|
on Public Finance |
| By: | Giacomo Corneo |
| Abstract: | An often neglected implication of couple taxation is its impact on marital sorting. A tractable model of such an impact is offered in this paper. It reveals that, as compared to joint taxation with income splitting, individual taxation makes higher-ability individuals more picky in the marriage market, which translates into a higher degree of economic homogamy in society. Furthermore, a shift from joint to individual taxation is predicted to reduce the average quality of marriages in the population. |
| Keywords: | economic homogamy, assortative mating, couple taxation, tax unit, progressive income tax |
| JEL: | H21 H24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11643 |
| By: | Shigeo Morita (Fukuoka University); Yukihiro Nishimura (Osaka University and CESifo); Hirofumi Okoshi (Okayama University) |
| Abstract: | As development of online market brings ongoing concerns that foreign app suppliers avoid value-added tax (VAT) in a domestic country, some countries design a tax reform which makes platform pay VAT instead of app suppliers (platform taxation). In the market where the monopoly platformer determines the prices of the network good and the commission fee of the platform services (with online apps as a representative example), this study investigates whether the prevention of tax leaks by platform tax improves the welfare of the host country, as well as the extent of the cross-market incidence of the two-sided market. We find that the tax reform reduces foreign app suppliers and consumption of a network good such as smartphones, with substantial extent of cross-market pass-through. The effect of the tax reform on home app suppliers crucially depends on the responsiveness of the app supplies from the number of users, which we call entry elasticity. Platform tax also increases the tax burden laid on the network product, but the monopoly seller let the increase of the tax burden born entirely by consumers. We also show that digitalization reduces the loss of welfare as well as tax planning by the platformer. |
| Keywords: | Value-added tax; Tax reform; Digital economy; Platform; Network externality |
| JEL: | F23 H26 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2502 |
| By: | David R. Agrawal; Adib Bagh; Mohammed Mardan |
| Abstract: | The conventional wisdom is that a big jurisdiction sets a higher tax rate than a small jurisdiction. We show this result arises due to simplifying assumptions that imply tax-base sensitivities are equal across jurisdictions. When more than two jurisdictions compete in commodity taxes, tax-base sensitivities need not be equal across jurisdictions and a small jurisdiction can set a higher tax rate than a big jurisdiction. Our analysis extends to capital and profit taxes, and, more generally, to various types of multi-player asymmetric competition. |
| Keywords: | Ramsey rule, inverse elasticity, fiscal competition, optimal taxation, spatial price competition, sales tax |
| JEL: | C70 D40 H20 H70 L10 R50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11616 |
| By: | Juin-Jen Chang (Academia Sinica,); Jang-Ting Guo (Department of Economics, University of California Riverside); Wei-Neng Wang (National Taichung University of Science and Technology) |
| Abstract: | This paper examines the theoretical and quantitative interrelations between progressive taxation and after-tax income inequality within a one-sector endogenous growth model. In a simplified two-type version of the macroeconomy, we analytically show that higher fiscal progression leads to less unequal long-run gross/net income distributions, provided the general-equilibrium elasticity of aggregate labor supply surpasses a specific negative threshold. In addition, numerical simulations find that our calibrated economy under useless or useful government spending, together with (i) agents' intertemporal elasticity of consumption substitution taking on the highest empirically-plausible value and (ii) a lower-than-unitary elasticity of capital-labor substitution in production, is able to generate qualitatively as well as quantitatively realistic long-run disposable-income inequality effects of changing the tax progressivity vis-Ã -vis recent panel estimation results. |
| Keywords: | Progressive Taxation; Income Inequality; Endogenous Growth. |
| JEL: | D31 E13 H30 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ucr:wpaper:202503 |
| By: | Christine L. Dobridge; Joanne Hsu; Mike Zabek |
| Abstract: | We estimate the effects of personal income tax decreases on financial well-being, including qualitative subjective assessments and quantitative measures. A plausibly causal design shows that tax decreases in the Tax Cuts and Jobs Act made survey respondents more likely to say they were “living comfortably” financially, with null effects at lower levels of subjective financial well-being. Estimates from a similar design using credit bureau data show that people who had larger tax decreases were modestly more likely to open new accounts and more likely to have higher consumer credit balances. Tax decreases had effects on credit scores and delinquencies that are indistinguishable from zero. Results suggest that larger tax decreases improve financial well-being in ways not fully proxied by typical administrative data. |
| Keywords: | taxes, subjective well-being, household finances, credit, financial well-being |
| JEL: | H24 G50 I31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11653 |
| By: | Maarten van 't Riet; Arjan Lejour; Arjan M. Lejour |
| Abstract: | Analysis of the international network of double tax treaties reveals a large potential for tax avoidance. Developing countries are, on average, not more likely to suffer from tax revenue losses than other countries. Yet, this average masks the fact that several countries, such as Bangladesh, Egypt, Indonesia, Kenya, Uganda and Zambia, are vulnerable to substantial potential losses of withholding tax revenue by treaty shopping. The analysis combines tax parameters of more than a hundred countries with an algorithm from network theory, which simulates the tax minimizing behaviour of multinational enterprises. We introduce the notion of potentially aggressive tax treaties. These are the key treaties in treaty shopping routes, that may lead to substantial tax revenue losses in developing countries. Moreover, the treaty partners are often in a prime position to top-up tax undertaxed profits of developing countries that offer tax incentives to attract investment, thus nullifying the incentive effects. |
