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on Public Finance |
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Issue of 2024‒05‒13
eight papers chosen by |
| By: | David R. Agrawal; Dirk Foremny; Clara Martínez-Toledano |
| Abstract: | We study the effects of decentralized wealth taxation on mobility and the effectiveness of tax coordination at mitigating tax competition. We exploit the reintroduction of the Spanish wealth tax, after which all regions except Madrid levied positive tax rates. We find the mobility responses to wealth taxes are within the range of prior estimates with respect to income taxes. However, wealth tax mobility responses generate losses to personal income tax revenues that are six times larger than the direct losses to wealth taxes. Madrid could achieve higher total regional revenues by agreeing to a harmonized positive tax rate. |
| Keywords: | wealth taxes, mobility, fiscal decentralization, fiscal federalism, tax coordination |
| JEL: | E21 H24 H31 H73 J61 R23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11048&r=pub |
| By: | Artur Swistak; Rita de la Feria |
| Abstract: | This paper presents a novel approach to addressing VAT regressivity, by proposing the adoption of a progressive VAT: a single-rate, broad-base, VAT, whereby tax paid on consumption is re-paid to lower income households in real-time, at the moment of purchase. Such a system can effectively eliminate regressivity, while minimizing the political economy, cash-flow, and welfare stigma obstacles that are often associated with standard welfare transfers used in modern VAT systems. It would also have other significant advantages, particularly in terms of compliance incentives. |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/078&r=pub |
| By: | Kapil Panda |
| Abstract: | Public finances are one of the fundamental mechanisms of economic governance that refer to the financial activities and decisions made by government entities to fund public services, projects, and operations through assets. In today's globalized landscape, even subtle shifts in one nation's public debt landscape can have significant impacts on that of international finances, necessitating a nuanced understanding of the correlations between international and national markets to help investors make informed investment decisions. Therefore, by leveraging the capabilities of artificial intelligence, this study utilizes neural networks to depict the correlations between US and International Public Finances and predict the changes in international public finances based on the changes in US public finances. With the neural network model achieving a commendable Mean Squared Error (MSE) value of 2.79, it is able to affirm a discernible correlation and also plot the effect of US market volatility on international markets. To further test the accuracy and significance of the model, an economic analysis was conducted that aimed to correlate the changes seen by the results of the model with historical stock market changes. This model demonstrates significant potential for investors to predict changes in international public finances based on signals from US markets, marking a significant stride in comprehending the intricacies of global public finances and the role of artificial intelligence in decoding its multifaceted patterns for practical forecasting. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.18823&r=pub |
| By: | Michael Overesch; Dirk Schindler; Georg Wamser |
| Abstract: | This chapter provides a description of one of the key anti-tax-avoidance rules to combat profit shifting by multinational corporations, so called Controlled Foreign Corporation (CFC) rules that directly target income in low-tax countries. We explain some key institutional features of CFC provisions. We then present some data and descriptive statistics before we review existing theoretical and empirical research analyzing CFC rules. Our review also includes the new U.S. GILTI rules. CFC rules are effective in curbing profit shifting, but their effect on the real economy is still unclear. In contrast, GILTI seems to be ineffective when it comes to profit shifting, but it has consequences for real activity. We finally argue that research on CFC regulations and GILTI can be informative in assessing the recent global minimum tax initiative. |
| Keywords: | Controlled-foreign-company (CFC) Rules, Global Intangible Low-taxed Income (GILTI), tax havens, tax avoidance, effects of regulation, global minimum tax |
| JEL: | H25 F23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11018&r=pub |
| By: | F. Atzori; V. Pelligra |
