Slowing Fossil Fuel Extraction: A Role for Taxation of Exports,Capital Gains and Interest Income

This paper develops a model of a growing open economy rich in non‐renewable resources, the extraction of which negatively impacts domestic productivity and whose sector competes with final production for capital. We analyse how tax rates on capital gains and interest income and the time trend of an export revenue tax rate could slow the extraction of resources for export. We find that taxing capital gains and interest income at the same rate and setting an export revenue tax rate to decline at the marginal social cost of extraction would defer extraction. An export revenue tax rate need not fall over time to curb depletion if capital gains are taxed at a lower rate than interest income, which is second best to taxing asset returns at the same rate when the resources sector competes for capital.     

Cost Uncertainty and Taxpayer Compliance

The existence of a private cost borne by audited taxpayers affects the tax enforcement policy. This is so because tax auditors will face now two sources of uncertainty, namely, the typical one associated with taxpayers’ income and that associated with the taxpayers’ idiosyncratic attitude towards tax compliance. Moreover, the inspection policy can be exposed to some randomness from the taxpayers’ viewpoint due to the uncertainty about the audit cost borne by the tax authority. In this paper we provide an unified framework to analyze the effects of all these sources of uncertainty in a model of tax compliance with strategic interaction between auditors and taxpayers. We show that more variance in the distribution of the taxpayers’ private cost of evading raises both tax compliance and the ex-ante welfare of taxpayers. The effects of the uncertainty about the audit cost faced by the tax authority are generally ambiguous. We also discuss the implications of our model for the regressive (or progressive) bias of the effective tax system.     

The Effect of Taxes on Corporate Financing Decisions: Evidence from a Panel of Italian Firms

This paper provides additional evidence on the relationship between corporate taxes and debt using panel data on Italian companies. The panel covers 1054 companies for the years 1982–1994.The paper follows the Graham-Shevlin methodology for calculating company specific marginal tax rates (MTR) relying on the non-linearity of corporate tax schedules resulting from company losses and the ensuing tax provisions (carry-forward and backward rules). In the period covered by the panel there were in Italy two taxes on corporate income (IRPEG and ILOR), with different loss carry-forward rules, whose statutory tax rates and tax bases changed several times. For these reasons the simulated MTRs display both cross-sectional and time-series variation.The paper tests whether taxes encourage the use of debt by analysing incremental financing decisions. In order to cope with the endogeneity of the MTR the paper considers two different specifications. The first uses the lagged value of the simulated MTR. The second employs the estimate of before-financing MTR proposed by Graham et al. (1998). Significant cross-sectional tax effects are identified under both specifications whereas time-series variation cannot be identified if due account is taken of firm-fixed tax effects.The paper also investigates whether personal taxes affect corporate financing decisions. The MTR may either overstate or understate the fiscal benefit of debt financing according to whether, at the personal level, interest income is taxed at a rate that is higher or lower than the tax rate on returns from common stocks. Differences in the dividend-payout ratio across companies and several reforms in interest, dividend and capital gains taxation provide sufficient cross-section and time-series variations to identify the effect of personal taxes on debt usage.     

Tax Reform and the Demand for Debt

This article examines the impact on household borrowing from a tax reform that implied a change from progressive to constant marginal tax rates on interest deductions. We use three alternative empirical methods to address the problem of endogenous explanatory variables, which arises when the marginal tax rate itself is a function of the amount of debt: The first approach uses instrumental variables to examine the significance of the marginal tax rate directly and produces mixed results. In the second approach we use tobit regressions based on repeated cross-sectional data to examine the correspondence between debt and income and find that the households' amount of debt were strongly and positively related to income before the tax reform and significantly more income-dependent under progressive tax rates than under the constant tax rate. Finally, using panel data covering the last year prior to the reform and the first year after, we find that the change in a household's marginal tax rate had a significant impact on the change in its amount of debt.     

Taxation of Interest Income

Why is interest income taxed so much more heavily than other forms of capital income? This differential tax treatment has generated substantial tax arbitrage, resulting in lower tax revenue, efficiency costs, and apparently net gains to rich borrowers and net losses to poor lenders, together suggesting that this tax treatment makes no sense on welfare grounds. In examining this argument more formally, this paper reveals two omitted considerations that can help explain the existing tax treatment. First, the forecasted increase in the market interest rate results in a redistribution from rich borrowers to poor lenders. Yet this redistribution comes at no marginal efficiency cost, starting from a situation with no distortions to portfolio choice, so at the margin dominates further redistribution through the income tax. In addition, information about an individual's portfolio choice reveals information about her earnings ability, even controlling for observed labor income, if those who are more able tend to be less risk averse. By making use of this extra information about earnings ability, the tax system can be better tailored to redistribute from able to less able, for any given efficiency cost.     

Tax Deductions and the Marginal Welfare Cost of Taxation

Recent work emphasizes the efficiency costs of tax deductions that distort the pattern of household spending. Using evidence on the sensitivity of taxable income to tax rates, this work suggests that the marginal welfare cost (MWC) of income taxes in the United States could be dramatically higher because of tax deductions, and might exceed unity. This paper develops an alternative approach for assessing the MWC using evidence on underlying parameters (e.g., labor supply elasticities, the demand elasticity for tax-favored goods). A MWC of around 0.3 to 0.5 seems more consistent with these parameter values, though this estimate is still significantly higher because of tax deductions.     