| Keywords: | tax treaties, treaty shopping, developing countries, network analysis, withholding taxes, aggressive tax treaties, global minimum tax |
| JEL: | F23 H25 H26 O10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11641 |
| By: | BRUN Lidia (European Commission - JRC); PYCROFT Jonathan; SPEITMANN Raffael (European Commission - JRC); STASIO Andrzej Leszek (European Commission - JRC); STOEHLKER Daniel (European Commission - JRC) |
| Abstract: | Most Member States have already transposed the EU Minimum Corporate Tax Directive that implements the so-called "Pillar Two" of the global agreement to address the tax challenges arising from the digitalisation of the economy. The Directive ensures a 15% global minimum level of taxation of for multinational enterprise groups and large-scale domestic groups in the Union that have an effective tax rate below 15%. The new top-up tax is expected to reduce profit shifting. While previous estimates have been produced by the IMF, OECD and EU Tax observatory, we bring complementary evidence by considering also the long-term and economy-wide impact of Pillar Two for the EU. Our empirical estimates, based on the 2017-2021 country-by-country reporting (CbCR) data collected by the OECD, suggest that Corporate Income Tax (CIT) revenues in the EU would increase on average by 7.1% or EUR 26 billion annually from the implementation of the Global Minimum Tax Rules by all EU countries in the short run. These calculations take into account the recent policy developments in the US concerning the opt-out from the Pillar Two agreement. Our long-term fiscal projections, once the impact of Pillar Two implementation on business investment is factored in, indicate that CIT revenues would increase annually by 7.0% (EUR 25.7 billion) for the EU as a whole. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc141119 |
| By: | Enea Baselgia |
| Abstract: | This paper studies the effects of the 2017 multilateral automatic exchange of information (AEoI) on tax compliance in Switzerland. Using detailed administrative tax data and difference-in-differences designs, I find significant positive compliance effects. The AEoI prompted 107k taxpayers (2% of all) to participate in the amnesty, disclosing CHF 42.3 billion—over 6% of GDP. At the micro level, once evaders participate in the amnesty, their reported wealth increases by approximately 50% on average, with compliance effects persisting in the medium run. Furthermore, I document that tax evasion in Switzerland is widespread and significantly more evenly distributed than in other countries. |
| Keywords: | tax evasion, AEoI, compliance, enforcement, CRS, tax amnesty, inequality |
| JEL: | D31 F38 F42 H24 H26 K34 K42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11615 |
| By: | Panagiotis Asimakopoulos |
| Abstract: | We adopted an empirical approach to capture the macroeconomic impact of tax changes for the examined period from 1974 to 2018. It is generally accepted that vector autoregression model (VAR) has proven useful for describing the dynamic interrelationships of multivariate series. Our empirical analysis focus on VAR models and Vector Error Correction Models to capture long term relationships Firstly, we apply a VAR (1, 1) estimation that shows that the tax rate negatively affects GDP growth in the short run. The regression shows that a one percent increase in the tax rate lowers the level of GDP growth by 0, 86%. The effects of a permanent change are given by the cumulative impulse response function which suggest 0, 0025 decline of future GDP growth to one-unit upward shift in total tax rates. In addition, we estimate vector autoregressive model 2, VAR (1, 1), and examine the short run relationship among real GDP growth, personal income taxes, tax on goods and services, property taxes, debt, general government consumption expenditure, gross fixed capital formation and household consumption. The analysis of the coefficients suggests that income taxes were the most important factor in debt servicing, which had a negative impact on growth, and taxes on goods and services (transaction taxes) served mainly to address difficulties in government spending. Increased government spending and household consumption have a negative effect on growth and investment, while property taxes are positively correlated with investment in fixed assets. Government spending is negatively correlated with gross fixed capital formation. Moreover, we estimate vector autoregressive model 3, as VAR (1, 1) and examine the short run relationship among real GDP growth, debt, general government consumption expenditure and tax rates. Our estimation result suggests that debt, government spending and the level of taxation are negatively correlated with GDP growth while lagged GDP growth is positively correlated with GDP growth of current period. In this context, we conclude that policymakers should pursue a strategy that promotes the rationalization of government spending and the sustainability of debt, keeping the revenue capacity at a level that does not harm long-term growth. |
| Keywords: | VAR, VECM, Macroeconomic Impact, Tax Revenues, Greek Tax |
| JEL: | E6 H2 |
| Date: | 2025–03–02 |
| URL: | https://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2025_02 |
| By: | Nu Nu Win (Australian National University); Jonathan Hambur (Reserve Bank of Australia); Robert Breunig (Crawford School of Public Policy, Australian National University) |
| Abstract: | Using Australian tax and survey data, we exploit discrete eligibility cut-offs to estimate the effect of several business investment tax breaks, including tax credits and instant asset write-offs, implemented over the past 15 years. Policies implemented during the global financial crisis increased investment. Responses are larger for unincorporated businesses, possibly reflecting reduced efficacy of investment stimulus under Australia's dividend imputation system. However, we find mostly no evidence of an effect for other investment policies, including those implemented to address the COVID-19 pandemic. |
| Keywords: | investment; tax incentives |
| JEL: | D21 D22 G31 H25 H32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbardp:rdp2025-01 |