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on Public Finance |
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Issue of 2024‒06‒10
seven papers chosen by |
| By: | Andreas Haufler; Hayato Kato; Hayato Kato |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyse tax competition between a tax haven and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. We show that the introduction of a moderate GMT increases tax revenues in both the haven and the non-haven countries. Gradual increases in the GMT rate, however, induce the haven to set a discriminatory, lower tax rate on small multinationals, causing revenues in the non-haven country to decline at the switch of regimes. We also discuss the quantitative effects of introducing GMT in a calibrated version of our model. |
| Keywords: | multinational firms, tax avoidance, Global Minimum Tax, profit shifting, tax competition |
| JEL: | F23 H25 H87 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11087&r= |
| By: | James Cloyne (University of California Davis, NBER and CEPR); Joseba Martinez (London Business School and CEPR); Haroon Mumtaz (School of Economics and Finance, Queen Mary, University of London); Paolo Surico (London Business School and CEPR) |
| Abstract: | Using a narrative identi cation of tax changes in the United States over the post-WWII period, we document that a temporary cut in corporate income tax rates leads to a long-lasting increase in innovation and productivity, whereas changes in personal income tax rates only have short-term e ects. We show that the results on corporate taxes are consistent with theories of endogenous growth that feature tax amortisation allowances on intellectual property purchases, as in the tax code of most countries in the world. In contrast, personal taxes work primarily through the response of labour supply, which is as transient as the tax change itself. |
| Keywords: | corporate taxes, narrative identi cation, TFP, R&D, technological adoption. |
| JEL: | E23 E62 O32 O34 O38 |
| Date: | 2024–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:979&r= |
| By: | Spencer Bastani; Daniel Waldenström |
| Abstract: | This paper examines the implications of Artificial Intelligence (AI) and automation for the taxation of labor and capital in advanced economies. It synthesizes empirical evidence on worker displacement, productivity, and income inequality, as well as theoretical frameworks for optimal taxation. Implications for tax policy are discussed, focusing on the level of capital taxes and the progressivity of labor taxes. While there may be a need to adjust the level of capital taxes and the structure of labor income taxation, there are potential drawbacks of overly progressive taxation and universal basic income schemes that could undermine work incentives, economic growth, and long-term household welfare. Some of the challenges posed by AI and automation may also be better addressed through regulatory measures rather than tax policy. |
| Keywords: | AI, automation, inequality, labor share, optimal taxation, tax progressivity |
| JEL: | H21 H30 O33 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11084&r= |
| By: | Vidar Christiansen; Odd E. Nygård |
| Abstract: | The paper discusses the tax treatment of commuting where wages and housing cost vary across locations. An income tax distorts the locational choices of agents, who dislike commuting and have preferences for place of residence Wages, housing cost and commuting cost determine how subsidising or taxing commuting affects behaviour and social efficiency. A subsidy encourages commuting and induces agents to choose a more favourable living place. The analysis clarifies the circumstances in which the subsidy alleviates or exacerbates the tax distortions, also where housing is tax favoured, as is often the case. The distributional impact depends on the effects of wages on commuting. An empirical illustration based on Norwegian data shows how one can infer efficiency effects of responses to subsidies on commuting. |
| Keywords: | income tax, commuting, commuter cost, subsidies on commuting, place of residence |
| JEL: | H21 H24 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11080&r= |
| By: | Andreas Haufler; Hayato Kato |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold. We set up a simple model of tax competition and profit shifting by heterogeneous multinational firms to evaluate the effects of this partial coverage of the GMT. A non-haven and a haven country are bound by the GMT rate for large multinationals, but can set tax rates for firms below the threshold non-cooperatively. We show that the introduction of the GMT with a moderate tax rate increases tax revenues in both the non-haven and the haven countries. Gradual increases in the GMT rate, however, trigger a sudden change in the tax competition equilibrium from a uniform to a split corporate tax rate, at which tax revenues in the non-haven country decline. In contrast, gradual increases in the coverage of the GMT never harm the non-haven country. We also discuss the quantitative effects of introducing a $15\%$ GMT rate in a calibrated version of our model. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.14302&r= |
| By: | Toshiyuki Uemura (School of Economics, Kwansei Gakuin University) |
| Abstract: | The wage-increase promotion tax system was introduced in the 2013 tax reform. It is an internationally unique system that aims to increase wages through corporate tax credits. This study focuses on the "hidden subsidies" and excess burdens necessary to make policy decisions about the wage-increase promotion tax credits. The study incorporated the wage-increase tax system into a firm-behavior model for analyzing corporate taxation to present the "implied wage-increase subsidy rate" concept as an indicator of a subsidy’s extent and scope, and a method for measuring the excess burden. It measures the "implied wage-increase subsidy rate" and excess burden using financial data for individual firms. First, the "implied wage-increase subsidy rate" indicates that the wage-increase promotion tax system has expanded the subsidy’s extent and scope. Second, the wage-increase promotion tax credits increase the producer surplus of applicable firms but exponentially increase the excess burden, which is social loss. Third, no significant difference is found in the changes in labor productivity between applicable and non-applicable firms. Global corporate tax reform tends to lean toward a neutral tax system, and the wage-increase promotion tax system may not fit this trend. |
| Keywords: | wage-increase promotion tax system, implied wage-increase subsidy, excess burden |
| JEL: | H25 H87 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:271&r= |
| By: | Boingotlo Gasealahwe; Konstantin Makrelov; Shanthessa Ragavaloo |
| Abstract: | South Africa has a high carbon intensity and a very low effective carbon price. This exposes the country to adverse economic shocks from carbon border adjustment mechanisms (CBAM) and changing consumer sentiments. Current impact assessments of the European Unions CBAM suggest small initial impacts, but these are likely to increase as (1) more goods and services become subject to the adjustment, (2) more countries implement such mechanisms, and (3) consumer choices shift away from carbon- intensive products. South Africa needs a higher, more predictable, and effective carbon price to drive the green transition and avoid revenue leakage. The additional government revenues can promote clean investment and reduce some of the negative impacts associated with carbon taxation. Economic and financial frictions to transitioning should be reduced by using a combination of price and non-price instruments. The focus of policy should be on how to position South Africa as a green production destination relative to other countries and consequently, reduce the exposure to CBAMs and changing consumer sentiments. |
| Date: | 2024–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:oboens:11056&r= |