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on Public Finance |
| By: | Georgy Lukyanov; Emin Ablyatifov |
| Abstract: | We embed honesty-based reputation into a Ramsey taxation framework with competitive firms and households. In a static benchmark with exogenous trust, there is a sharp cutoff below which the optimal policy sets no taxes and above which the optimal tax take rises with trust. In the dynamic model, beliefs evolve through noisy public monitoring of delivered public goods; the planner's problem is well posed, the value is increasing and convex in beliefs, and optimal revenue is monotone in reputation with a trust threshold that is weakly below the static cutoff. With multiple broad instruments and symmetric monitoring, the dynamic force acts through the total revenue scale; the tax mix is indeterminate along an equivalence frontier. Blackwell-improving monitoring and greater type persistence expand the optimal scale and shift the trust threshold inward. The model delivers clear policy prescriptions for building fiscal capacity in low-trust environments and testable links between measured trust, verifiability, and revenue. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.03087 |
| By: | Dyck, Daniel; Kourouxous, Thomas; Lorenz, Johannes |
| Abstract: | We investigate how tax authorities use joint tax audits as a coordinated enforcement tool in cross-border transactions of a multinational firm. Joint tax audits aim to resolve potential tax disputes early, before such disputes escalate into costly and time-consuming resolution procedures that may not fully eliminate double taxation. Employing a game-theoretic model, we identify settings in which we expect joint audits to occur and investigate their effect on the firm's expected tax payments and tax audit efficiency. We find that the occurrence of joint audits critically depends on the double taxation risk in the absence of joint audits. Unless tax rules are consistently applied, joint audits can occur more often when this risk is higher. The reason is that the firm changes its income-shifting strategy to reduce its expected tax payments, and thereby also enables tax authorities to better target tax disputes via joint audits that would otherwise escalate. However, we identify conditions under which joint audits are then detrimental to tax audit efficiency, particularly when the firm prefers them most. Our results imply that cost-sharing arrangements for joint audits should be tailored to the level of double taxation risk, with firm involvement having the potential to improve efficiency when this risk is high. |
| Keywords: | joint tax audits, double taxation, dispute prevention, income shifting |
| JEL: | H26 H87 F23 M42 C72 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:324870 |
| By: | Baute, Sharon; Bellani, Luna; Hecht, Katharina |
| Abstract: | Wealth is increasingly unequally distributed in many countries. This study examines public perceptions of wealth deservingness and preferences for taxing the wealth of the rich, focusing on how opinions vary based on the amount, use, and origin of wealth. Drawing on an original vignette experiment conducted in Germany (n=6, 018), our results show a consistent pattern: as wealth increases, its perceived deservingness declines, while support for taxation rises. Similarly, spending on luxury items is seen as less deserving than philanthropic or nonprofit investments, leading to greater support for taxing the wealth of luxury spending rich people. However, wealth obtained through inheritance presents a puzzling exception: although it is perceived as the least deserving compared to wealth gained through entrepreneurship or management, this does not translate into a stronger preference for taxing inheritors over managers. These findings, which hold across different income and wealth groups as well as political affiliations, highlight the complex and sometimes contradictory public attitudes toward the rich and the taxation of their wealth. |
| Keywords: | Inequality, Redistribution, Richness, Survey experiment, Wealth taxation |
| JEL: | D3 D6 H2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cexwps:324862 |
| By: | Lavecchia, Adam M. (McMaster University); Stutely, James |
| Abstract: | This paper documents sharp bunching in third-party reported employment earnings at a basic exemption for social security contributions among older workers. Beginning in 2012, workers age 60-64 who were receiving a public pension were required to make social security contributions equal to 9.9 percent of their employment earnings above a basic exemption threshold of $3, 500. Using administrative data on third-party reported earnings and a differences-in- bunching estimator we document sharp bunching at the $3, 500 threshold. We argue that our results represent new evidence on the role of firms in mediating the earnings response to payroll taxes. |
| Keywords: | sharp bunching, social security contributions, employment earnings |
| JEL: | H20 H24 H25 H31 H32 H55 J22 J23 J38 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18106 |
| By: | Lesley-Ann Daniels; Frank Borge Wietzke |
| Abstract: | Bellicose theories of state-building suggest that wars enable the emergence of strong states via the mechanism of increased war-time fiscal capacities. We explore the hitherto little-analysed micro-level foundations of this claim. Does the experience of war increase public support for higher taxation? Furthermore, is this support limited to only defensive purposes, or does it extend to other war-related but forward-looking goals like post-war reconstruction and cohesion-building? We implement a survey experiment during the ongoing war in Ukraine to address the above questions. |
| Keywords: | War, Statebuilding, Taxation, Fiscal capacity, Ukraine, Experimental design |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-57 |
| By: | Dong, Sarah (Australian National University); Satyadini, Agung (Australian National University); Sinning, Mathias (Australian National University) |
| Abstract: | Both theory and evidence suggest an ambiguous relationship between business tax compliance and geographic proximity to tax offices. We study this issue using a large-scale natural field experiment with Indonesia’s tax authority involving 12, 000 micro, small, and medium enterprises (MSMEs). Businesses were randomly assigned to receive deterrence, information, or public goods letters, or no message. All letters improved compliance, with deterrence messages producing the largest gains - substantially increasing filing rates and raising monthly tax payments. Each dollar spent on deterrence letters generated about US$30 in additional revenue over the course of a year. We observe high compliance among non-treated MSMEs near metropolitan tax offices and find that enforcement messages successfully raise compliance in non-metropolitan regions to comparable levels. However, targeting already compliant MSMEs near metropolitan tax offices backfires, underscoring the need for geographically tailored tax administration strategies. These results provide novel experimental evidence on the relation between geographic proximity and the effectiveness of tax enforcement, helping to reconcile mixed findings in the tax compliance literature. |
| Keywords: | behavioral insights, natural field experiment, tax compliance |
| JEL: | C93 D90 H25 H26 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18108 |