in government and tax compliance by analysing citizens' perception of governance By Enrico Nichelatti; Heikki Hiilamo

  1. By: Chen, An; Hieber, Peter; Sureth, Caren
    Abstract: In this study, we use advance tax rulings (ATR) to investigate the impact of fee-based tax certainty on risky investment decisions of a firm under both cash flow and tax uncertainty. We model and analyze the multi-dimensional nature of tax uncertainty from tax reforms and tax audits in expected tax rates, tax bases, and in conjunction with loss offset restrictions. A tax au-thority can provide tax certainty by offering ATRs and charging an ATR fee. The fee imposes costs on firms. We determine the critical ATR fee range in which the ATR is acceptable for both the firm and tax authority. Gener-ally, we find the ATR allows the firm to take on riskier investments. If the ATR is employed in an environment with a generous tax loss offset policy, the ATR's inducement effect on risky investments is even strengthened. We identify settings in which the tax authority is willing to charge zero or even negative ATR fees. Negative fees can be interpreted as enhanced services to taxpayers that reduce taxpayers' compliance costs. Surprisingly, we find that an ATR is particularly effective for firms with low risk aversion. Our findings suggest that ATRs can effectively fight tax uncertainty and stimulate investment. However, their effectiveness crucially depends on tax system features such as loss offset restrictions and the ATR fee.
    Keywords: advance tax ruling,cash flow uncertainty,loss offset provisions,optimal fee,optimal investment,tax uncertainty
    JEL: G11 H25 M41 M42 M48
    Date: 2022
  2. By: Khanindra Ch. Das
    Abstract: Extractive industries are spread across mining of metal and minerals, oil and gas, among others. Multinationals in these sectors are confronted with different challenges ranging from corruption, political risk, economic uncertainty, sunk costs, and the long-gestation periods to execute projects. As a result, tax payment behaviour of subsidiaries in the extractive sector could be dependent not only on these factors, but also on the life cycle of the subsidiary, profitability, and holding structure.
    Keywords: Extractive industries, Tax, policy uncertainty, Corruption, Political stability, Economic policy
    Date: 2022
  3. By: António Afonso; João Tovar Jalles; Ana Venâncio
    Abstract: This paper empirically links the efficiency and performance assessment of the general government, proxied by efficiency scores, to the trust in government. Government spending efficiency scores are first computed via data envelopment analysis (DEA). Then, relying on panel data and instrumental variable approaches, we estimate the effect of public sector efficiency on citizens trust on national governments. The sample covers 36 OECD countries between 2007 and 2019. We find that the more efficient countries in terms of government spending are Australia, Chile, Ireland, New Zealand, South Korea, Switzerland. Secondly, our main finding is that better public sector spending efficiency is positively associated with citizens’ higher trust in governments. In general, political economy variables and the existence of fiscal rules do not seem to significantly affect our measure of trust. Results were held using alternative proxies for public sector efficiency, specifications with different control variables and instrumental variables approaches.
    Keywords: government spending efficiency, DEA, panel data analysis, confidence effects, ideology, fiscal rules
    JEL: C14 C23 E44 G15 H11 H50
    Date: 2022
  4. By: Rezgar FEIZI; Sahar AMIDI; Thais NUNEZ-ROCHA; Isabelle RABAUD
    Date: 2022
  5. By: Ms. Dora Benedek; Sebastian Beer; Jan Loeprick; Brian Erard
    Abstract: Governments use tax expenditures (TEs) to provide financial support or benefits to taxpayers. The budgetary impact of TEs can be similar to that of direct outlays: after the support is provided, less money is available to fund other government priorities. Systematic evaluations are needed to guide informed decision-mak¬ing and to avoid a situation where the narrative on the benefits of TEs is primarily driven by profiting stakeholders. By TE “evaluation,” this note refers to a process that seeks to systematically inform policymak¬ers on the desirability of introducing or maintaining specific tax benefits by gathering and analyzing avail¬able quantitative and qualitative information on their effects. Evaluation processes can be tailored to different levels of data availability and analytical capacity. An evaluation should focus on the policy objective of a TE and whether it effectively and efficiently contrib¬utes to that policy objective. Although important lessons can be learned from coun¬try practices in implementing increasingly ambitious evaluation processes, there is no single best-practice approach to replicate.