The roles of book‐tax conformity and tax enforcement in regulating tax reporting behaviour following International Financial Reporting Standards adoption

This study investigates whether increasing the level of tax enforcement can potentially offset the primary cost of a reduction in the level of book‐tax conformity (BTC) following International Financial Reporting Standards (IFRS) adoption – increased tax avoidance. We find that after the decrease in BTC and the concomitant increase in tax enforcement that followed IFRS adoption in Israel, tax avoidance declined significantly. Our results imply that one of the primary costs of reducing BTC can be avoided. Moreover, the results suggest that rather than one strict regulatory approach to deal with reporting manipulations, a combination of trust and control is more effective and less radical.     

Direct evidence on the marginal rate of taxation on dividend income

Miller and Scholes (1978) hypothesize that the marginal tax rate on dividend income may be less than the marginal rate of tax on capital gains. Their hypothesis is dependent upon individuals utilizing existing provisions of the Code which serve to reduce the taxation of dividends. In this study, estimates of the marginal and effective rates of tax on dividend income for the year 1979 are presented using the Statistics of Income sample of returns. The average marginal rate of tax on dividend income is estimated to be 40%, while the average effective rate of tax is estimated to be 30%.     

Taxes and production: The case of Pakistan

This paper investigates the effectiveness of investment incentives and corporate income taxes in influencing production and investment decisions in the Pakistani wearing apparel and leather products industries. Three tax instruments are considered: the corporate income tax (CIT), the investment tax credit (ITC), and the capital cost allowance (CCA).The results show that since there are significant capital adjustment costs, it is important to distinguish between the short, intermediate, and long-run effects associated with the tax instruments. Production decisions are relatively more responsive to changes in the ITC rate compared to changes in either CCA or CIT rates in each run. However, only in the long run for the apparel industry are the ITC and CCA rates cost effective in stimulating investment. The CIT is never cost effective. Thus targeted instruments outperform the general CIT instrument. In addition, although the incentive to invest is enhanced, there is little effect on output. Therefore, tax incentives essentially make production techniques more capital intensive.     

Reduced Tax Progressivity in Norway in the Nineties: The Effect from Tax Changes

The inequality in pre-tax income increased in Norway in the 1990s, while the concentration of taxes remained largely unaltered. This means that tax progressivity has decreased in the period, as measured by summary indices of tax progressivity. In this paper I analyze individual income data to ascertain whether tax changes in the period can explain the observed decrease in tax progressivity. As marginal tax rates at high income levels have been substantially reduced in the period, for instance through the tax reform of 1992, it is expected that tax changes may have influenced the degree of inequality in pre-tax incomes. This behavioral effect is examined by deriving estimates of the elasticity of gross income with respect to the net-of-tax rate, obtained from various panel data regressions. The tax changes may also have shifted the distributional burden of taxes for unaltered level of pre-tax income inequality. In order to identify this (direct) effect of tax-law alterations, the same fixed distribution of pre-tax income is exposed to various tax-laws in the period.     

Determinants of Regional Investment Decisions in China: An Econometric Model of Tax Incentive Policy

This paper examines whether concessionary tax rates and tax incentives can attract foreign direct investment (FDI) into certain designated areas in China. Since China opened its doors to foreign investors in 1979, tax benefits have been used extensively to attract FDI into different areas. In 1991, a new tax law was introduced which superseded two previous income tax laws. This new law provides additional tax benefits which improve the investment environment for foreign investors. This study investigates the effect of China's tax rates and tax incentive policy on FDI and on the locational choices of foreign firms. Our empirical results indicate that tax rates and incentives are important determinants of regional investment decisions in China, after controlling for potential confounding variables covering infrastructure, unemployment rate, wage rate and agglomeration economics. Specifically, areas offering lower tax rates and increased tax incentives are found to attract greater amounts of FDI. The impetus of the tax effect on FDI is more apparent in the post-1991 period due to changes in the tax laws. Our results also suggest that infrastructure variables are important determinants of regional investment decisions.     

The effects of standardized tax rates,average tax rates,and the distribution of income on tax progressivity

This study examines the changes in US individual income tax progressivity over the 1986–2003 period using the indexes developed by [Kakwani, N.C., 1976. Measurement of tax progressivity: An international comparison. Economic Journal 87(March), 71–80]. Although progressivity over this time frame has generally been studied in the literature, we provide additional insights by decomposing the changes in index values to account for the effects of concurrent changes in the standardized tax rates, average tax rates, and the income distribution. The decomposition should prove to be particularly useful when different summary indexes lead to conflicting conclusions about progressivity changes, as is often the case. From a policy standpoint, we show that it is the standardized tax rates, a derivative of the legislated tax rates, which need to be monitored and managed to offset the negative progressivity effects of increasing before-tax income inequality.     

