Capital adjustment costs,time-to-build effects,and inflation nonneutrality

The paper examines how the presence of capital adjustment costs and time-to-build constraints weaken the Fisher effect and inflation neutrality, and hence attenuate the arbitrage opportunities implicit in intertemporal substitution and the investment decision. It is demonstrated that large and permanent changes in inflation affect nominal interest rates, intertemporal substitution, and investment choices differently than small or temporary changes. Small, transitory inflationary innovations will lower real interest rates, yet create no arbitrage opportunities since the benefits from these low rates will be insufficient relative to the adjustment costs implicit in altering investment. Large, permanent inflationary innovations will possess no real effects. The paper then presents empirical work to support the prediction that the expected inflation effect on nominal interest rates depends on the perceived size and permanence of the innovation.     

税收优惠对企业创新的影响——基于先进制造业企业的实证分析

正确评价税收政策对先进制造业企业创新的影响具有重要意义。以2010—2019年中国A股先进制造业上市公司为研究样本,实证考察税收优惠与先进制造业企业创新的关系。研究发现：税收优惠对于先进制造业企业的创新具有激励效应,与所得税优惠相比,增值税优惠激励作用更为明显;区域异质性分析发现增值税优惠激励先进制造业企业创新呈现中、东、西部递减的状态,所得税优惠激励创新呈现东、西、中递减的状态。为提高税收优惠政策对于先进制造业企业创新的激励效应,提出完善税收优惠政策的建议。     

我国利率上升的替代效应与收入效应

利率上升的消费效用取决于利率上升的替代效应和收入效应的作用之和。文章首先利用一个两期跨时选择模型考察了利率上升的替代效应和收入效应;然后实证分析了利率上升对于我国城镇居民消费支出的影响,结果表明名义利率上升所产生的收入效应大于替代效应;最后提出了相应的政策     

Transfer Pricing: Strategies,Practices, and Tax Minimization

Using a survey of tax executives from multinational corporations, we document that some firms set their transfer pricing strategy to minimize tax payments, but more firms focus on tax compliance. We estimate that a firm focusing on minimizing taxes has a GAAP effective tax rate that is 6.6 percentage points lower and generates about $43 million more in tax savings, on average, than a firm focusing on tax compliance. Available COMPUSTAT data on sample firms confirm our survey‐based inferences. We also find that transfer pricing‐related tax savings are greater when higher foreign income, tax haven use, and R&D activities are combined with a tax minimization strategy. Finally, compliance‐focused firms report lower FIN 48 tax reserves than tax‐minimizing firms, consistent with the former group using less uncertain transfer pricing arrangements. Collectively, our study provides direct evidence that multinational firms have differing internal priorities for transfer pricing, and that these differences are strongly related to the taxes reported by these firms.     

Personal savings,ethnicity and redistribution

The effects on personal savings of measures to equalise incomes are prominent in current policy debates. Both supporters and opponents of redistributive measures adopt the Keynesian position that greater income equality will itself reduce savings. However, not only income level affects household savings. Different ethnic groups have very different savings behaviour: surveys suggest that black households in the larger urban areas have a higher savings function than white households and a higher marginal propensity to save. Equalising incomes in South Africa implies shifting income to black households from white ones. In these circumstances redistributive measures could actually increase savings. These findings do not, however, point to specific measures to achieve that end or indicate how redistributive measures themselves could shift the savings functions of the various ethnic groups. Nor do they ensure that higher personal savings will translate efficiently into higher investment.     

A choice‐theoretic analysis of a corporate tax holiday versus a subsidy

This paper attempts to compare the effect of a corporate tax holiday with that of a subsidy on the behaviour of the individual firm. Assuming the subsidy equals the amount of tax paid by a firm operating under the subsidy system, we find that the firm's net profit will be greater under the tax holiday than under the subsidy regime. Similarly, if the subsidy exceeds the tax by an amount that would equalize the profits made by the (“marginal”) firm under the two regimes, then it is found that firms with higher than “average” unit costs would opt for the subsidy system; conversely, firms with a low cost structure would maximize profits by selecting the tax holiday. Finally, a multiperiod analysis of the particular choice facing prospective manufacturers in Ciskei, shows that the firm would normally choose the subsidy system except if the current tax exceeded the subsidy at the output level representing maximum profit under the tax holiday.     

Consumption externalities,market imperfections and optimal taxation

In a dynamic model with a keeping‐up‐with‐the Joneses preference and market imperfections, we attempt to investigate under what circumstances and for what reason the optimal tax should be state‐varying. We extend the Ljungqvist and Uhlig (2000) proposition to include preferences that exhibit non‐homotheticity. We show that a keeping‐up‐with‐the‐Joneses preference (a non‐intertemporally‐dependent preference) can lead the social planner to commit to a state‐contingent tax on labor income. Moreover, the optimal labor income tax can be either procyclical or countercyclical with respect to economic fluctuations, this crucially depending on whether the level of contemporaneous consumption increases or decreases the wedge between the intertemporal substitution elasticity of households and of the social planner.     

