nep-pub New Economics Papers
on Public Finance
Issue of 2023‒09‒11
six papers chosen by
Kwang Soo Cheong, Johns Hopkins University

  1. The taxation of labour vs. capital income: A focus on high-income earners By Sarah Perret; Diana Hourani; Bethany Millar-Powell; Antonia Ramm
  2. Citizenship/Residence by Investment and Digital Nomad Visas: The Golden Era of Individual Tax Evasion and Avoidance? By Casi, Elisa; Mardan, Mohammed; Stage, Barbara M. B.
  3. Pricing energy consumption and residential energy-efficiency investment: An optimal tax approach By Crampes, Claude; Ladoux, Norbert; Lozachmeur, Jean-Marie
  4. Digital Service Taxes By Kane Borders; Sofía Balladares; Mona Barake; Enea Baselgia
  5. Targeting taxes on local externalities By Stéphane Gauthier; Fanny Henriet
  6. Taxation and Accountability in sub-Saharan Africa By Roel Dom; Oliver Morrissey; Abrams Tagem

  1. By: Sarah Perret; Diana Hourani; Bethany Millar-Powell; Antonia Ramm
    Abstract: This working paper presents novel analysis comparing in a consistent way the tax treatment of labour and capital income across OECD countries, through stylised effective tax rates (ETRs). It shows that dividend income and capital gains are generally subject to lower ETRs than wage income at the personal level. In many countries, capital income is also tax-favoured even when considering taxes paid by both firms and individuals, although the gap between labour and capital income taxation tends to be smaller than when considering only personal-level taxes. The gap between ETRs on labour and capital income varies between countries and grows with income levels in some. The paper highlights that differential tax treatment of labour and capital income can affect the efficiency and equity of tax systems.
    Keywords: capital, high earners, inequality, labour, progressivity
    JEL: H2
    Date: 2023–08–28
  2. By: Casi, Elisa (Dept. of Business and Management Science, Norwegian School of Economics); Mardan, Mohammed (Dept. of Business and Management Science, Norwegian School of Economics); Stage, Barbara M. B. (WHU - Otto Beisheim School of Management)
    Abstract: In recent decades, increased mobility of capital and labor improved individuals’ opportunities to avoid or evade tax. This chapter explores two programs commonly provided by tax havens that facilitate individuals in dodging taxation in their home country. We first focus on longer-existing initiatives targeting wealthy individuals by offering citizenship and residence-by-investment (CBI/RBI) programs and discuss how they allow individuals to evade taxes. We then delve into the recently launched digital nomad visa (DNV) programs, which grant individuals temporary residence in a country while working exclusively remotely. We provide a comprehensive overview of the key features of existing programs based on a novel, hand-collected dataset. Currently, more than 40 countries offer a DNV program, and half of them are tax havens. Although DNV programs mainly create concerns about tax avoidance, they can also provide tax evasion opportunities similar to those documented in the literature for CBI and RBI programs.
    Keywords: Digital Nomadism; Citizenship- and Residence by-investment Programs; Digital Nomad Visa; Tax Residency; Tax Havens; Offshore Tax Avoidance and Evasion
    JEL: F42 G21 H26
    Date: 2023–08–31
  3. By: Crampes, Claude; Ladoux, Norbert; Lozachmeur, Jean-Marie
    Abstract: We analyze a Pareto optimal income tax problem à la Mirrlees (1971) in which households consume three types of goods: energy goods, energy efficient investments and non-energy goods. The two main ingredients of our normative analysis are: i) an indirect relationship between energy and the satisfaction of energy needs, as energy-efficient investments transform energy into services such as light, heating, and air conditioning; and, ii) imperfect information of the policy designer as regards the level of energy efficiency of households’ housing and their labor market productivity. Each household differs with respect to these two latter characteristics, and the government designs a non-linear income tax combined with energy and energy efficient investment non linear pricing that maximizes a weighted sum of households’ utilities. We show that a benevolent social planner should distort energy prices in a way that depends on the difference between the saturation of energy needs and the complementarity between energy and the level of energy efficiency in the provision of energy services. A sufficient condition for energy consumption to be subsidized is that the rebound effect is small. Second, when individuals can invest in energy efficiency on top of energy consumption, these investments should always be subsidized and the marginal subsidy should always be higher than the one on energy consumption.
    JEL: H21 I38 Q48
    Date: 2023–08–24
  4. By: Kane Borders (EU Tax - EU Tax Observatory); Sofía Balladares (EU Tax - EU Tax Observatory); Mona Barake (EU Tax - EU Tax Observatory); Enea Baselgia (EU Tax - EU Tax Observatory)
    Abstract: Digital Service Taxes (DSTs) are a recently introduced fiscal tool designed to tax digital companies. This note collects all publicly available data to take stock of the first few years of DST implementation. Currently, twelve countries – both OECD and non-OECD – have an active DST in place. Current tax revenues from these DSTs are mostly in line with expected revenues, comparable in magnitude to estimated Pillar 1 revenues, and rising rapidly. First experiences (e.g., from the UK) suggest that DSTs can be effective at taxing digital companies that have tended to pay low corporate income tax rates in destination countries in a targeted way. However, the available data remains limited and more research needs to be done to progress towards a full cost-benefit analysis of DSTs.
    Date: 2023–06
  5. By: Stéphane Gauthier (Institute for Fiscal Studies); Fanny Henriet (Paris School of Economics)
    Date: 2023–08–14
  6. By: Roel Dom; Oliver Morrissey; Abrams Tagem
    Abstract: Taxation can contribute to state-building through a tax bargain in which taxpayers are willing to increase compliance in return for improved government accountability. There is limited evidence for this in sub-Saharan Africa (SSA) where it is argued that the fiscal state is weak, with low tax revenues and governments that are not accountable. However, since the early 2000s, SSA countries on average have increased tax/GDP ratios significantly and there have also been increases in measures of accountability. Has the increase in taxation promoted improved accountability? This paper analyses data for up to 47 African countries from 1980 to 2019 and shows a robust positive correlation between tax revenue and accountability. Instrumental variable estimation provides support for a causal interpretation. The effect of taxation is only observed for vertical accountability (capturing the quality of elections and party competition), not for other measures of accountability capturing the role of civil society or the judiciary, consistent with the emergence of a tax bargain. Furthermore, we show that the tax effect is one of the significant determinants of vertical accountability.
    Keywords: tax revenue, vertical accountability, tax bargain, sub-Saharan Africa
    Date: 2023

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