nep-pub New Economics Papers
on Public Finance
Issue of 2023‒07‒10
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Overview of the Characteristics of Tax Haven By Dhammika Dharmapala
  2. Who Gains from Corporate Tax Cuts? By James Cloyne; Ezgi Kurt; Paolo Surico
  3. Do household tax credits increase consumption? The role of demand elasticity and the extent of demand By Jarkko Harju; Sami Jysmä; Aliisa Koivisto; Tuomas Kosonen Koivisto
  4. Fiscal Consequences of Corporate Tax Avoidance By Katarzyna Bilicka; Evgeniya Dubinina; Petr Janský; Katarzyna Anna Bilicka
  5. Impact of Local Corporate Income Taxes on the Effective Corporate Income Tax Rates: Excess Taxation and Tax Deductibility in Japan By Toshiyuki Uemura

  1. By: Dhammika Dharmapala
    Abstract: Tax havens have become a subject of great interest among policymakers, scholars and the general public, and are central to many important current policy debates. This chapter provides an overview of the scholarly literature on the characteristics and origins of tax havens. The earlier literature, used cross-country analysis and found evidence that tax havens tend to have stronger governance institutions than comparable nonhaven countries. The more recent literature analyses the historical origins of tax havens and undertakes longitudinal analysis of their adoption of haven-like laws. This chapter also presents a descriptive analysis of the relationship between tax haven status and quantitative measures of countries’ historical characteristics. This descriptive analysis suggests that tax haven jurisdictions are not appreciably different from nonhavens in their historical experience of foreign rule and in other historical characteristics. This suggests some caution in attributing tax havens’ status to their colonial history or to other historical variables.
    Keywords: tax havens, international taxation, colonial history, governance, economic development, comparative economics
    JEL: H87 O10
    Date: 2023
  2. By: James Cloyne; Ezgi Kurt; Paolo Surico
    Abstract: Goods producers increase their capital expenditure and employment in response to a cut in marginal corporate income tax rates or an increase in investment tax credits. In contrast, companies in the service sector mostly use any tax windfall to increase dividend payouts. We base our conclusions on a novel measure of U.S. firm-specific tax shocks that combines changes in statutory tax rates faced by each firm with narrative identified legislated U.S. federal tax changes between 1950 and 2006.
    JEL: E32 E62 H32
    Date: 2023–05
  3. By: Jarkko Harju (Tampere University, Finnish Centre of Excellence in Tax Systems Research (FIT)); Sami Jysmä (Labour Institute for Economic Research Labore); Aliisa Koivisto (VATT Institute for Economic Research); Tuomas Kosonen Koivisto (VATT Institute for Economic Research, Finnish Centre of Excellence in Tax Systems Research (FIT))
    Abstract: This paper studies the effects of household tax credit (HTC) on service demand and tax evasion. HTC is a tax credit for consumers to reclaim a share of the labor costs of home improvement services, such as renovation and cleaning work. The aim of this widely used tax credit has been both to increase demand for services to boost employment in the service sector and to curb tax evasion. We use data on firm-level monthly value added tax reports and annual tax filings to study the effects of the introduction of HTC for home cleaning services in Sweden in July 2007 together with a difference-in-differences approach using small Finnish service sector firms as a control group. Our results show that, at best, the HTC system has very limited effects on demand for services in the cleaning sector. We provide counterfactual analysis suggesting that the demand elasticity is low, and that the extent of population consuming cleaning services could be low, which is important to consider in ex ante policy analysis. In addition, we do not find HTC to be ef- ficient in reducing tax evasion. Our survey evidence suggests that consumers are poorly informed about the details of HTC rules, which is one likely explanation for the limited responses to the tax credit.
    Keywords: Household tax credit, demand, employment, consumer price, tax evasion
    JEL: H24 H25 H26 H31
    Date: 2023–03
  4. By: Katarzyna Bilicka; Evgeniya Dubinina; Petr Janský; Katarzyna Anna Bilicka
    Abstract: We study the consequences of multinational tax avoidance on the structure of government tax revenues. To motivate our analysis, we show that countries with high revenue losses due to profit shifting have lower corporate tax revenues and rates and higher indirect tax revenues and rates. To establish causality, we use German municipal data and analyse how changes in municipal trade tax rates levied on corporate profits affect local tax revenue structure. Following a trade tax rate increase, we find that municipalities with high exposure to aggressive multinationals experience a significant decline in trade tax revenue levels and shares.
    Keywords: corporate tax avoidance, profit shifting, multinational corporations, government tax revenue structure
    JEL: E62 H26 H71
    Date: 2023
  5. By: Toshiyuki Uemura (School of Economics, Kwansei Gakuin University)
    Abstract: This study explores local corporate income taxes in Japan, which are considered unique from an international perspective. Few countries impose local corporate income taxes. Although corporate income tax rates have decreased worldwide, countries with local corporate income taxes may show less flexibility in corporate income tax reform than countries without, as effective corporate income tax rates based on statutory tax rates remain higher than those without local corporate income taxes. Japan's local corporate income tax system allows for excess taxation and deductibility of corporate enterprise taxes. Countries such as Japan, where local corporate income tax revenues account for a significant share of total tax revenues, may need to reform their local corporate income tax systems. Germany's 2008 business tax reform, which abolished deductibility and lowered the tax rate, provides a helpful reference. This study incorporates the permanent effect of deductibility into the forward-looking effective tax rates by Klemm (2008, 2012) and analyzes the impact of excessive taxation and effective corporate tax rates of reforms of the deductibility of enterprise taxes, following the German business tax reform. First, the excessive taxation of the corporate inhabitant tax rate and the enterprise tax rate impacts 0.9 to 1.1% when converted to the real interest rate. Second, abolishing the deductibility of enterprise taxes and reducing the tax rate improves financing neutrality, possibly reducing the tax rate by approximately 1%. Third, a reform that changes the timing of deductibility in the current period has less impact than abolishing deductibility. Future reforms must be implemented in Japan's local corporate income taxes while considering the current impact on effective corporate income tax rates.
    Keywords: local corporate income tax, excess taxation, tax deductibility
    JEL: H25 H32
    Date: 2023–06

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