The Effect of Changes in Income Shifting on Affiliate Managers' Internal Reporting Decisions*†

This study examines the interplay between tax and internal reporting incentives among affiliates of multinational corporations (MNCs). MNCs face limited information flows that may prevent affiliates' performance metrics to be responsive immediately to changes in the firm's tax planning. Using granular data of affiliates belonging to MNCs from 21 European countries, our study provides new empirical evidence of affiliate internal reporting responses induced by changing tax plans. When high-tax-rate countries tighten income shifting rules, we first document that income shifting is reduced and low-tax-rate affiliates have less income. Second, we predict and document that managers of these low-tax-rate affiliates offset this decrease in profits by managing upwards a key performance metric: affiliate earnings. Our results are consistent with firms not quickly adjusting the affiliate managers' incentives in the face of changing tax planning strategies, and affiliates managing reported earnings to offset the effect of changes in the tax planning of the firm. Cross-sectional analyses provide further evidence consistent with the theory underlying the main tests. The results support the policy of tightening income shifting rules when the objective is to reduce income shifting, and firms' central management would benefit from considering the implications of changing tax plans on the assessment of local managers.     

Nature and determinants of household retirement savings behaviour in South Africa

This study investigates the savings behaviour among South African households using the General Household Survey data for the periods 2002–04 and 2008–10. The age-cohort analysis shows that households achieve their income peaks when the household heads are in their early forties, earlier than in most other countries. Although initial support for the life-cycle hypothesis framework in the form of smoothed consumption was found from multivariate analysis, a closer examination reveals that the consumption–income ratio is also smooth over the age and cohort variables. This indicates that savings rates do not follow a hump-shape pattern as required in the life-cycle hypothesis framework. While households are seen to be able to maintain their consumption in retirement years through government grants, a large portion of the grants seem to be utilised for savings. This shows that the government grants have the dual effect of sustaining consumption levels while disincentivising savings during working years.     

Trade‐offs between Tax and Financial Reporting Benefits: Evidence from Purchase Price Allocations in Taxable Acquisitions

Under U.S. GAAP, firms recognize assets acquired in business combinations at fair value. Similarly, in taxable asset acquisitions firms adjust the tax basis of assets to fair value. Managers can increase the present value of future tax savings by allocating a greater portion of the purchase price to shorter‐lived assets than to goodwill or indefinite‐lived intangibles. However, this tax planning strategy imposes a financial reporting cost because it reduces book income following the acquisition; all else equal, allocations to shorter‐lived depreciable assets increase book depreciation expense, whereas allocations to goodwill and indefinite‐lived intangibles do not increase book amortization expense. We exploit the features of taxable asset acquisitions to investigate trade‐offs between tax and financial reporting incentives. We predict and find greater allocations to depreciable versus intangible assets when managers have strong tax incentives and weak financial reporting incentives. However, we also find that strong financial reporting incentives moderate the effects of strong tax incentives. These findings contribute new evidence to the literature on the importance of nontax costs in tax planning decisions     

FDI税收激励的两难选择

本文从博弈论视角分析实施税收激励政策吸引FDI的内在机理,并以亚洲其他国家的税收激励实践为鉴,探析当周边国家实行税收激励时,我国面临两难时的谨慎选择。     

The Timing of Redistribution

We investigate whether late redistribution programs that can be targeted toward low income families, but that may distort savings decisions, can “dominate” early redistribution programs that cannot be targeted as a result of information constraints. We use simple two‐period overlapping generations models with heterogeneous agents under six policy regimes: a model calibrated to the U.S. economy (benchmark), two early redistribution (lump sum) regimes, two (targeted) late redistribution regimes, and finally a model without taxes and redistribution. Redistribution programs are financed by a labor tax on the young generation and a capital tax on the old generation. We argue that if the programs are small in size, late redistribution can dominate early redistribution in terms of welfare but not in terms of real output. Better targeting of low income households cannot completely offset savings distortions. In addition, we find that the optimal transfer and tax policy implies a capital tax of 100% and transfers exclusively to the young generation.     

The economic effects of the fair tax: analysis of results of a dynamic CGE model of the US economy

By replacing the current income tax with a national sales tax, the FairTax proposal would end the double taxation of saving inherent in the existing tax code and, by doing so, raise output, employment, investment and capital stock relative to the benchmark economy. While these positive effects would be felt almost immediately, the FairTax is very much an investment in the future. Its full benefits would be realized only after the economy achieved a new “steady state,” some 20–25 years into implementation. Only by that point, will the effects on growth have been fully absorbed into the economy and the wellbeing of most households across most income groups improved. The policy choice, then, is between the status quo, and a new policy that would inflict some short-run pain as the price of a permanently expanded economy.     

