Border tax adjustments and tariff‐tax reforms with consumption pollution

We develop a model of a small open economy, where pollution per unit of consumption between domestically produced and imported quantities of the same good differs. We show that the first‐best policy combination calls for consumption taxes on all polluting goods, and border tax adjustment (BTA) measures, that is, tariffs or import subsidies. We identify conditions under which well‐known tariff‐tax reform policies for developing economies, such as a consumer‐price‐neutral piecemeal reform of trade and a consumption tax, and a consumer‐price‐neutral reform of all trade and consumption taxes improve welfare. We also evaluate whether reforms of trade taxes alone are superior to consumer‐price‐neutral reforms of trade and consumption taxes.     

Building a computable general equilibrium tax model for Italy

In this paper, we develop a multi-sectoral computable general equilibrium tax model for Italy allowing for a number of fiscal tools. We illustrate the methodology for modelling and accommodating the full range of direct and indirect taxes into the national general equilibrium model. In particular, we build a commodity tax matrix by commodity, source, user and tax type; and a production tax matrix by industry and tax type. We also put a special emphasis on the institutional sector accounts, incorporating a detailed system of equations. Our model provides a powerful tool for acquiring new insights in fiscal policy analysis, through the assessment of tailored tax reforms, which can consist of either changes in tax rates and tax bases for indirect and direct taxes. Finally, to validate the model we perform an equalizing Value-Added-Tax rates reform. We find that a budget-neutral uniform tax rate reform would be GDP and welfare improving. However, results across agents and sectors vary.     

A basic tool to assess tax administration strength in emerging Europe

Large tax compliance gaps, together with the need to generate additional tax revenue have put a premium on tax administration reform in emerging Europe. The key features of an efficient tax administration are well established, but an objective assessment of the relative strengths and weaknesses of tax administrations have been lacking. This paper proposes a simple index of tax administration strength, based on objective indicators reflecting key organizational and operational aspects of revenue administrations relative to international best practice. A diagnostic test is then conducted to assess the performance of the proposed index in its ability to predict variations in tax collection efficiency in emerging Europe.     

Do we now collect any revenue from taxing capital income?

The U.S. income tax system has long been recognized as a hybrid of an income and consumption tax system, with elements that do not fit naturally into either pure system. What it actually is has important policy implications for, among other things, understanding the impact of moving closer to a pure consumption tax regime. In this paper, we examine the nature of the U.S. income tax system by calculating the revenue and distributional implications of switching from the current system to one form of consumption tax, a modified cash flow tax.     

Estimating the revenue losses of international corporate tax avoidance: the case of the Czech Republic

International corporate tax avoidance by multinational enterprises likely lowers the Czech Republic’s corporate income tax revenue, but it is not clear by how much. To clarify this I first review existing estimates of the revenue losses of international corporate tax avoidance to government revenue worldwide. I then discuss revenue estimates relevant for the Czech Republic and develop a few new, albeit only illustrative, ones. None of the existing research focused on the Czech Republic nor did the six recent international studies I examine provide reliable estimates for the Czech Republic. The extrapolations from these studies result in a revenue loss of a quite wide range with a median of 10% of current corporate income tax revenues. The other newly prepared estimates, based on firm-level and aggregate data, are of similar magnitude. I conclude with a discussion of these rough estimates as well as questions for further research and policy recommendations.     

Fiscal policy under a minimum‐time objective

In an endogenous growth model, we characterize the fiscal policy driven by a minimum‐time objective of economic development. We find that in equilibrium government should levy the highest possible consumption taxes, reduce public expenditures to the lowest possible level, and keep labor income tax rate and capital income tax rate satisfy a substitution relationship at the balanced budget constraint. We also identify the condition under which income tax rate should be set to zero. We further find that the equilibrium fiscal policy is equivalent to the growth‐maximizing fiscal policy, whereas it generally deviates from the welfare‐maximizing fiscal policy. We hence identify a circumstance where setting the policy goal of reaching an economic‐performance target as soon as possible cannot be justified in the sense of maximizing the welfare of households.     

