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on Public Finance |
| By: | Javier Garcia-Bernardo (1Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czechia; Department of Methodology & Statistics, Utrecht University, the Netherlands; Centre for Complex Systems Studies, Utrecht University, the Netherlands); Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | We exploit the new country-by-country reporting data of multinational corporations, with unparalleled country coverage, to reveal the distributional consequences of profit shifting. We estimate that multinational corporations worldwide shifted over $850 billion in profits in 2017, primarily to countries with effective tax rates below 10%. Countries with lower incomes lose a larger share of their total tax revenue due to profit shifting. We further show that a logarithmic function is better suited for capturing the non-linear relationship between profits and tax rates than linear or quadratic functions. Our findings highlight effective tax rates’ importance for profit shifting and tax reforms. |
| Keywords: | multinational corporation, corporate taxation, profit shifting, effective tax rate, country-by-country reporting, global development |
| JEL: | F23 H25 H26 H32 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2023_33&r=pub |
| By: | Redonda, Agustin; Von Haldenwang, Christian; Berg, Sofia |
| Abstract: | Tax expenditures are deviations from the benchmark tax system which provides preferential tax treatment. Governments use them to pursue different policy goals, such as boosting innovation, creating employment or greening the economy. Their fiscal cost can be significant since the global average revenue forgone, estimated at around 4% of GDP and 25% of tax revenue, has remained stable over the last 30 years. Evaluating tax expenditures against their stated policy objectives and the potential side effects or externalities they might trigger is a crucial step for the rationalization of tax expenditures, with implications for domestic resource mobilization and the alignment of tax policies with growth and development strategies. This report analyses tax expenditure evaluation as a key element of the tax expenditure policy cycle and highlights the need for integrated frameworks that link ex-ante assessments with ex-post evaluations. It also provides an international overview of the state of tax expenditure evaluations, showing that it remains relatively underdeveloped, not only in Latin America and the Caribbean, but also across the world. |
| Date: | 2023–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:68667&r=pub |
| By: | Kerim Can Kavakli; Giovanna Marcolongo; Diego Zambiasi |
| Abstract: | We analyze the enforcement of financial sanctions and the role of offshore secrecy jurisdictions (‘tax havens’) in it. Tax havens can undermine sanctions and provide a safe refuge for targeted actors by hiding information on asset ownership. Consequently, we hypothesize that targets of financial sanctions will increase their funds in tax havens. We test this hypothesis using data from the Bank of International Settlements and the Offshore Leaks Database and find strong support for it. Additionally, neither participation in sanctioning coalitions nor membership in relevant intergovernmental organizations prevent tax havens from attracting target state funds. However, when the US leads (not only joins) a sanction coalition, then this effect disappears. Our findings suggest that targeted actors use tax havens to evade sanctions, but such evasion can be prevented when the US prioritizes enforcement. More broadly, our paper highlights a novel and geostrategically important role of tax havens in global finance. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp23212&r=pub |
| By: | Ghiglino, C.; Muller, A. |
| Abstract: | We provide a politico-economic theory of income redistribution with endogenous social identity of voters. Our analysis uncovers a non-monotonic relationship between market income inequality and redistributive taxation in line with the mixed evidence on the sign of their empirical relationship: taxation first increases with wage inequality as all voters identify with others, but then drops sharply as affluent voters switch to identify in-group. We further add ethnicity as an identification attribute. Consistent with existing empirical evidence, our model predicts that the presence of ethnic minorities and across ethnic group inequality reduce redistribution, while within ethnic group wage inequality increases it. |
| Keywords: | Inequality, Probabilistic Voting, Redistribution, Social Class, Social Identity, Tax Rate |
| JEL: | D64 D71 D72 H20 |
| Date: | 2023–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2371&r=pub |
| By: | Tannous Kass-Hanna; Julien Reynaud; Chris Walker |
| Abstract: | Empirical (employing the Blanchard-Perotti framework) and modeling (using a country-specific DSGE model) approaches are used to estimate fiscal multipliers by policy instrument for Bolivia, to evaluate possible adjustments in a fiscal consolidation strategy. Multipliers are also estimated using alternative assumptions about the accompanying exchange rate regime and capital mobility, highlighting the importance of the policy mix in determining the impact of fiscal adjustments. The study exploits the DSGE modeling structure to assess this interaction of fiscal and monetary policy in a lower middle-income country under different exchange rate regimes. It finds that expenditure multipliers fall into the range of 1/3 to 2/3, with public investment multipliers slightly higher than government consumption multipliers over longer horizons, and multipliers generally higher under a peg than inflation targeting. Tax multipliers are shown to be about half of expenditure multipliers. |
| Keywords: | fiscal multiplier; capital mobility; Bolivia; DSGE model |
| Date: | 2023–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/240&r=pub |
| By: | Samuel Bryson; Kwabena Adu-Ababio; Evaristo Mwale; John Rand |
| Abstract: | We investigate the behavioural responses of individual taxpayers to changes in marginal personal income tax rates applying empirical bunching methodology to tax administrative data from Zambia over the period from 2014 to 2021. We find evidence for excess bunching at the first kink in the tax schedule for all years but less evidence of bunching at the second and third thresholds. While bunching is considerable and behavioural responses are observed to changes in the location of the kinks over time, bunching at reference points ('round-number bunching') also appears large. |
| Keywords: | Personal income tax, Zambia, Income distribution, Tax data |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2023-142&r=pub |