nep-pub New Economics Papers
on Public Finance
Issue of 2023‒04‒03
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The surplus-value rate and the structure of the tax system By Ferran Sancho
  2. Has the Time Come for Excess Profit Taxes? By Shafik Hebous
  3. Carbon Tax in the Shipping Sector: Assessing Economic and Environmental Impacts By Paula Pereda; Andrea Lucchesi, Thais Diniz, Rayan Wolf
  4. Forecasting fiscal crises in emerging markets and low-income countries with machine learning models By Raffaele De Marchi; Alessandro Moro
  5. Personal Income Taxes in the Middle East and North Africa: Prospects and Possibilities By Mario Mansour; Eric M. Zolt
  6. Investigating Tax Compliance with Mixed-Methods Approach: The Effect of Normative Appeals Among the Firms in Latvia By Saulitis, Andris; Chapkovski, Philipp

  1. By: Ferran Sancho
    Abstract: We explore the relationship between the tax system and the surplus-value rate. Since government policy directly conditions the economic environment, any variations in the tax rates will affect disposable income. This, in turn, translates to consumption adjustments that give rise to changes in the surplus-value rate. For the evaluation of changes from the baseline figure, we argue that the correct data set needs to be more comprehensive than the input-output and national accounts data. The reason is that they do not include, in a coherent and integrated manner, all the tax flows taking place in the economy. A Social Accounting Matrix (SAM), however, does include all the tax flows affecting households (indirect taxes on consumption, direct taxes on income, and personal labour taxes). Therefore, the SAM provides the basis for counter-factual calculations of the surplus-value rate that a standard input-output table, for example, cannot provide. We illustrate the possibilities of the analysis using a recent SAM of Spain.
    Keywords: Surplus-value rate, Social Accounting Matrix, Taxation and consumption, Policy indicators.
    JEL: B51 C54 H22
    Date: 2023–03–21
  2. By: Shafik Hebous
    Abstract: Excess profit taxes (EPTs) emerge as an option to contribute to the extra needed revenues, avoiding a general increase in corporate tax rates, while having the prospect to serve as a gateway to converge toward a permanent efficient rent tax in lieu of the corporate income tax. General unilateral (temporary or permanent) EPTs would face the same international pressures from profit shifting and tax competition as the existing corporate income tax, calling for international coordination. A coordinated EPT on multinational enterprises can take the form of a formulary apportionment approach that allocates the EPT base using sales by destination.
    Date: 2023
  3. By: Paula Pereda; Andrea Lucchesi, Thais Diniz, Rayan Wolf
    Abstract: We discuss the impact of a carbon tax on the maritime transport sector, which is responsible for approximately 3% of global emissions. The International Maritime Organization (IMO) has set long-term targets to reduce carbon intensity and achieve carbon neutrality, but the impact of the policies to achieve those targets on the global and local economies must be assessed. We use a global and multi-region Computable General Equilibrium (CGE) model - Global Trade Analysis Project Energy-Environmental augmented version (GTAP-E) – to evaluate the environmental and economic effectiveness of a carbon tax of $50/tCO2e on international shipping. GTAP-E does not provide emissions data by transport mode and accurately estimating emissions is crucial to proposing a carbon pricing measure. Therefore, we have applied machine-learning techniques to predict the share of international trade transported by sea by sector, origin and destination countries and calculate ship emissions for each bilateral flow by sector. The findings indicate that while the tax considerably reduced emissions from ships, it also had a negative impact on exports and resulted in mixed impacts on GDP, exacerbating existing inequalities across regions. Our analysis highlights the importance of considering various economic and social variables in impact assessments to identify potential trade-offs and synergies between policy objectives.
    Keywords: Carbon Pricing; Carbon Tax; Shipping; Computable General Equilibrium
    JEL: Q52 R48 F17 Q56
    Date: 2023–03–16
  4. By: Raffaele De Marchi (Bank of Italy); Alessandro Moro (Bank of Italy)
    Abstract: Pre-existing public debt vulnerabilities have been exacerbated by the effects of the pandemic, raising the risk of fiscal crises in emerging markets and low-income countries. This underscores the importance of models designed to capture the main determinants of fiscal distress episodes and forecast sovereign debt crises. In this regard, our paper shows that machine learning techniques outperform standard econometric approaches, such as the probit model. Our analysis also identifies the variables that are the most relevant predictors of fiscal crises and assesses their impact on the probability of a crisis episode. Finally, the forecasts generated by the machine learning algorithms are used to derive aggregate fiscal distress indices that can signal effectively the build-up of debt-related vulnerabilities in emerging and low-income countries.
    Keywords: fiscal crises, debt sustainability, emerging and low-income countries, machine learning techniques
    JEL: C18 C52 F34 H63 H68
    Date: 2023–03
  5. By: Mario Mansour; Eric M. Zolt
    Abstract: Personal income taxes (PITs) play little or no role in the Middle East and North Africa, often yielding less than 2 percent of GDP in revenue—with the exception of few North African countries. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Top marginal tax rates on labor and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue intake from this source remains low throughout the region (less than 1 percent of GDP on average and concentrated in oil-importing non-fragile states). Social security contributions (SSC) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increase of SSC, have resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT/SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance the revenue and equity objectives against effciency objectives (in particular labor market incentives and infromality). Countries with no PITs will have to weigh whether a consumption tax/SSC system that mimic a flat tax on labor income is sufficient to diversify revenue away from oil and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, who face more political volatility and weaker fiscal institutions, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
    Keywords: Personal income taxes; social security contributions; payroll taxes; fragile and conflict states; Middle East and North Africa; Gulf-Cooperation Council; SSC reform; SSC system; revenue performance; PIT objective; PIT revenue; Personal income tax; Income tax systems; Income; Income and capital gains taxes; Corporate income tax; North Africa; Middle East; East Africa; Global
    Date: 2023–02–17
  6. By: Saulitis, Andris; Chapkovski, Philipp
    Abstract: This study employs a field experiment and qualitative content analysis to examine the effect of various behaviourally-informed messages on increasing tax compliance in Latvia. In a field experiment, more than 3, 000 businesses received a message with a normative appeal to increase the relatively low salaries compared to firms operating in the same industry and region. Other treatment groups received the same message with an additional paragraph that varied audit probabilities or included prosocial messages. All treatments effectively increased the average declared salaries in the enterprises relative to not sending a message. Even though the overall fiscal effect was positive, the qualitative analysis of the feedback by the firms indicates that messages, particularly those that did not state the future actions of the tax administration, provoked discontent and distrust between the taxpayer and the tax administration. Our findings demonstrate that clear communication of the intended actions of the tax administration is the most effective approach to promoting tax compliance. Furthermore, our research indicates that a relatively small audit probability (5%) is as effective as a larger probability (66%), implying that there is no need to carry out audits on a large scale to address tax evasion.
    Keywords: tax collection; shadow economy; prosocial behaviour; tax audits; mixed-methods
    JEL: C93 D03 H26 H32 H83
    Date: 2023–03–01

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