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on Public Finance |
| By: | Aart Gerritsen |
| Abstract: | I consider the case for the minimum wage alongside (optimal) income taxes when workers differ in both wages and working hours, such that a given level of income corresponds to multiple wage rates. The minimum wage is directly targeted at the lowest-wage workers, while income taxes are at most targeted at all low-income workers, regardless of their hourly wage rates. This renders the minimum wage unambiguously desirable in a discrete-type model of the labor market. Desirability of the minimum wage is a priori ambiguous in a continuous-type model of the labor market. Compared to the minimum wage, income taxes are less effective in compressing the wage distribution but more effective in redistributing income. Desirability of the minimum wage depends on this trade-off between the “predistributional advantage” of the minimum wage and the “redistributional advantage” of the income tax. I derive a desirability condition for the minimum wage and write it in terms of empirical sufficient statistics. A numerical application to the US suggests a strong case for a higher federal minimum wage – especially if social preferences for the lowest-wage workers are relatively strong and the wage elasticity of labor demand relatively small. |
| Keywords: | minimum wage, income taxation, optimal redistribution, multidimensional heterogeneity |
| JEL: | H21 J38 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10734&r=pub |
| By: | Bührle, Anna Theresa; Casi-Eberhard, Elisa; Stage, Barbara; Voget, Johannes |
| Abstract: | We study the economic consequences of anti-loss trafficking rules, which disallow the use of loss carry-forwards as tax shield after a substantial ownership change. Using staggered changes to these rules, we find that limiting the transfer of tax losses reduces the number of M&As with loss-making targets by 22%. We further observe decreases in birth and survival rates of young companies in response to stricter regulations and vice versa. Tightening (loosening) anti-loss trafficking rules impairs (increases) return on assets, especially for R&D-intensive firms, and stricter rules lead to a decrease in successful patent applications. |
| Keywords: | Mergers and acquisitions, anti-loss trafficking rules, taxes, market entry, market exit, productivity, innovation |
| JEL: | G34 G38 H25 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:279548&r=pub |
| By: | OECD |
| Abstract: | This document provides an integrated view on income-based tax incentives for R&D and innovation. It brings together the latest evidence on the adoption, design, generosity, cost and take-up of income-based tax incentives, and gives new insights into both the long-term and short-term trends in the take-up of income-based tax incentives by business and their cost to governments, including role of policy design changes. Furthermore, the report explores the scope for developing indicators that provide a more complete picture of the value of expenditure- and income-based tax relief for R&D and innovation in the OECD area and beyond. |
| Keywords: | innovation, Research and development, tax incentives |
| JEL: | H25 O38 O34 |
| Date: | 2023–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaac:161-en&r=pub |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10726&r=pub |
| By: | Pessino, Carola; Rasteletti, Alejandro; Artana, Daniel; Lustig, Nora |
| Abstract: | This chapter analyzes the incidence on income distribution by a comprehensive array of direct and indirect taxes in ten Latin American countries circa 2018. The study finds that although there is a significant heterogeneity, the redistributive impact is equalizing for direct taxes and unequalizing for indirect taxes. Overall, redistribution through taxes, without accounting for spending effects and interactions, is slightly equalizing for some countries and unequalizing for others, but the burden on the poor is high and even higher than on the rich. This is mainly a consequence of the high share of indirect taxes in the tax structures, and of low personal income tax collection and coverage. The inclusion of the redistributive effect of the corporate income tax contributes to improve redistribution and accounts for better comparison with the redistributive impact in more developed countries, where dividends are taxed heavily with personal income taxes rather than corporate income taxes as in Latin America. High levels of evasion and informality make payroll taxes more regressive in integrated labor markets with high informality, but make indirect taxes less regressive, since the poor pay little or no indirect taxes on some of their purchases. |
| Keywords: | taxes; inequality; informality; Latin America |
| JEL: | D31 E26 H22 H26 N36 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120697&r=pub |
| By: | Andrea Amado; Koji Kotani; Makoto Kakinaka; Shunsuke Managi |
| Abstract: | People worldwide aim to reduce the adverse impacts from carbon emissions by adopting clean energy sources. While the literature identifies potential policies, such as carbon taxes, to address this issue, few studies have investigated how these policies can be concretely designed to facilitate cleaner-energy transition. We pose a question of how a carbon tax can be an effective instrument at transitioning to clean energy and hypothesize that providing a set of crucial information with respect to the tax persuades people to support it. We experimentally examine the determinants influencing public support for the introduction of a carbon tax via a vignette experiment with 1500 Japanese subjects. The vignette policy dimensions include “who pays the tax, †“how the tax gets paid, †“where the revenue gets used†and “how much the burden becomes, †each of which is introduced as a treatment with the baseline of “no information†provision. The results indicate that public support comparatively increases when the entities specified to pay are producers, when the tax revenue is used towards renewable energies and when the burden is sufficiently low. Overall, we demonstrate that a carbon tax can be an effective policy instrument for cleaner-energy transition, while garnering public support and ample revenue. To this end, it is necessary to inform people that the carbon-tax policy design targets producers and renewable energy along with a per-capita burden between 500 JPY to 3000 JPY a month. |
| Keywords: | carbon tax, clean energy, policy design, vignette experiment |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2023-6&r=pub |
| By: | Rose Camille Vincent; Stephan Dietrich; Kyle McNabb |
| Abstract: | This paper investigates business tax compliance in a multilevel tax structure with limited coordination. We study the case of Kampala, where firms are taxed at national and local levels—by the Uganda Revenue Authority and the Kampala Capital City Authority, respectively—and where the agencies operate quasi-independently. We begin by merging large-scale administrative tax data from the separate registries of the two agencies. In doing so, we have a rare opportunity to understand firm compliance with their due payments to the URA and KCCA. |
| Keywords: | Business tax, Tax compliance, Uganda |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2023-134&r=pub |
| By: | Corti Paul Lakuma; Rehema Kahunde |
| Abstract: | This paper simulates the impact of the global minimum corporate tax rate (GMCTR) in Uganda by estimating the difference between the mechanical and the behavioural changes in tax revenue. Overall, implementation of GMCTR will increase tax revenue, and the revenue increase is inversely proportional to the behavioural response. The differences in elasticities may introduce tax competition. In addition, the revenue gain is positive but quantitatively small. There are also sectoral differences in revenue gain resulting from the GMCTR. |
| Keywords: | Corporate tax, Effective tax rate, Tax revenue, Tax administration, Base erosion, Profit shifting |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2023-137&r=pub |
| By: | Nicholas Musoke; Tereza Palanská; Caroline Schimanski |
| Abstract: | Uganda has one of the lowest corporate income tax collection rates in sub-Saharan Africa, while offering generous corporate tax incentives. It is unclear whether tax incentives achieve their objectives without primarily benefiting firms, potentially undermining domestic revenue mobilization and encouraging tax avoidance. Using Uganda's administrative tax data for 2014-21 and a new tax incentive dataset, this study shows that tax holidays and the reintroduction of investment allowances are associated with a significant increase in investment and mostly with higher workforce-related expenses. |
| Keywords: | Corporate tax, Tax incentive, Domestic revenue mobilization, Administrative data, Tax data, Developing countries, Tax avoidance |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2023-133&r=pub |