nep-pub New Economics Papers
on Public Finance
Issue of 2023‒03‒27
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Not So Sweet: Impacts of a Soda Tax on Producers By Goncalves, Judite; Merenda, Roxanne; Pereira dos Santos, João
  2. Imperfect competition, emissions tax and the Porter hypothesis By Flavio M. Menezes; Jorge Pereira
  3. On the relationship between information and individuals’ perception in affecting income tax evasion By Ludovica Spinola
  4. Government Audits By Martina Cuneo; Jetson Leder-Luis; Silvia Vannutelli
  5. Means Testing and Social Security in the U.S. By Shantanu Bagchi
  6. Estimating tax gaps in Zambia: A bottom-up approach based on audit assessments By Kwabena Adu-Ababio; Aliisa Koivisto; Eliya Lungu; Evaristo Mwale; Jonathan Msoni; Kangwa Musole

  1. By: Goncalves, Judite (Universidade Nova de Lisboa); Merenda, Roxanne (Universidade Nova de Lisboa); Pereira dos Santos, João (RWI)
    Abstract: Portugal introduced a sugar-sweetened beverages (SSB) tax in 2017. This study uses unique administrative accounting data for all SSB producers/importers in Portugal, and an event study design with bottled water firms as the primary comparison group, to assess the causal impacts of the tax on multiple firm-level outcomes. We find a 6.8% average decrease in domestic SSB sales, vis-à-vis bottled water. The soda tax hindered SSB firms' financial health, namely net income, ability to convert receivables into cash, and liabilities. SSB producers/importers did not decrease wages, cut jobs, or modify their workforce towards higher R&D capacity. Forgone corporate income tax appears negligible compared to the government revenue generated by the tax itself.
    Keywords: sugar tax, soda tax, firm-level, sin taxes
    JEL: H25 H51 I18
    Date: 2023–02
  2. By: Flavio M. Menezes (Australian Institute for Business and Economics, University of Queensland, Brisbane, Australia); Jorge Pereira (School of Economics, University of Queensland, Brisbane, Australia)
    Abstract: This paper investigates the conditions under which the design of an emissions tax can align social and private interests. Our contribution is to determine the general conditions for firms' profits and social welfare to be higher under the implementation of an emissions tax than under no tax. We consider n firms producing an homogeneous product and competing over supply schedules, which covers a continuum of imperfect competition equilibria from Bertrand to Cournot. We show that, as competition intensifies, the pass-through of the tax to consumers increases, to a point where the price rises more than offsets the net result of the investment outlay. Our analysis provides new insights into the trade-off between environmental policy, market competition and the so-called "win-win" outcome for firms and society.
    Keywords: Technology; R&D; Environment; Policy; Emission tax; Subsidy; Porter Hypothesis
    JEL: H23 O32 O38 Q55 Q58
    Date: 2023–02–28
  3. By: Ludovica Spinola (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: We experimentally test how information about the number of caught tax evaders, by interacting with individuals’ prior beliefs, affect the decision to underreport taxes. Specifically, our results indicate that when individuals receive the information about the number of people caught evading taxes and perceive this as higher than prior beliefs, they evade less. When, instead, individuals consider the number of caught evaders as low with respect to their beliefs, they evade more. These findings suggest that when subjects are informed on how many people have been found evading taxes they infer the audit probability, rather than the tax evasion rate. Finally, we observe no salience bias effect when considering individuals to whom we highlighted information about others’ norm violation nor when looking at those to whom we emphasised the probability of being audited.
    Keywords: tax evasion, social information, audit probability, salience bias, laboratory experiment
    JEL: D83 D9 H2 H26
    Date: 2023
  4. By: Martina Cuneo; Jetson Leder-Luis; Silvia Vannutelli
    Abstract: Audits are a common mechanism used by governments to monitor public spending. In this paper, we discuss the effectiveness of auditing with theory and empirics. In our model, the value of audits depends on both the underlying presence of abuse and the government’s ability to observe it and enforce punishments, making auditing most effective in middling state-capacity environments. Consistent with this theory, we survey all the existing credibly causal studies and show that government audits seem to have positive effects mostly in middle-state-capacity environments like Brazil. We present new empirical evidence from American city governments, a high-capacity and low-impropriety environment. Using a previously unexplored threshold in federal audit rules and a dynamic regression discontinuity framework, we estimate the effects of these audits on American city finance and find no marginal effect of audits.
    JEL: D73 H83 M42
    Date: 2023–02
  5. By: Shantanu Bagchi (Department of Economics, Towson University)
    Abstract: This paper uses a heterogeneous-agent overlapping-generations model to examine the fiscal and distributional consequences of introducing a means test in U.S. Social Security. I find that a means test, i.e. conditioning benefit payments on a household’s earnings and/or assets, leads to a higher implicit tax on old-age resources, but has desirable distributional effects. A 75% cut in the benefits to households with earnings more than 200% of the median leads to a 2.3% reduction in the overall size of Social Security, but has almost no effect on the average benefit level. A fiscally comparable payroll tax cut, on the other hand, leads to an across-the-board decline of 2% decline in the benefits. Finally, an asset-based means test causes a decline of 1% in average benefits, but has a large negative effect on the accidental bequests left behind by deceased households.
    Keywords: Health risk, Social Security, benefit-earnings rule, consumption smoothing, general equilibrium.
    JEL: E21 E62 H55
    Date: 2023–03
  6. By: Kwabena Adu-Ababio; Aliisa Koivisto; Eliya Lungu; Evaristo Mwale; Jonathan Msoni; Kangwa Musole
    Abstract: Assessing tax gaps—the difference between the potential and actual taxes raised—plays a vital role in achieving positive domestic revenue objectives through improved and reformed taxation. This is particularly pertinent for growth outcomes in developing countries. This study uses a bottom-up approach based on micro-level audit information to estimate the extent of tax misreporting in Zambia.
    Keywords: Tax gap, Value-added tax, Bottom-up approach, Audits, Tax compliance, Tax administration, Zambia
    Date: 2023

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