The Complexity of Tax Structure in Competitive Political Systems

We explore the nature of tax complexity in competitive political systems. The analysis does not rely upon imperfections in the operation of the public sector. Complexity arises in the course of the struggle for office, during which political parties are induced to propose platforms that discriminate carefully among heterogeneous voters. A basic model is enriched by the addition of administration costs and self-selection, factors which limit the ability of any government to discriminate fully. The effect on complexity of inequalities in political influence is also investigated. The analysis suggests that simple tax systems (such as a flat tax or a broadly based tax without special provisions) are not compatible with vigorous political competition.     

Political fragmentation and projected tax revenues: evidence from Flemish municipalities

The level of revenues pocketed by a government during the fiscal year often deviates from that projected by this government in its budget. Despite a flourishing literature on, for example, the technical or procedural determinants of such forecast errors, little is yet known about how political stratagems may affect forecast errors. In the present paper, we analyse whether differences in the level of government fragmentation are useful in explaining local government tax revenue forecast errors—controlling for various other factors. Using data on 242 Flemish municipalities for the period 1992–2002, we find that two-party governments are more optimistic than single-party governments. In contrast to our initial expectations, governments with at least three parties are significantly more careful (or less optimistic) in their revenue projections than single- or two-party governments.      

Fighting Tax Evasion by Discouraging the Use of Cash?

We propose a bargaining model of tax evasion with a seller that offers a price discount to a buyer in exchange for a cash payment without a receipt, which allows tax evasion. We study the effect on evasion and government revenue of two policy instruments: a tax on cash withdrawals (TCW), which imposes a cost on the buyers who pay cash, and a tax rebate conditional on having the receipt. The tax rebate reduces evasion but it is costly if tax evasion is low. The TCW reduces evasion only if it is set at a sufficiently high rate, which must be higher the larger is the mass of cash users. We also show that the implementation of a TCW, which poses several challenges, is easier if the cost of cash hoarding is high.     

The value relevance of corporate tax expenses in the presence of partisanship: International evidence

This study examines the value relevance of corporate tax expenses in an international setting and determines whether partisanship plays a role in its informativeness. Our empirical results indicate the greater value relevance of corporate taxes during the administration of right-leaning governments. Moreover, our cross-sectional analysis suggests that corporate tax expense is value-relevant during the administration of right-leaning governments; however, corporate tax expense does not convey information regarding returns when left-leaning parties are in office. These findings highlight the importance of the political orientation of tax policymakers in determining value-related information on corporate tax expenses.     

The relationship between culture and tax evasion across countries: Additional evidence and extensions

This study builds on the work of Tsakumis et al. [Tsakumis, G. T., Curatola, A. P,. & Porcano, T. M. (2007). The relation between national cultural dimensions and tax evasion. Journal of International Accounting, Auditing and Taxation, 16, 131-147] by conducting further empirical analysis of the relationship between Hofstede's [Hofstede, G. H. (1980). Cultures consequences: International differences in work-related values. Beverly Hills, CA: Sage Publications] cultural dimensions and tax evasion across countries using multiple measures of tax evasion to gain additional evidence on the subject. Moreover, this study extends the preliminary international tax evasion model developed by Tsakumis et al. [Tsakumis, G. T., Curatola, A. P,. & Porcano, T. M. (2007). The relation between national cultural dimensions and tax evasion. Journal of International Accounting, Auditing and Taxation, 16, 131-147] to examine, along with culture, the impact of legal, political, and religious variables on tax evasion across countries. Based on data from 47 countries, and after controlling for economic development, the regression results indicate that the higher the level of uncertainty avoidance and the lower the level of individualism, legal enforcement, trust in government, and religiosity, the higher is the level of tax evasion across countries. These findings remain robust to multiple measures of tax evasion. Government policymakers should find the results of this study useful in assessing the likelihood of tax evasion from cultural, legal, political, and religious perspectives, and in developing tax reform policies to reduce tax evasion.     

逃税规模的衡量

逃税造成了政府财政收入的减少,因而政府理所当然地关心社会中的逃税程度,而且逃税程度的大小也代表了一国税务机关税收征管成效的高低.因此从这个意义上讲,对逃税规模的衡量就显得必要了.不过,由于纳税人的逃税行为是隐蔽的,故很难对逃税规模进行直接有效的衡量,尽管如此,还是存在一些方法从侧面去测算一国的逃税规模的.     