Distributional Effects of a Wealth Tax under Lifetime‐Dynastic Income Concepts*

Annual wealth tax is back on the policy agenda, but discussion of its effect is not well informed. When standard methodology is used and wealth‐tax burdens are measured against annual individual income, it is found that a large share of the tax burden falls on people with low incomes. In this study, we use rich Norwegian administrative data to discuss the distributional effects of wealth tax under several different income concepts, ultimately measuring income over the lifetime of family dynasties. When measured against lifetime income and lifetime income in dynasties, wealth tax is mostly borne by high‐income taxpayers and is seen as clearly redistributive.     

Numerical simulation on property tax reform: evidence from China

This article analyses the property tax reform in China in a computable general equilibrium model that recognizes the interaction between and among housing markets in different provinces and macroeconomic development. Using real data in 2010, we present the benchmark equilibrium for reference property and income tax rates. Then, we examine different property and income tax policies and make a comparison of their production, consumption, welfare and national income. We find that the implementation of property tax would decrease the house production at the expense of welfare in taxed area. The expansion of the taxed regions may increase the total social welfare and national income. Even though property tax policy may not be able to change the income distribution in China, increasing income tax rate could narrow the income disparity. Finally, this article shows the reliability of the conclusions when sensitivity analysis on optimal condition of equilibrium computation is performed under varied property tax policy.     

Dynamics of the Market for Corporate Tax‐Avoidance Advice*

This paper addresses the debate over aggressive tax‐planning models and analyzes the role of tax consultants. It focuses on the dynamic interaction between innovation and imitation of aggressive tax‐planning products and governmental tax regulation, and it highlights the importance of the length of regulatory lag in comparison with the time it takes the tax‐consulting industry to imitate newly innovated tax‐avoidance products. It reveals an alignment of interests between highly innovative tax‐consulting firms and the governmental tax legislator/regulator. The conclusions are also relevant for the policy debate on mandatory disclosure rules about aggressive tax‐planning models.     

Foreign direct investment in a world of multiple taxes

Governments impose multiple taxes on foreign investors, though studies of the effect of tax policy on the location of foreign direct investment (FDI) focus almost exclusively on corporate income taxes. This paper examines the impact of indirect (non-income) taxes on FDI by American multinational firms, using affiliate-level data that permit the introduction of controls for parent companies and affiliate industries. Indirect tax burdens significantly exceed the foreign income tax obligations of foreign affiliates of American companies. Estimates imply that 10% higher local indirect tax rates are associated with 7.1% lower affiliate assets, which is similar to the effect of 10% higher income tax rates. Affiliate output falls by 2.9% as indirect taxes rise by 10%, while higher income taxes have more modest output effects. High corporate income tax rates depress capital/labor ratios and profit rates of foreign affiliates, whereas high indirect tax rates do not. These patterns reveal the impact of indirect taxes and suggest the mechanisms by which direct and indirect taxes affect FDI.     

我国节能减排税收政策效应研究

税收政策是我国促进节能减排的重要工具之一。采用Engle-Granger协整检验方法,对我国节能减排税收政策效应的实证研究结果表明,从长期看,节能减排税收收入与我国单位GDP能耗之间存在协整关系,但各个税种的节能减排效应差异较大。其中,增值税的节能减排效果显著,但仍有改善空间,而消费税和资源税并未发挥应有的作用。因此,建议通过全面改革资源税制、扩大消费税征税范围以及优化增值税税率等系列措施,促进我国节能减排税收政策效应的发挥。     

Paternalism and Tax Competition

When consumers make mistakes, the government may wish to use paternalistic taxation as a corrective measure. We analyse the extent to which tax competition undermines the feasibility of paternalistic taxation. We show that the paternalistic component of a tax on a harmful good is reduced when there is cross-border shopping, but it does not disappear altogether. In a model with tax competition between two countries, only one of which has a paternalistic objective, we show that a minimum tax rate requirement can be Pareto improving despite the divergence in policy objectives. Tax harmonization, however, reduces welfare in the non-paternalistic country.     