The Effects of the Tax Cuts and Jobs Act of 2017 on Defined Benefit Pension Contributions*

This study examines the effect of the Tax Cuts and Jobs Act of 2017 (TCJA) on corporate defined benefit pension contributions. The TCJA decreases the corporate tax rate from 35 percent in 2017 to 21 percent in 2018 and thereafter. This change incentivizes firms to increase 2017 pension contributions to take advantage of tax deductions at a higher rate. Consistent with this incentive, we find firms increase defined benefit pension contributions by an average of 25 to 31 percent in 2017 compared with earlier years. We also find that taxpaying firms are the primary contributors. Further, taxpaying firms with high levels of pension-related deferred tax assets contribute over three times as much as taxpaying firms with low levels of pension-related deferred tax assets. We also find firms that increase pension contributions in 2017 reduce 2018 contributions, consistent with intertemporal income shifting rather than a permanent change in pension funding strategy.     

The Effect of Tax Preparation Expenses for Employees: Evidence from Germany

Using a panel of German income tax accounting data from taxpayers with no business income (employees), we find a negative relationship between tax preparation expenses and tax liabilities. However, preparation expenses are shown to exceed estimated tax savings. Specifically, one additional Euro spent on preparation yields an estimated tax savings of 72 cents in an OLS regression and 24 cents in a fixed effects regression. In addition, we observe substantial heterogeneity in tax savings among income groups, but even if we account for long‐term tax savings, tax liability reductions exceed tax preparation expenses only for the highest income quintile. In all other income quintiles, average preparation expenses exceed the estimated tax and time savings. Based on these results, we also examine whether other specific benefits affect an individual's decision to purchase tax preparation services, and the results indicate the importance of the benefits of coping with complexity and reduced uncertainty. Overall, our findings illustrate that the current tax compliance process violates at least two of Adam Smith's principles of taxation, taxes are neither certain nor fair.     

【学界视点】营业税还是增值税：企业选择的逻辑基础

以企业为基础的分析单位,文章尝试从公共选择理论的视角,考察单个企业对营业税和增值税制度的选择行为及其逻辑基础。结论表明,在对经济预期稳定的情况下,企业更加偏好于增值税,而在经济处于波动的预期中将更加偏好于营业税。     

Do R&D tax incentives work? Firm-level evidence from China

Tax incentives have been used worldwide to encourage firm R&D, but there is little evidence on their effectiveness as a policy tool in developing countries. We use a panel dataset of Chinese listed companies covering 2007 to 2013 to assess the effects of tax incentives on firm R&D expenditures and analyze how institutional conditions shape these effects. Our results show that tax incentives motivate R&D expenditures for our sample firms. A 10% reduction in R&D user costs leads firms to increase R&D expenditures by 3.97% in the short run. We also find considerable effect heterogeneity: Tax incentives significantly stimulate R&D in private firms but have little influence on state-owned enterprises' R&D expenditures. Moreover, the effects of tax incentives are more pronounced for private firms without political connections. Hence, reducing political intervention complements tax incentives' capacity to foster firm R&D in developing countries.     

Marginal and Average Tax Rates and the Incentive for Self-Employment

The paper examines how the incentives for individuals to take up self-employment, rather than paid employment, are influenced by the marginal and average income tax rate. A model is developed in which an individual optimally chooses the supply of labor effort and the amount of tax to evade. Assuming that remuneration is more responsive to effort but that the opportunities for evasion are greater in self-employment, we find a negative relationship between self-employment and the marginal tax rate but a positive relationship with the average rate. This is supported by empirical evidence for 15 OECD countries over the 1980s.     

Population age structure and the size of social security

"This paper uses a general overlapping generations model to analyze social security. Rather than focusing on intertemporal price and income considerations, however, the paper focuses on the effect of contemporaneous (same period) prices and income. The analysis shows that the old-age dependency ratio acts as a shadow price for old-age benefits. With this new shadow price, the equilibrium price and quantity of social security benefits and the level of the payroll tax rate are determined in a demand-supply framework with individual utility maximization. Three explicit demand functions (intergenerational contracts) are analyzed. The model is tested using [U.S.] time series data for the social security Old-Age and Survivors (OASI) program."     

The Effects of Competition from S Corporations on the Organizational Form Choice of Rival C Corporations

Subchapter C of the U.S. Internal Revenue Code levies an entity‐level tax on corporate profits, whereas Subchapter S allows corporations meeting specific criteria to elect out of this tax. Despite these differences, C and S corporations regularly compete for customers and capital. We examine whether and the extent to which competition from S corporations influences the future organizational form choice of rival C corporations and explore outcomes of this choice. Using data for 4,462 private U.S. commercial banks grouped by Metropolitan Statistical Area during 1997–2010, we find that greater competition from S corporation banks increases the likelihood that rival C corporation banks convert to Subchapter S status. We estimate that the aggregate first‐year tax savings from S conversion exceed $372 million. Consistent with these savings being used to maintain competitive parity with rivals, we find that converting banks increase their interest rates on customer deposits and advertising intensity. Our findings provide insight into whether competition from tax‐advantaged firms influences the organizational form choice of rival tax‐disadvantaged firms.