|
on Public Finance |
| By: | Youssef Benzarti |
| Abstract: | This paper reviews the literature on the incidence of consumption and labor taxes and focuses on the empirical results that show stark departures from the canonical model of tax incidence, which I refer to as anomalies. In particular, there is mounting evidence questioning three fundamental implications of the canonical model: (1) that statutory incidence is irrelevant for economic incidence, (2) that the relative magnitude of the demand and supply elasticities is a sufficient statistic for tax incidence, and (3) that incidence is symmetric for increases and decreases. I review this empirical evidence and draw implications for the canonical model’s relevance. |
| JEL: | H0 H22 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32819 |
| By: | Damiani, Genaro Martín |
| Abstract: | This paper provides new theoretical insights into the causes and consequences of indirect tax evasion. I propose a decision-making framework that contemplates biased perceptions of apprehension probabilities, which are affected by the environment where the agents operate. This microfounded formulation allows for the analysis of how taxation affects tax evasion (and vice versa) in the aggregate, emphasizing the existing relationships between the relative size of the shadow economy, tax rates, and government revenue. It is shown that a traditional Laffer curve (inversely U-shaped and with a unique maximum) can only exist under certain conditions. The maximum government revenue attainable turns out to be, in any case, lower than in the absence of tax evasion. Nevertheless, evasion control policies are proven to be always effective in increasing government revenue. |
| Keywords: | Indirect tax evasion; Law and Economics; Biased perceptions |
| JEL: | D80 H26 K42 |
| Date: | 2024–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121779 |
| By: | Sergio Galletta; Tommaso Giommoni |
| Abstract: | We explore the effects of exposure to conflict and violence on civic compliance with the law. Using newly digitized historical records of income declarations and tax audits from post-World War I Italy, we show that losing a relative as a direct result of the war reduces tax compliance. To account for the potential endogeneity of the treatment, we use an instrumental variable strategy exploiting the exogenous allocation of soldiers to more/less dangerous military units. Our results show that the effect of reduced tax compliance remains consistent across different measures of compliance and is not due to economic reasons. We also find that this negative impact is lessened when the state acknowledges the sacrifice of the deceased, in communities that suffered many casualties, or in areas with high levels of social cooperation before the war. Overall, our findings suggest that war can erode social norms, leading to a lower willingness to contribute to public goods, such as paying taxes. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11230 |
| By: | Vladimir Smirnyagin; Aleh Tsyvinski; Xi Wu |
| Abstract: | Analyzing the universe of federal environmental regulations in the U.S., we construct a measure of regulations—direct taxes on pollution. Analyzing the universe of firms’ investor disclosures, we construct a measure of material environmental concerns—indirect taxes on pollution. These two empirical measures are new to the environmental regulations literature. Thirdly, we document an important new fact that the cross-sectional distribution of pollution changes is lumpy. We build a dynamic heterogeneous firm model with non-convex adjustment costs that fits the cross-sectional pollution evidence. The model explains half of the pollution decline in U.S. manufacturing over the last two decades due to direct and indirect taxes. We show that the dynamics of direct taxes (environmental regulations) and indirect taxes (environmental concerns), non-convex adjustment costs, and idiosyncratic productivity shocks are key determinants of pollution dynamics in U.S. manufacturing. |
| JEL: | E0 H0 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32852 |
| By: | Salla Kalin; Antoine B. Levy; Mathilde Muñoz |
| Abstract: | This paper investigates whether and why pensioners move across borders in response to tax rate differentials. In 2013, retirees relocating to Portugal became eligible to a full tax exemption of foreign-source pensions. Contrary to the broadly held belief that seniors "age in place", we find substantial international mobility responses to the reform, concentrated among wealthy and educated pensioners in higher-tax origin countries. The implied migration elasticity of the stock of foreign pensioners to the net-of-tax rate is large (between 1.5 and 2) and increases at longer horizons. Tax-induced retirement migration clusters in space, and exhibits amplification and hysteresis patterns consistent with agglomeration through endogenous amenities. We show such forces theoretically and empirically have significant implications for optimal tax rates, and for the limited efficacy of unilateral policy responses to tax competition, like the source-based taxation of pensions. |