The Tax‐rate Elasticity of Local Business Profits

Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a 1% increase in the LBT rate decreases the LBT base by 0.45%, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using tax revenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.     

Optimal Differentiation of International Environmental Taxes in the Presence of National Labor Market Distortions

We explore the implication of the `doubledividend' debate for international environmentaltaxes. In our scenario, small open economies withdifferent labor market distortions follow a commonenvironmental policy and use national environmentaltax revenues to finance labor tax cuts. Since thedouble dividend hypothesis does not hold, a high labortax implies a low environmental tax relative to othercountries. The optimal differentiation ofinternational environmental taxes is proven to be afunction of the national labor tax rates and theuncompensated elasticities of labor supply.     

促进我国区域间产业资本转移的税收政策研究

现阶段我国区：域经济发展仍不协调．东部地区的产业资本向中西部转移尚存制度上的障碍。文章基于东部产业资本向中西部转移的动机分析,对我国现行税收政策在促进区域间产业资本转移的效果进行评价,为有效促进我国区域间产业资本转移。提出尽快在中西部全面实施资源税改革、落实增值税扩围和增加对中西部产业的流转税优惠以及推进消费税、个人所得税和企业所得税改革等政策建议。     

Do income tax breaks for the elderly affect economic growth?

Income tax breaks for elderly taxpayers are sizable, widespread, and potentially affect growth through migration and other behaviors. We provide the first investigation into the growth effects of differential tax policy by age, taking a multi-pronged empirical approach to US state-level data since 1977. Some analyses include panel error-correction models combined with variation in state-level policies over time. Alternative analyses use how changes in federal tax law manifest at the state-level. Results suggest that taxes on lower income taxpayers, of any age, decrease growth the most, while taxing the high income elderly—those targeted recently—has little effect.     

我国创业投资税收政策的实证分析

税收政策对创业投资的发展至关重要.本文通过对我国有关创业投资税收政策的实证分析,认为现行税收政策对创业投资业的发展影响甚微,应当通过税收立法消除重复征税,制定鼓励投资者和创业企业和相关人员的税收政策,以发挥税收杠杆的调节作用.     

Revenue Sharing and Information Exchange under Non‐discriminatory Taxation*

The international exchange of tax information, and its merits compared to withholding taxation, has emerged as a central topic in international tax policy. We characterize and compare the outcomes that emerge, in a two‐country world, with and without information exchange, under the assumption that countries are unable to tax residents and non‐residents differentially. The analysis focuses on the role of asymmetries in country size (capturing a key feature of tax havens) and on the impact and potential desirability of schemes to share the revenue raised by withholding (as under the new EU savings tax arrangements) or (more innovatively) as a consequence of information exchange. We show that, irrespective of any difference in country size, it is in the interests of both countries, in terms of tax revenue, that all revenue collected from non‐residents be transferred to the residence country—which would entail taking the EU practice even further from the norm, but is currently the standard in relation to information exchange. A withholding scheme with revenue fully reallocated in this way gives both countries more revenue than does information sharing, whatever the allocation under the latter.     

Net Wage Illusion in a Real‐Effort Experiment*

In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25, and 50 percent. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is because of a net wage illusion effect. The existence of this effect demonstrates that not only are the tax rate and the tax base of importance for work incentives, but the perception of a tax is also important.     

A Synthesis of Contour and Flexible Wage Hypotheses

Economic instability has risen in emerging economies after capital account liberalization. A more progressive income tax policy could offer a stabilizing alternative. It could result in more revenue, more countercyclical policy, and more income equality and thus more stable demand growth. We test the effects of progressive taxes on stability using univariate and multivariate analyses based on panel data for emerging economies from 1982 to 2002 and compare those to the effects of a value added tax (VAT). We also consider possible constraints on tax policy design, such as government spending, international tax competition, and openness. Progressive taxes are associated with greater income equality and a higher likelihood of countercyclical fiscal policies. The potential benefits from progressive income taxation, though, are lower with VAT. Tax policy is also constrained by government expenditures and openness, but not by lower corporate taxes, suggesting that all income tax rates are constrained by openness.