Do auditors constrain intertemporal income shifting in private companies?*

This study investigates the association between private company auditing and intertemporal income shifting. Using a large reduction in the Finnish corporate tax rate as a strong incentive for income shifting and financial statement data coupled with proprietary information from the tax authorities, we analyse accruals and cost stickiness of small private companies. Our results reveal significant differences in accrual income shifting between audited and unaudited companies, but only among companies that on average could anticipate the tax reduction the most. Further, we find auditors to restrict sticky selling, general, and administrative cost behaviour that we hypothesise is associated with illegal actions. Additional tests expose a nontrivial number of incorrectly unaudited companies which are the ones mostly associated with income shifting. Taken together, our study highlights the effects of audit exemption and the importance of enforcement while also suggesting that the audit process is value adding for the tax authorities.     

The Elasticity of Taxable Income in New Zealand*

This paper reports estimates of the elasticity of taxable income with respect to the net‐of‐tax rate for New Zealand taxpayers. The relative stability of the New Zealand personal income tax system, in terms of marginal rates, thresholds and the tax base, provides helpful conditions for deriving these estimates. The elasticity of taxable income was estimated to be substantially higher for the highest income groups. Changes in the timing of income flows for the higher income recipients were found to be an important response to the announcement of a new higher rate bracket. The marginal welfare costs of personal income taxation were consistent across years, being relatively small for all but the higher tax brackets. For the top marginal rate bracket of 39 per cent, the welfare cost of raising an extra dollar of tax revenue was estimated to be well in excess of a dollar. Implications of the findings are that: disincentive effects of high top marginal rates can be substantial even when labour supply responses are small; the welfare costs of increases in top marginal tax rates can be high; and announcement effects of tax policy changes can lead to considerable income shifting between time periods.     

优化我国证券收益所得课税的思考

我国经济和证券市场的高速发展对现行证券税制提出更高的要求。因此,我国证券税制的改革应循着这样的道路:进一步完善现行税制,并与国际惯例接轨;调节收入分配关系,更好地体现公平原则;打击短期投资行为,鼓励长期投资;尽快解决重复征税问题,使之成为推动证券市场健康发展的动力。     

浅谈个人所得税纳税筹划

21世纪,经济飞速发展,人们的收入水平也在不断的提高.但是,作为一名纳税义务人,依法纳税是我们必须遵守的,收入的提高也就意味着要多缴税,这样一来,原来增长的一部分收入由于要缴纳税金又剩下不多了.于是合理的进行个人所得税的纳税筹划越来越成为人们迫切的要求之一.本文的主要内容就是通过介绍纳税筹划的概念、内容及方法来研究和探讨个人所得税的筹划方法,其中包括避税筹划、节税筹划和转税筹划.指导我们如何在不违反国家税法规定的情况下,合理、有效、持续的节约个人所得税费用,达到收益最大化的目的.     

Neutral Taxation of Shareholder Income

A Norwegian tax reform committee recently proposed a personal tax on the realized income from shares after deduction for an imputed risk-free rate of return. This paper describes the design of the proposed shareholder income tax and shows that it will be neutral with respect to investment and financing decisions and decisions to realize capital gains, provided that full loss offsets are granted. Thus the tax allows some non-distortionary double taxation of corporate equity income. With an appropriate choice of tax rates, it also solves the problem of income shifting under a dual income tax. JEL Code: H24, H25     

新旧企业所得税制度的差异比较

从2008年1月1日起,我国的企业所得税制度合二为一。新的企业所得税制度与原制度相比,在纳税人、纳税义务、税率、收入、扣除、资产的税务处理、应纳税所得额的计算、境外所得税收抵免、税收优惠和反避税管理等方面均有突出的变化,标志着新制度更具有科学性、规范性和国际性,对推进我国社会主义市场经济建设,促进改革开放和社会主义和谐社会的建立都具有深远的意义。     

Income Shifting in the Spanish Dual Income Tax*

Based on a model of behavioural response to taxes, and using the Taxpayers Panel from the Instituto de Estudios Fiscales for the period 1999–2009, we analyse whether the dual nature of the Spanish personal income tax (PIT), reinforced by the 2007 reform, has influenced taxpayers’ behaviour, causing them to convert part of their ‘general income’ (from labour, real estate or economic activities) into ‘savings income’ (from movable capital or capital gains). We also extend the analysis of income shifting and study whether Spanish taxpayers also responded to the different tax treatments given to the two types of savings income (from movable capital and capital gains) until 2007, transforming savings income from one type to the other. The results of our study demonstrate three facts. First, Spanish taxpayers did respond to the different tax rates, shifting income from the general base to different forms of savings, especially capital gains. The highest‐income individuals and the self‐employed and business owners are the groups where this behaviour was most marked. Second, the self‐employed and business owners also turned income from movable assets into capital gains, guided by their different tax rates. And third, we find signs of ‘anticipation’ and ‘learning’ effects caused by the 2007 tax reform. We believe that the results obtained will enrich the growing literature on income shifting.     

An applied analysis of ACE and CBIT reforms in the EU

We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT). We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical estimates of elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less efficient. A combination of ACE and CBIT is always welfare improving.