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on Public Finance |
| By: | Matteo Dalle Luche; Demetrio Guzzardi; Elisa Palagi; Andrea Roventini; Alessandro Santoro |
| Abstract: | In this paper, we exploit the new data available from the European Central Bank's Distributional Wealth Accounts (DWA) to reconstruct the distribution of capital income in Italy by accounting for heterogeneous returns to capital. With respect to previous estimates, we find that capital income is more concentrated along the income distribution and the Italian tax system is more regressive with lower tax rates hinging on the top 7%. We show that such rates are remarkably lower than those suggested by an optimal taxation approach and we provide estimates for revenues and inequality reductions that could be attained by applying (higher) optimal rates either to capital income or wealth while controlling for various degrees of behavioral responses. These results provide a direction for revenue-increasing and inequality-reducing tax reforms in Italy. |
| Keywords: | Optimal tax; Inequality; Capital Income; Wealth tax |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2024/26 |
| By: | Jacopo Bassetto; Giuseppe Ippedico |
| Abstract: | Brain drain is a key policy concern for many countries. In this paper we study whether tax incentives are an effective policy to attract high-skilled expatriates back to their home country, exploiting a generous income tax break for Italian returnees. Using administrative data and a Triple Differences design, we find that eligible individuals are 27% more likely to return to Italy. Additionally, we uncover significant effects throughout the wage distribution, revealing that tax-induced migration is a broad phenomenon beyond top earners. A cost-benefit analysis shows that the tax scheme can pay for itself by targeting young high-skilled individuals. |
| Keywords: | tax incentives, return migration, wage distribution |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:not:notgep:2024-05 |
| By: | Anna D'Souza; Zachariah Mampilly |
| Abstract: | The impact of conflict on taxation and development has long been debated. Most studies suggest that conflict will have a depressive effect on state tax collection, negatively impacting economic growth and development. After reviewing the existing literature, we argue for an approach that recognizes conflict's nuanced effects on taxation. We show how violence can trigger the emergence of new taxation authorities, specifically non-state armed groups, including both criminal organizations and insurgent groups. |
| Keywords: | Conflict, Taxation, Development, Armed conflict |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-60 |
| By: | Giacomo Brusco; Marlies Piek; Tejaswi Velayudhan |
| Abstract: | Refunds are an essential feature of well-functioning VAT systems and take up a sizeable portion of government spending. In South Africa, refunds amount to 50 percent of gross VAT collection, representing a substantial transfer from the government to taxpayers that has to occur at relatively high frequency, often monthly. We show that delays in these refund payments reduce domestic investment, especially by small firms. We use administrative data to provide extensive evidence that firms respond to incentives created by delays and denials of refunds. |
| Keywords: | Value-added tax, event study, Firm behaviour |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-58 |
| By: | Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper is about fiscal consolidation measures (i.e. tax hikes and government spending cuts motivated by a desire to reduce the fiscal deficit and public debt) in euro area (EA) countries. The focus is on analysing the growth effects of fiscal adjustments as well as their implications for debt sustainability assessments. I discuss the size and composition of fiscal consolidation by distinguishing three periods the run-up to the EA, when governments faced the Maastricht criteria for joining the monetary union (1992-1998); before and during the recession triggered by the global financial crisis (1999-2009); and the euro crisis (with a specific focus on the 2011-2013 period). The empirical evidence on the growth effects of fiscal consolidation shows that while fiscal adjustments are contractionary, the negative growth effects were particularly strong and persistent during the euro crisis. With regard to the austerity outlook, I show that, beginning in 2025, EA countries are set to implement fiscal consolidations over multiple years so as to meet reformed EU fiscal rules. The adjustment requirements for some member countries are large in historical comparison. The paper argues that the framework for debt sustainability analysis at the heart of the reformed EU fiscal rules downplays the domestic growth impacts of fiscal adjustments and ignores cross-country spill-overs that magnify domestic growth effects. In all likelihood, the reformed framework underestimates the negative growth effects of fiscal consolidation. I conclude that implementing the multi-year fiscal adjustments required to meet EU fiscal rules may not reduce public debt ratios across the EA’s member countries, as the European Commission expects, and that the economic and political implications of austerity may complicate the governance of a fragile EA. |
| Keywords: | Fiscal policy, fiscal consolidation, fiscal multiplier, growth, public debt, euro area |
| JEL: | H30 H63 O47 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:253 |
| By: | Chu, Angus C.; Liao, Chih-Hsing; Peretto, Pietro |
| Abstract: | How does taxation affect growth and inequality? We develop a Schumpeterian model with wealth heterogeneity, which influences the effects of tax policy. Our model features iso-elastic utility on leisure under which the change in consumption dispersion across heterogeneous households may cause a novel positive effect of labor income tax on employment in addition to the usual negative effect, which together yield an overall ambiguous effect. A negative (positive) effect on employment causes a negative (positive) effect on growth and innovation in the short run and also a negative (positive) effect on the real interest rate, which determines asset income. Consequently, labor income tax has an ambiguous effect on gross income inequality but unambiguously increases consumption inequality by reducing disposable wage income. Therefore, its effects on income inequality and consumption inequality are drastically different. We also calibrate the model to examine its quantitative implications. |
| Keywords: | taxation; innovation; inequality; economic growth |
| JEL: | O23 O3 O4 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122219 |
| By: | Patricia Justino; Santiago Tobón; Martín Vanegas-Arias; Juan Vargas |
| Abstract: | Tax revenues are fundamental to state-building and development, particularly in the aftermath of conflict. Through the lens of the recent post-conflict experience of Colombia, this paper explores the challenges of increasing tax revenues amid violence and illicit economic activities. We study four factors that the literature has identified as key determinants of a country's local fiscal capacity: early land conflicts; historical political violence; recent political violence; and the prevalence of illegal economies. |
| Keywords: | Taxation, Conflict, Violence, Colombia |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-62 |