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on Public Finance |
| By: | Xincheng Qiu; Nicolo Russo |
| Abstract: | This paper examines income tax systems in over thirty countries over the past forty years using microdata from the Luxembourg Income Study. We show that income tax systems worldwide are well approximated by a two-parameter log-linear effective tax function. We provide country- and year-specific estimates and document several insights. First, higher average tax rates are associated with higher progressivity. Second, richer countries have more progressive tax systems. Third, progressivity varies by family structure, with marriage and children associated with higher progressivity. Finally, transfers play an important role in redistribution, making the overall tax-and-transfer function more progressive than the tax function. |
| JEL: | E62 H20 H30 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:lis:liswps:906 |
| By: | Berliant, Marcus; Gouveia, Miguel |
| Abstract: | The political economy setting of voting over general nonlinear income taxes with labor disincentives and information asymmetry in consumer/worker/voter types is considered. The economy is the realization of a finite draw from a continuous distribution. The revenue required from a draw is determined by Pareto optimal provision of a public good for that draw. Assuming that the government must meet the revenue requirement for any possible draw, in other words the tax is robust, a majority rule equilibrium is shown to exist at the median voter's preferred tax function out of this robust set. |
| Keywords: | Voting; Income taxation; Public good; Robustness |
| JEL: | D72 D82 H21 H41 |
| Date: | 2025–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126649 |
| By: | Sayag, Doron; Snir, Avichai; Levy, Daniel |
| Abstract: | In 1991 and 2008, Israel abolished the equivalents of 1¢ and 5¢ coins, respectively, effectively eliminating low-denomination coins and introducing rounding in cash transactions. When totals were rounded up, shoppers incurred a small rounding tax. Using detailed data on price endings and basket sizes across supermarkets, drugstores, small groceries, and convenience stores, we estimate that the magnitude of the rounding tax borne by Israeli consumers averaged only 0.001%–0.002% of revenues in the fast-moving consumer goods markets. These findings have implications for the ongoing debate regarding the desirability and viability of abolishing the 1¢ and 5¢ coins in the US. |
| Keywords: | Rounding Tax; Round Prices; Price Rounding Regulation; 9-Ending Prices; Just-Below Prices; Currency Indivisibility; Rigid and Flexible Prices; Elimination of Low-Denomination Coins; Cost of Producing Low-Denomination Coins; 1¢ coin; 5¢ coin; |
| JEL: | K00 K20 L11 L40 L51 M30 |
| Date: | 2025–11–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126714 |
| By: | José Félix Sanz Sanz |
| Abstract: | This paper analyses the effectiveness of statutory marginal rates in generating revenue and (local) progressivity in personal income taxation. Utilising an analytical approach, we derive expressions for the elasticity of the average tax rate and its progression in response to changes in marginal tax rates. The analysis recognises the endogeneity between taxable income and marginal rates (behaviour) and is carried out for the individual taxpayer and the population aggregate. Regarding tax collection, we confirm a low elasticity of the average tax rate to marginal tax rates, individually and in the aggregate. Regarding progressivity, when the marginal rate of a given bracket increases, the progressivity of this specific bracket is heightened. However, it decreases the progressivity of the brackets above while leaving the progressivity in the brackets below unchanged. In other words, increasing the marginal tax rate in a given bracket is “backwards neutral” but “forward regressive”. Finally, to show the use of the analytical expressions derived, they are applied to a Spanish microdata set of tax returns. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2025-13 |
| By: | Annalisa Tassi; Adrien Bussy |
| Abstract: | We investigate whether firms engage in VAT evasion at the retail stage—typically a point of weakness in VAT systems—in a high-enforcement, low-informality setting. To measure evasion, we exploit a reform of VAT rules (the reverse charge, RC) whereby retailers do not only remit taxes on their own value-added, but on that created along the entire supply chain, increasing their incentive to evade. Using German administrative firm-level VAT return data and an instrumental variable approach based on RC’s staggered introduction, we find no evidence of greater evasion under RC. Our results suggest that evasion at the retail stage might not be quantitatively important in high-enforcement and low-informality settings, implying little need to enlist consumers in tax enforcement to boost tax compliance. |
| Keywords: | Value Added Tax; VAT; Reverse Charge Mechanism; Tax Evasion; Withholding; Last- Mile Problem |
| JEL: | H21 H26 D22 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:fbk:wpaper:2025-05 |
| By: | Nico Lukas Kasparetz |