| JEL: | H21 H31 R12 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32890 |
| By: | Ana Maria Santacreu; Ashley Stewart |
| Abstract: | This paper investigates the impact of the 2017 Tax Cuts and Jobs Act (TCJA) on U.S. multinationals’ intangibles. We develop a theoretical model that incorporates key provisions of the TCJA—the Global Intangible Low-Taxed Income (GILTI) and the Foreign-Derived Intangible Income (FDII)—and derive testable implications for changes in licensing and patent transfer patterns. Using data on international royalty flows and patent assignments, we test the model’s predictions. Our findings suggest that the TCJA may have impacted profit shifting strategies through intangibles, aligning with our model’s predictions. |
| Keywords: | profit-shifting; intangibles; patents; taxation |
| JEL: | F12 O33 O41 O47 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98710 |
| By: | John R. Scott; Ricardo Massa; Ana Cecilia Parada |
| Abstract: | Carbon pricing is one of the most effective tools available worldwide for the regulation of greenhouse gas (GHG) emissions. There is extensive theoretical and empirical research on optimal pricing instruments, such as environmental taxes —carbon and energy taxes, in particular— and emissions trading systems. In Mexico, as in most countries globally, energy taxation, particularly through taxes on fuels, serves as the primary carbon pricing instrument. This study quantifies the size and the distributive effects of green taxes (and anti-green subsidies) in Mexico, principally focusing on excise taxes (IEPS, from its initials in Spanish) levied on coal and fuels, as well as subsidies for residential electricity consumption. We analyse the distributive effect of fuel taxes within Mexico's broader fiscal system, including the main tax and public expenditure instruments, spanning the 2014-2022 period. In terms of the effect on extreme poverty, consumable income (disposable income net of subsidies and indirect taxes) shifts from a reduction of 2.3 ppt (with respect to household market income) to an increase of 0.5 ppt between 2014 and 2020. In other words, the increase in indirect taxes implies that their impoverishing effect completely eliminates the poverty-reducing effect of all direct transfers for the extremely poor. As in many other countries, energy subsidies in Mexico or their equivalent in energy tax exemptions, have been motivated by considerations of equity. However, given Mexico’s high income inequality, broad energy subsidies are proven to be inefficient redistributive instruments, especially compared to targeted or even universal transfers. |
| Keywords: | Mexique |
| JEL: | Q |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:avg:wpaper:en17000 |
| By: | Julio Ortega Carrillo (ANALISTAS FINANCIEROS INTERNACIONALES); Roberto Ramos (BANCO DE ESPAÑA) |
| Abstract: | This paper provides an update for 2019 on the parametric function estimates of the Spanish personal income tax carried out by García-Miralles, Guner and Ramos (2019), which pertained to 2015 for individual taxpayers and to 2013 for households. Thus, the new estimates summarise personal income tax prior to the pandemic and, in particular, they include the 2015 tax reform in the case of households. These functions are useful for calibrating general equilibrium macroeconomic models to simulate tax reforms and to compute after-tax income in surveys where information is collected solely in gross terms. |
| Keywords: | personal income tax, tax functions |
| JEL: | E62 H24 H31 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2423e |
| By: | Kristijan Fidanovski (The Vienna Institute for International Economic Studies, wiiw); Biljana Jovanovikj (The Vienna Institute for International Economic Studies, wiiw); Nóra Kungl (The Vienna Institute for International Economic Studies, wiiw); Hana Ross (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This policy note presents simulation estimates for the fiscal and health impact of raising tobacco taxes in Ukraine through the Tobacco Excise Tax Simulation Model (TETSiM). It outlines two scenarios for tax reform, which differ in terms of the scale and type of the tax increases, as well as of their application to different tobacco products. Both scenarios reveal clear fiscal and health benefits, thus providing compelling evidence for increasing tobacco taxes in Ukraine. We estimate that by 2028 the tax reform would bring in between EUR 3.69bn (UAH 157.8bn) and EUR 5.22bn (UAH 223.7bn) of additional tax revenue, boosting total tobacco tax revenue by between 39.3% and 68.9%, while preventing between 65, 000 and 165, 000 smoking-related deaths. The results also reveal considerable revenue gains if there were more rapid excise tax increases without any tax advantage being given to heated tobacco products. |
| Keywords: | Excise, Taxation, Tobacco, Smoking |
| JEL: | H24 I18 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:wii:pnotes:pn:82 |