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on Public Finance |
| By: | Juan Carlos Suárez Serrato; Owen M. Zidar |
| Abstract: | This paper estimates the incidence of state corporate taxes using new data and methods for estimating the effects on profits. We extend Suarez Serrato and Zidar (2016) by developing two new identification approaches that use the effects of business taxes on the labor demand of incumbent firms and local productivity to identify profit effects. We estimate these reduced-form effects using data from Census, show how reduced-form moments identify incidence and parameters, and provide incidence estimates using a variety of reduced-form approaches as well as a structural model. Across these approaches, we find that owners bear a substantial portion of incidence. Our central estimate is that firm owners bear half of the incidence, while workers and landowners bear 35-40 percent and 10-15 percent, respectively. |
| JEL: | H22 H25 H32 H71 J23 R30 R58 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31206&r=pub |
| By: | YiLi Chien; Yi Wen |
| Abstract: | In the design of an optimal tax-transfer system, there are two complementary conventional wisdoms: the labor-efficiency argument and the debt-efficiency argument. The former emphasizes the trade-off between redistribution and distortions in the labor market, while the latter emphasizes the trade-off between gains from monopoly rents and distortions in the asset market. We use an analytically tractable infinite-horizon model with both ex-ante and ex-post heterogeneity to show that neither argument is complete in the design of the tax-transfer system. Instead, in Aiyagari-type models the optimal system should be determined at the point where the intertemporal wedge between the market interest rate and the time discount rate is completely eliminated, provided that the government fiscal space permits an interior Ramsey steady state. Otherwise the optimal labor tax rate approaches 100% regardless of the Pareto weight distribution in the social welfare function. |
| Keywords: | Ramsey redistribution; optimal tax-transfer system; optimal interest rate; Laffer curve; incomplete markets; heterogeneity |
| JEL: | E13 E62 H21 H30 |
| Date: | 2023–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:96078&r=pub |
| By: | Manuel E. Lago (Governance and Economics research Network (GEN) and University College of Dublin (UCD)); Santiago Lago-Penas (Governance and Economics research Network (GEN) and Universidade de Vigo); Jorge Martinez-Vazquez (International Center for Public Policy, Georgia State University, Atlanta) |
| Abstract: | This paper offers a comprehensive and updated review of the effects of intergovernmental grants. We focus on the main findings in the existing literature on the effects of intergovernmental grants on tax policy and choices, expenditure decisions, fiscal stability and behavioral choices, and political economy. The intricate nature of the subject, intrinsically, does not allow for an all-inclusive survey, but we aim to provide a thorough examination and update of the most salient effects of intergovernmental grants, while indicating areas for further research. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper2310&r=pub |
| By: | Patricia Gil; Justin E. Holz; John A. List; Andrew Simon; Alejandro Zentner |
| Abstract: | In modern economies, when debt and trust issues arise, a partial forgiveness policy is often the solution to induce payment and increase disclosure. For their part, governments around the globe continue to use tax amnesties as a strategy to allow debtors to make amends for past misdeeds in exchange for partial debt forgiveness. While ubiquitous, much remains unknown about the basic facts of how well amnesties work, for whom, and why. We present a simple theoretical construct that provides both economic clarity into tax amnesties as well as insights into the necessary behavioral parameters that one must estimate to understand the consequences of tax amnesties. We partner with the Dominican Republic Tax Authorities to design a natural field experiment that is linked to the theory to estimate key causal mechanisms. Empirical results from our field experiment, which covers 125, 452 taxpayers who collectively owe $5.2 billion (5.5% of GDP) in known debt, highlight the import of deterrence laws, beliefs about future amnesties, and tax morale for debt payment and increased disclosure. Importantly, we find large short run effects: our most effective treatment (deterrence) increased payments of known debt by 25% and hidden debt by 48%. Further, we find no evidence of our intervention backfiring on subsequent tax payments. |
| JEL: | C93 H2 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31210&r=pub |
| By: | Joana Andrade Vicente |
| Abstract: | In this paper we analyse the United States’ role as the current international tax leader, acting as an institutional leader uncapable of pushing forward towards a new, more suitable international corporate tax regime, due to the particularities of its international taxation system and economic preferences. After assessing United States multinationals’ activity in the Single Market, we find evidence of artificial profit shifting across Member States under the current method to allocate multinational enterprises’ profits. Such actions challenge a fair international taxation in the European Union, distorting European internal competition and hampering tax revenues collection. Although it may not be (yet) the time for a worldwide unitary taxation approach, the analysis performed highlights the urge for the European Union to overcome the United States political power and to unilaterally adopt the Formulary Apportionment approach, overhauling a century-old set of global tax rules based in the separate entity approach. |
| Keywords: | Country-by-Country Reporting; European Union; Formulary Apportionment; United States multinationals enterprises; tax havens. |
| JEL: | F23 H25 H26 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp02742023&r=pub |
| By: | Alain Babatoundé; Bart Capéau; Romain Houssa |
| Abstract: | In West Africa, the Value Added Tax (VAT) policy consists of a uniform tax rate, but several items consumed by rich and poor households, are exempted. We provide an optimal tax framework to reflect on the welfare effects of such a tariff structure, in the context of current debates on domestic resource mobilisation in low-income countries (LICs). Our analysis includes the distinguishing feature that a significant part of the consumption goods in LICs stems from own production, and can therefore not be taxed. We also account for preference heterogeneity over market goods and auto-consumption. A preference consistent individual welfare measure that depends on both types of goods, is used. To determine optimal tax rates, individual welfare levels are aggregated by social welfare functions with different degrees of inequality aversion. We apply this framework to household data from Benin. The results support reforms for alternative VAT rate structures that improve welfare in the region. In comparison to the current VAT policy, our reforms yield higher average relative welfare gains for the lower deciles. Due to preferences heterogeneity, however, we find winners and losers in all welfare deciles. We develop a bootstrap procedure to construct confidence intervals on welfare indicators. |
| Keywords: | Africa, Value Added Tax (VAT), optimal taxation, taste heterogeneity, domestic resource mobilisation, tax reform, welfare |
| JEL: | O55 O23 H21 H23 H75 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10381&r=pub |