| Abstract: | Understanding the factors influencing people's choices in tax compliance decision-making is still important because tax evasion is a crucial issue for governments everywhere. This lab experiment investigates how social norms influence tax compliance behavior. We examine the effects of positive and negative empirical and normative expectations using the opinion-matching approach for measurement. According to our results, normative expectations—as opposed to empirical expectations—most strongly impact people's behavior. Surprisingly, positive empirical messages may have a negative effect, increasing tax evasion. Furthering our understanding of the causes of tax evasion, we also include a norm-following task to assess participants' propensity to adhere to norms. This study presents new viewpoints on tax compliance while replicating some established conclusions from previous research sheds new light on the interaction between tax compliance and social norms. |
| Keywords: | H26;E26;O17;D91;C92 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:202407&r=pub |
| By: | José Mª Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Luca Salvadori (UAB & BSE & IEB & TARC (University of Exeter)) |
| Abstract: | Decentralized fiscal decision-making should serve to enhance welfare by promoting allocative efficiency gains and fostering greater political accountability. Within such an institutional framework, individuals are assumed to be willing to pay, at least, no less taxes than those they pay in a centralized system. We test this hypothesis by means of a survey experiment, leveraging the process of decentralization that has unfolded in Spain over the last 25 years. Our results suggest that individuals have very limited awareness of the tier of government to which they pay their taxes, frequently assuming the system to be centralized. This holds true even in regions where tax decentralization is maximum, as is the case of Spain’s foral communities. On ‘discovering decentralization’ (i.e., being informed that a tax is more decentralized than initially perceived), an individual’s marginal willingness to pay taxes undergoes only a minimal change, with the exception of that of personal income tax. These findings raise questions about the purported benefits of tax decentralization. |
| Keywords: | Tax Decentralization; Fiscal Knowledge; Survey Data |
| JEL: | H11 H71 H77 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:doc2024-04&r=pub |
| By: | Falcão, Tatiana |
| Abstract: | This paper aims to highlight the key policy considerations undertaken when drafting the articles that informed the text of the Multilateral Carbon Tax Treaty (MCTT). It is the product of the many comments received from the commentators invited to provide inputs to the MCTT. The MCTT comprises 31 articles that together establish an obligation on contracting states to tax carbon contained in fossil fuel ore or one of its byproducts, at the level of extraction. If the country entitled to tax at the level of extraction chooses not to exercise its right to tax, it allows first the country of refining or processing, and second, the country of consumption, under a secondary and tertiary allocation of rights. The MCTT identifies a minimum carbon tax, but not a ceiling. It provides for different tax rate schedules according to the country’s level of development and following the principle of common but differentiated responsibilities. This is an environmental agreement that uses a tax instrument (a carbon tax) to assist countries in meeting the mitigation objective contained in the nationally determined contributions, as set forth in the Paris Agreement. In other words, it is an environmental agreement that enables countries to use a tax instrument to quantify and reduce carbon dioxide emissions in furtherance of the climate commitments assumed under the Paris Agreement. |
| Keywords: | Climate Change, Development Policy, Environment, Politics and Power, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18295&r=pub |
| By: | Yunmin Chen (National Central University, Taiwan); Jang-Ting Guo (Department of Economics, University of California Riverside) |
| Abstract: | In the context of a dynamic (three-period) general equilibrium model, this paper examines the optimal tax rates on capital savings and labor income under quasi-hyperbolic discounting and idiosyncratic productivity shocks. In the absence of skill-type uncertainty, we analytically show that the marginal capital tax wedges on agents' first-period savings are negative for correcting inherent preference internalities, and that these tax rates will be higher when productivity disturbances are incorporated. In the stochastic two-type setting with exogenously-given factor input prices, our calibrated numerical experiments find that the marginal capital wedges for both types on their period-1 savings are positive, indicating the government's motive to relax individuals' incentive-compatibility constraints. We also quantitatively find that the optimal tax rates for both types on their first- and second-period capital savings, as well as the economy's social welfare, are ceteris paribus decreasing in the degree of quasi-hyperbolic discounting because of a stronger need to rectify negative utility internalities. |
| Keywords: | Optimal Dynamic Income Taxation; Quasi-Hyperbolic Discounting; Idiosyncratic Productivity Shocks. |
| JEL: | D91 H21 H24 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ucr:wpaper:202403&r=pub |