结合逃税的最优税收理论研究评述

最优税收理论主要研究税制的最优设计问题,而逃税理论主要致力于政府的最优执行问题,最近出现了将这两种理论结合起来的研究趋势。结合逃税的最优税收理论,包括最优所得税和最优商品税等内容,研究结果表明:结合逃税的最优税收理论并不能得出比标准最优税收理论更为明确的政策结论,其还有待于进一步的研究和发展。     

The social value of risk-free government debt

Can eliminating the stock of government bonds reduce welfare? When the government must raise revenue to pay interest on its bonds, the social value of government debt hinges on whether the benefits from greater portfolio diversification outweigh the costs of the revenue-raising efforts. A positive stock of debt is optimal only if interest payments are financed by an inflation tax, agents are not too risk averse, there is a government budget deficit, and the economy is on the bad side of the Laffer curve. Welfare is higher on the good side of the Laffer curve without bonds.     

The Optimality of Punishing Only the Innocent: The Case of Tax Evasion

We study the effectson tax enforcement and tax policy of unintentional complianceerrors by taxpayers and administrative errors by tax auditors.The government can impose both penalties for misreporting andrewards for honest reporting. Maximal sanctions will not be appliedbecause errors are possible, so evasion cannot be eliminatedcostlessly. Under optimal policy intentional evasion can be deterred,but innocent tax evaders must be penalized whether they haveunintentionally evaded or have been mistakenly convicted. Thisdeters intentional evasion, but limits redistribution. Withoutrewards for honest reporting, the revelation principle need notapply, so intentional evasion can occur.     

Political Sustainability and the Design of Environmental Taxes

This paper studies the issue of political support for environmental taxes. The environmental tax is determined by majority voting, given a refund rule that specifies the allocation of tax proceeds. The refund rule is chosen by a welfare-maximizing constitutional planner. We show that: (i) The equilibrium tax rate is increasing in the proportion of tax reductions based on wage incomes. (ii) If labor and capital income taxes are reduced in the same proportion, to keep the government's budget balanced, majority voting yields a rate of environmental taxation that is lower than the optimal (Pigouvian) level. (iii) To mitigate this negative bias, the government reduces wage taxes by a higher proportion than capital income taxes. (iv) The final outcome will either be the Pigouvian tax or else all reductions will be given in wage taxes. This depends on individuals' preferences for the polluting good as well as wage and capital income distributions.     

Washington meets Wall Street: A closer examination of the presidential cycle puzzle

We show that the annual excess return of the S&P 500 is almost 10 percent higher during the last two years of the presidential cycle than during the first two years. This pattern cannot be explained by business-cycle variables capturing time-varying risk premia, differences in risk levels, or by consumer and investor sentiment. We formally test the presidential election cycle (PEC) hypothesis as an alternative to explain the presidential cycle anomaly. The PEC states that incumbent parties and presidents have an incentive to manipulate the economy (via budget expansions and taxes) to remain in power. We formulate eight testable propositions relating to the fiscal, monetary, tax, unexpected inflation and political implications of the PEC hypothesis. We do not find statistically significant evidence confirming the PEC hypothesis as a plausible explanation for the presidential cycle effect. The presidential cycle effect in U.S. financial markets thus remains a puzzle that cannot be easily explained by politicians employing their economic influence to remain in power, as is often believed.     

Destination taxation and evasion: Evidence from U.S. inter-state commodity flows

Tax evasion has been an important issue in the accounting literature for several decades, but the focus has been on corporate income taxes. We develop a new way to examine tax evasion that focuses on corporate transactions, rather than corporate profits. Specifically, we examine how commodity flows respond to destination sales taxes, allowing for tax evasion as a function of distance between trade partners. After accounting for transportation costs, we find that the effect of taxes decreases as distance increases. This is consistent with the notion that longer distances between trade partners hinder government oversight and increase the likelihood of successful tax evasion. Our results are robust with respect to outliers, strategic neighbor effects, information sharing agreements and other re-specifications. These results are important to policymakers because they evidence the difficulty of enforcing destination taxation in open economies such as U.S. states and the European Union.     

Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets

We empirically investigate one form of illegal investor‐level tax evasion and its effect on foreign portfolio investment. In particular, we examine a form of round‐tripping tax evasion in which U.S. individuals hide funds in entities located in offshore tax havens and then invest those funds in U.S. securities markets. Employing Becker's ( 1968 ) economic theory of crime, we identify the tax evasion component by examining how foreign portfolio investment varies with changes in the incentives to evade and the risks of detection. To our knowledge, this is the first empirical evidence of investor‐level tax evasion affecting cross‐border equity and debt investment.     