| Abstract: | Old diesel cars without modern emissions control technology substantially contribute to air pollution by emitting high amounts of fine particulate matter, which is known to be detrimental to human health. Periodic vehicle registration fees offer a potentially powerful lever to speed up the retirement of old and polluting vehicles, yet little empirical evidence exists on the matter. This paper analyzes how higher registration fees for old and polluting diesel vehicles in the Netherlands accelerate their outflow from the vehicle fleet. It leverages the staggered rollout of diesel particulate filters as factory-fitted equipment to create quasi-random variation in pollution levels across otherwise comparable diesel car models. By applying Synthetic Difference-in-Differences complemented with a hazard model, this paper establishes that the tax increase on old and polluting cars is effective at reducing their numbers, albeit at the cost of being a very regressive policy. |
| Keywords: | Vehicle Retirement, Particulate Matter Emissions, Vehicle Registration Fee, Difference-in-Differences, Survival Analysis, Policy evaluation, The Netherlands, Vehicle Taxes, Externalities, Redistributive Effects, Environmental Taxes and Subsidies |
| JEL: | H23 L62 Q52 R48 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_721 |
| By: | Javier Garcia-Bernardo (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic and Department of Methodology & Statistics, Utrecht University, the Netherlands); Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Gabriel Zucman (Paris School of Economics and University of California, Berkeley) |
| Abstract: | The 2017 Tax Cut and Jobs Act lowered the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms´ profits after the reform. Between 2017 and 2020, the share of profits booked abroad declined by 1 - 5 percentage points, in part related to repatriations of intellectual property to the US. However, the share of foreign profits booked in tax havens remained stable at around 50%. While aggregated changes in profit allocation are small, a number of firms responded strongly. |
| Keywords: | multinational corporation; corporate taxation; profit shifting; effective tax rate; country-by-country reporting; Tax Cuts and Jobs Act |
| JEL: | F23 H25 H26 H32 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2025_28 |
| By: | Theo Palomo (Paris School of Economics (PSE)); Davi Bhering (Paris School of Economics (PSE)); Thiago Scot (World Bank); Pierre Bachas (World Bank); Luciana Barcarolo (Secretariat of the Federal Revenue of Brazil, Ministry of Finance (Receita Federal do Brasil, RFB)); Celso Campos (Secretariat of the Federal Revenue of Brazil, Ministry of Finance (Receita Federal do Brasil, RFB)); Javier Feinmann (EU Tax Observatory); Leonardo Moreira (Secretariat of the Federal Revenue of Brazil, Ministry of Finance (Receita Federal do Brasil, RFB)); Gabriel Zucman (Paris School of Economics (PSE), UC Berkeley) |
| Abstract: | We use population-wide administrative micro-data to provide new estimates of income inequality and effective tax rates by income groups in Brazil, capturing all income and all tax payments. Our data allow us to link businesses to their owners and thus to allocate business income and associated taxes to the corresponding individual firm owners. We provide sharp upward revisions to official inequality estimates: the top 1% earns 27.4% of total income in 2019, one of the highest level recorded in the world. The tax system, which relies heavily on consumption taxes, is regressive: while the average tax rate in the economy is 42.5%, this rate falls to 20.6% for million-dollar earners (roughly the top 0.01% of the distribution), due to the non-taxation of dividends and provisions that reduce corporate tax liabilities. We provide evidence suggesting that inequality in developing countries may be systematically underestimated, as even in Brazil—where dividends are untaxed, and hence incentives to retain income within companies are limited—attributing profits to business owners substantially raises income inequality. |
| Keywords: | Income inequality, effective tax rates, Brazil |
| JEL: | D3 H2 H3 H5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:report:009 |
| By: | Arbind Modi (xKDR Forum) |
| Abstract: | This paper examines the conceptual foundations and legal architecture of input tax credit (ITC) and refunds under India's Good and Services Tax (GST). It highlights how current design features have diluted the GST's character as a neutral, consumption-based value-added tax. While a well-functioning VAT hinges on seamless ITC across goods, services and capital goods, India's regime embeds on extensive restrictions, delayed credit flow, and narrowly circumscribed refund entitlements. These provisions create cascading, raise effective tax incidence, distort production and trade neutrality, and weaken the self-enforcing compliance mechanism intrinstic to the invoice-credit method. Comparative evidence from OECD and emerging economics shows that India's approach is unique in its own way, with refund design and blocked functioning as de facto taxes on investmenet and intermediate production. The paper argues that restoring neutrality requires full and immediate ITC, rationalized rates to reduce inversion, and automated refund administration. Such reforms are essential for reducing hidden cascading, improving competitiveness, and realigning India's GST with global best practice. |
| JEL: | H2 H20 H21 H77 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:anf:wpaper:44 |