nep-pub New Economics Papers
on Public Finance
Issue of 2023‒11‒13
four papers chosen by
Kwang Soo Cheong, Johns Hopkins University

  1. Persistence in Tax Revenues: Evidence from Some OECD Countries By Guglielmo Maria Caporale; Silvia García Tapia; Luis Alberiko Gil-Alana
  2. How much tax do the rich really pay? Evidence from the UK By Advani, Arun; Hughson, Helen; Summers, Andy
  3. Tax structure and public sector efficiency: new evidence for developing countries By Lucas Menescal; José Alves
  4. Replacing Customs Revenue with Taxes on Income and Domestic Consumption: The South African Experience By Andreas Freytag; Krige Siebrits

  1. By: Guglielmo Maria Caporale; Silvia García Tapia; Luis Alberiko Gil-Alana
    Abstract: This paper examines persistence in tax revenues in a set of 21 OECD countries over the period 1965-2021 using long-range dependence techniques based on fractional integration. The results imply that there are only a few cases of mean reversion: one for total revenue (Switzerland); three for VAT (Belgium, Italy, and Spain), and six for tax on income (Austria, Belgium, Finland, Spain, Sweden and USA). The analysis is also carried out for inflation in the same set of countries. Again the I(1) hypothesis cannot be rejected in most cases, mean reversion only occurring in Korea, Iceland, Norway and Sweden. However, stronger evidence of mean reversion is found for the differences between the three original tax series and inflation compared to the tax series themselves, which points to the existence of a linkage between taxation and inflation, especially in the case of VAT and tax on income.
    Keywords: revenues, taxes, persistence, fractional integration, long memory
    JEL: C13 C22
    Date: 2023
  2. By: Advani, Arun; Hughson, Helen; Summers, Andy
    Abstract: Using anonymized administrative data on the population of UK taxpayers, we show that—in line with high-profile anecdotes about the tax affairs of the rich—effective average tax rates (EATRs) decline at the top of the distribution of income and capital gains. We also document substantial variation in EATRs within remuneration level: a quarter of those in the top 1 per cent pay headline rates, while another quarter pay at least 9pp less than the headline rate. Most of this effect is driven by the composition of remuneration, with investment income having lower tax rates and capital gains having lower rates still. If all individuals with income above £100, 000 paid the headline rates, this would raise tax revenue on income and gains by £23 billion on a static basis, an increase of 27 per cent in the tax paid by this group.
    Keywords: inequality; horizontal equity; effective tax rates; capital gains tax; through the CAGE Research Centre at Warwick (ES/ L011719/1) and ‘Taxing the Super-Rich’ Research Grant (ES/W012650/1)
    JEL: D63 H23 H24
    Date: 2023–08–18
  3. By: Lucas Menescal; José Alves
    Abstract: This study examines the effects of the tax structure composition for public sector efficiency in a sample of 41 developing countries for the period between 1997-2019. We start by calculating Public Sector Performance (PSP) composite indicators and use them as outputs to compute data envelopment analysis (DEA) efficiency scores under different orientation setups. After using a general-to-specific approach to identify the most determinant variables, we analyze the relevance of different taxes for public efficiency in a panel regression specification. We find that tax effects are significantly different depending on the orientation of DEA scores. Notably, we observe that taxation presents stronger detrimental effects to input-oriented scores in comparison to output-oriented, and that Opportunity PSP indicators seem more affected by property taxes and working contributions, while Musgravian PSP indicators are more closely related to individual and corporate income taxes. Our results allow us to provide policy implications regarding better tax structures to improve efficiency on the provision of public goods and services.
    Keywords: Public sector performance; Government efficiency; Tax structure; Data envelopment analysis; Developing countries; Panel data.
    JEL: C14 C23 H11 H21 H50
    Date: 2023–10
  4. By: Andreas Freytag; Krige Siebrits
    Abstract: The African Continental Free Trade Agreement (AfCFTA) was signed by 54 member states of the African Union and is the largest free trade area in the world. Among other things, dismantling tariffs will have effects on public revenues in member states; this will require a revenue transition from customs duties to other forms of public revenues such as income and value added taxes. This transition may be a politically difficult process. This paper analyses the process of revenue transition in South Africa after World War I and after the end of the Apartheid regime to improve understanding of the constraints to and effects of such a revenue transition. The transition in South Africa from a tax revenue structure anchored by customs revenue to one dominated by income taxes and taxes on domestic consumption was a protracted and unplanned process. The general revenue needs of the government led to the introduction of income taxes in 1914 and a broad-based consumption tax in 1979. In addition, excise taxes have been in use ever since the establishment of the Union of South Africa in 1910 and in recent times have become increasingly important for other purposes as well. Along with the shift in the role of customs duties from revenue-generating to protective instruments and fairly extensive use of non-tariff barriers, these developments meant that import taxes became markedly less important tax handles during the course of the 20th century. As a result, the revenue implications of the trade liberalisation process in the early 1990s were minor, and the implementation of AfCFTA would not be a large shock to government revenue in South Africa either.
    Keywords: free trade agreements, revenue transition, taxes, South Africa
    JEL: H20 H27
    Date: 2023

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