The Distributional Implications of Income Under‐Reporting in Hungary*

The ability and inclination of specific social groups to evade tax vary widely, and this leads to considerable variation in the actual tax burden on individuals with similar levels of income. Thus, ignoring tax evasion can be seriously misleading in terms of the distributive and fiscal effects of the tax system. This paper estimates the distributional implications of income tax evasion in Hungary, based on a random sample of the administrative tax records of nearly 230,000 individuals. Gross incomes declared in the administrative tax returns are compared with incomes stated in a nationally representative household budget survey. Our estimates show that the average rate of underreporting is 9–13 per cent, though this conceals a big difference between the self‐employed (who hide the greater part of their income) and employees. The estimates are likely to be lower bounds. These rates are used in a tax– benefit microsimulation model to calculate the fiscal and distributional implications of under‐reporting. Tax evasion reduces households' personal income tax payments by about 16–20 per cent. While the poverty rate increases only slightly, income inequality rises significantly, suggesting that high‐income households tend to evade tax proportionately more. Finally, we find that tax evasion largely reduces the progressivity of the tax system.     

The Distributional Impact of the Greek Crisis in 2010*

The severe economic crisis affecting Greece is widely thought to be having a significant social impact in terms of greater inequality and increased poverty. We provide an early assessment of whether (and to what extent) this was the case in 2010, the first year of the Greek crisis. We distinguish between two interrelated factors: on the one hand, the austerity policies taken to reduce fiscal deficits; on the other hand, the wider recession. Using a tax–benefit model, we attempt to quantify the distributional implications of both. With respect to the austerity policies, we focus on the changes affecting taxation, pension benefits and public sector pay. With respect to the wider recession, we model the effects of rising unemployment and inflation, as well as of lower earnings for self-employed workers and for employees of private firms. In simulating the impact of these changes on the distribution of incomes (and in estimating how the total burden of the crisis is shared across income groups), we take into account tax evasion and benefit non-take-up. We conclude by discussing the main findings, methodological pitfalls and policy implications of our research.     

财政危机的预防与治理——近代中国财政危机的启示

财政危机极易转化为全面社会危机,危害巨大。基于财政危机的起源、传导及社会效应的理论分析,回顾近代中国晚清、北洋、南京政府的财政危机。以史为鉴,总结教训,结合当前财政形势,预防和治理财政危机,要做到明确税收中性原则,税制改革以减税富民为导向;促进税收负担合理化,寻求财政赤字弥补形式多样化;合理划分中央与地方财权,警惕地方政府债务风险;拓宽刚性支出资金来源,逐步优化财政支出结构;构建和谐稳定发展环境,财政政策适时"转型"。     

The assignment and division of the tax base in a system of hierarchical governments

Vertical externalities, changes in one level of government’s policies that affect the budget of another level of government, may lead to non-optimal government policies. These externalities are associated with tax bases that are shared or “co-occupied” by two levels of government. Here I consider whether co-occupancy of tax bases is desirable. I examine the optimal extent of the tax bases of a lower level of government (local) and a higher level (state). I find that it is optimal to have co-occupancy in the absence of other corrective policies if commodities in the tax bases are substitutes. Further, if the state government can differentially tax the co-occupied segment of the tax base and the segment it alone taxes it will obtain the (second-best) outcome obtained with other policy instruments such as intergovernmental grants.     

Should the Power to Redistribute Income be (De-)Centralized? An Example

This paper deals with two questions which have recentlyreceived considerable attention in both the political debateand the academic literature: First, are fiscal programs largeror smaller when they are (de-)centralized? Second, should suchprograms be (de-)centralized? We answer these questions withina politico-economic model in which voters choose the parametersof a linear income tax taking into account how taxes affect laborsupply and migration decisions. It is shown that a decentralizedpolitical system may lead to a smaller government budget. Theconcept of a veil of ignorance is used to analyze the desirabilityof a decentralized system. It is argued that a decentralizedsystem is preferred under the veil of ignorance only if individualsare not too risk-averse and the income distribution is not toopolarized.     

防控“新冠肺炎”疫情的财税政策研究

突如其来的“新冠肺炎”疫情对我国宏观经济的平稳运行特别是对中小企业的经营以及就业都会产生较大的影响。在这场防控疫情的斗争中,财政税收政策将发挥重要的作用,但无论是减税还是增支都将会加大财政的赤字率。在2020年这个特殊时期,国家可以考虑突破3%的财政赤字率,但从长期来看,未来也不应该搞结构性赤字,因为这将导致巨大的政府债务。为了应对疫情,国家应当在加大宏观政策调节的力度、加大对公共卫生领域的投入、缓解企业经营困难以及实施好就业优先政策方面出台相应的财税政策。     

双元控制主体企业现金交易逃税研究

随着现代企业所有权和控制权的分离,所有者和经营者都有可能在公司经营过程中做出逃税决策。双元控制主体企业采取现金交易的方式逃避增值税。除税率和税收部门的稽查力度以外,产品成本、销售利润和市场竞争状况均会对企业的逃税决策产生影响。此外,双元控制主体企业在其经营管理过程中的“内耗”,也在一定程度上影响企业的逃税水平。