    Keywords: tax expenditures; cost-benefit assessment; public policy evaluation; sample evaluation; publication order; publication service; title page; post evaluation; Tax incentives; Compliance costs; Value-added tax; Global; East Asia
    Date: 2022–11–30
  6. By: Blaufus, Kay; Milde, Michael; Schaefer, Marcel
    Abstract: Using a series of experiments, we examine whether the additional opportunity to save retroactively for retirement at the time of tax filing increases overall retirement savings. Our findings show that introducing the additional savings opportunity at tax time increases the total savings rate by almost 5 percentage points. This positive effect holds regardless of whether retirement savings are taxed immediately (back-loaded pension plans) or deferred (front-loaded pension plans) or whether subjects expect back taxes or a tax refund. We show that the effect is not due to higher tax salience at tax time but that the additional offer to save nudges impulsive savings behavior. Policymakers may thus consider the introduction of an additional savings opportunity at tax time as a policy tool to encourage retirement savings. In addition, policymakers should consider the advantage of immediate over deferred taxation in increasing retirement savings. We show that the savings gap between immediate and deferred taxation found in previous studies can expand further if savings are additionally allowed at tax filing.
    Keywords: Retirement savings,tax incentives,impulsive savings,tax salience,nudging,deferred taxa-tion
    JEL: D9 D14 D15 G51 H31
    Date: 2022
  7. By: Congressional Budget Office
    Abstract: CBO issues a volume describing 17 policy options that would each reduce the federal budget deficit by more than $300 billion over the next 10 years or, in the case of Social Security options, have a comparably large effect in later decades.
    JEL: H20 H50 H60 H61 H62 H63
    Date: 2022–12–07
  8. By: Congressional Budget Office
    Abstract: CBO issues a volume that contains short descriptions of 59 policy options that would each reduce the federal budget deficit by less than $300 billion over the next 10 years.
    JEL: H20 H50 H60 H61 H62 H63
    Date: 2022–12–07
  9. By: Milan Scasny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Matej Opatrny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: We provide the first estimate of the elasticity of marginal utility of consumption, µ, for Europe and for thirty individual European countries, using the income-tax individual-level data. Specifically, we rely on the absolute equal-sacrifice approach and CRRA utility function to elicit the revealed preferences of income tax payers on their acceptance of the tax schedule. Our central estimate of µ equals to 1.42. With few exceptional cases, µ´s for European countries exceed unity, ranging between 1.2 and 1.90. We further discuss the implications of our estimate of µ for the social discount rate and Social Cost of Carbon. We conclude that the social discount rate might be slightly higher than traditionally assumed, implying lower magnitude of Social Cost of Carbon, at least for Europe.
    Keywords: elasticity of marginal utility of consumption; equal-sacrifice approach; income tax schedules; marginal tax rate; social discount rate
    JEL: D60 D61 H24 R13
    Date: 2022–12
  10. By: Gaul, Johannes; Klein, Daniel; Müller, Jessica M.; Pfrang, Alina; Schulz, Inga; Spengel, Christoph; Weck, Stefan; Wickel, Sophia; Winter, Sarah
    Abstract: In order to curb tax-motivated profit shifting and limit international tax competition, 137 signatory coun- tries to the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) agreed in 2021 to introduce a global minimum tax on multinational corporations. At first glance, the introduction of the minimum tax would effectively limit international tax competition to a rate of 15%. However, this would require the global implementation of the scheme, as well as the harmonization of tax-base calculation methods. Ful- filment of these conditions is unrealistic, however, due to non-cooperative countries as well as current political tensions. In addition, high administrative and compliance costs would result. Our estimates show that the additional tax declaration costs for affected German corporations would amount to around 319 million euros for implementation and to around 100 million euros annually for ongoing compliance. In September 2022, the German government announced that, if necessary, Germany will unilaterally intro- duce the global minimum tax scheme. This is not advisable, however, since a unilateral move would not reduce tax-motivated profit shifting or international tax competition. At the same time, it would lead to high one-sided costs and a reduction in Germany's attractiveness as a location for business and invest- ment, while also generating little in the way of new revenues.
    Date: 2022
  11. By: Enrico Nichelatti; Heikki Hiilamo
    Abstract: The COVID-19 pandemic showed that many developing countries could not respond effectively to crises due to their limited capacity to diversify their social protection responses. Social protection systems depend mainly on government tax revenue capacity. Raising domestic revenue still represents a priority for most sub-Saharan African countries, which continue to face high tax non-compliance. This research investigates whether there is a link between citizens' perceptions of governance and individual tax compliance in sub-Saharan Africa.
    Keywords: Tax compliance, Governance, Sub-Saharan Africa, Tax revenue, Regression analysis, Mediation analysis
    Date: 2022

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