Income segregation and local progressive taxation: Empirical evidence from Switzerland

This study investigates spatial income segregation in fiscally decentralized urban areas. The theoretical part proposes the progressivity of local income taxes as a new theoretical explanation for income segregation. The empirical part studies how income tax differentials across municipalities affect the households' location decisions. I use data from the Swiss metropolitan area of Basel that contains tax information on all moving households in 1997. The location choice of the households is investigated within the framework of the random utility maximization model. Different econometric specifications of the error term structure, such as conditional logit, nested logit and multinomial probit, are compared. The empirical results show that rich households are significantly and substantially more likely to move to low-tax municipalities than poor households. This result holds after controlling for alternative explanations of segregation. Social interactions and distance from the central business district are established as other major factors for income segregation. Households in general tend to choose locations close to other households like themselves.     

Congestion and tax competition in a parallel network

The purpose of this paper is to study the effects of tolling road use on a parallel road network where each link can be tolled by a different government. Using both theoretical and numerical models, the paper analyses the potential tax competition between countries that each maximise the surplus of local users plus tax revenues in controlling local and transit transport. Three types of tolling systems are considered: (i) toll discrimination between local traffic and transit, (ii) only uniform tolls on local and transit transport are acceptable, (iii) tolls on local users only. The results suggest that the welfare effects of introducing transit tolls are large, but that differentiation of tolls between local and transit transport as compared to uniform tolls does not yield large welfare differences. Also, the welfare effects of toll cooperation between countries are relatively small in comparison with the welfare gains of non-cooperative tolling of transit. The numerical model further illustrates the effects of different transit shares and explicitly considers the role of asymmetries between countries. Higher transit shares strongly raise the transit toll and slightly decrease local tolls. With asymmetric demands, the welfare gains of introducing differentiated tolling rise strongly for the country with lower local demand.     

Decentralization and international tax competition

This paper models tax competition between two countries that are divided into regions. In the first stage of the game, the strategy variable for each country is the division of a continuum of public goods between central and regional government provision. In the second stage, the central and regional governments choose their tax rates on capital. A country's decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exists under tax competition. In contrast to standard tax competition models, decentralizing the provision of public goods may improve welfare.     

Intergovernmental fiscal transfers and local tax efforts: evidence from provinces in China

This paper explores the incentive effects of total central fiscal transfers and its components – tax rebates and equalization grants – on provincial tax efforts in China. Our theoretical model predicts negative impacts on provincial tax efforts from both total fiscal transfers and equalization grants, while the effects of tax rebates are theoretically unclear. Using Chinese provincial panel data from 1995 to 2007, our empirical study provides significant evidence on the theoretical implications.     

The incentive effect of fiscal equalization transfers on tax policy

A theoretical analysis considers the impact of a typical system of redistributive “fiscal equalization” transfers on the tax effort of local jurisdictions. More specifically, it shows that the marginal contribution rate, i.e. the rate at which an increase in the tax base reduces those transfers, might be positively associated with the local tax rate while the volume of grants received is likely to be inversely related to the tax rate. These predictions are tested in an empirical analysis of the tax policy of German municipalities. In order to identify the incentive effect the analysis exploits discontinuities in the rules of the fiscal equalization system as well as policy changes. The empirical results support the existence of an incentive effect, suggesting that the high marginal contribution rates induce the municipalities to set significantly higher business tax rates compared with a situation without fiscal equalization.     

A spatial tax harmonization model

Policies to harmonize value-added tax rates are controversial in the European Union. This paper formulates a multi-country model over a one-dimensional space as a non-cooperative Nash game, in which each country aims at maximizing its tax revenue, subject to the constraint that its tax rate lies within a given common band. Then we examine the effects of changes in the common band on tax rates, tax revenues and the number of cross-border shoppers at Nash equilibrium. We also analyze the effects of geographical variation in country size and location.     

EU regional policy and tax competition

The European Union (EU) provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU member states and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyze these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.     

Competing for a duopoly: international trade and tax competition

Abstract We analyse the tax/subsidy competition between two potential host governments to attract the plants of firms in a duopolistic industry. While competition between identical countries for a monopolist's investment is known to result in subsidy inflation, two firms can be taxed in equilibrium with the host countries appropriating the entire social surplus generated within the industry, despite explicit non‐cooperation between governments. Trade costs mean that the firms prefer dispersed to co‐located production, creating these taxation opportunities for the host countries. We determine the country‐size asymmetry that changes the nature of the equilibrium, inducing concentration of production in the larger country.     

Property taxation as incentive for cost control: Empirical evidence for utility services in Norway

Recent theoretical research suggests that property taxation has incentive effects that can help control cost problems in the public sector. The institutional setting in Norway allows this first empirical investigation of the incentive effect of property taxation, since we can separate between local governments with and without property tax. The raw data of the variation in the unit cost level for utilities show that local governments with property tax have 20% lower unit cost. Using both linear regression and propensity score matching, we are not able to wash out the difference in unit costs. Our interpretation is that having a visible and controversial local tax related to property stimulates voter interest in local government activities and thereby may help cost control.     

The Distributive and Labor Supply Impact of the Minimum Insertion Income: The Case of Italy

This paper analyzes the redistributive and labor supply effects of extending at national level the Minimum Insertion Income, introduced experimentally in 1999 in some Italian municipalities. We develop a behavioral microsimulation tax-benefit model that allows for simultaneous labor supply decisions by household members, endogenous choice between dependent employment and self-employment, complete representation of the current Italian tax-benefit system. The results show a positive impact on both inequality and poverty, while overall labor supply reduces. On average magnitude of labor supply disincentive is small for married individuals, relatively larger for single persons and, within this category, for women than men.     

On the welfare effects of competition for foreign direct investments

This paper investigates welfare effects of subsidy competition for the location of a multinational enterprise. One of the competing regions benefits more from the inward investment but, in the absence of incentives, the multinational's preferred location is the other, more advanced region. The paper shows that subsidies, by making the multinational switch location, may increase aggregate welfare. If the multinational exports in the absence of incentives, the welfare effects of subsidy competition may look very different. Allowing subsidies attracts the direct investment, which otherwise would not take place, in one of the two regions. Further, it intensifies competition in the market. The paper shows that the welfare increasing role of incentives may be amplified, but also that the competition effect, by hurting domestic firms, may cancel out any other positive role of incentives.     

Central governance or subsidiarity: A property-rights approach to federalism

We consider a model where one region in a federation can realize a public project after undertaking value-increasing investments. While negotiations on the federal level ensure that an efficient project size is implemented in equilibrium, non-contractibility of investments causes the overall outcome to differ across regimes. If the region bears the entire implementation costs of its policies, underinvestment prevails and subsidiarity (centralized governance) is superior when spillovers are weak (strong). Conversely, if linear cost sharing arrangements are feasible, decentralized authority often admits a socially optimal outcome while centralized authority (with majority or unanimity rule) does not.     

A journey from a corruption port to a tax haven

We sketch a model according to which tax havens attract corporate income generated in corrupted countries. We consider the choice of optimal bribes by corrupt officials and the share of the proceeds of corruption that will be concealed in tax havens. Our framework provides novel welfare implications of tax havens. First, tax havens’ services have a positive effect on welfare through encouraging investment by firms fearing expropriation and bribes in corrupt countries. Second, by supporting corruption and the concealment of officials’ bribes, tax havens discourage the provision of public goods and hence have also a negative effect on welfare. The net welfare effect depends on the specified preferences and parameters. One source of this ambiguity is that the presence of multinational firms in corrupted countries is positively associated with demanding tax havens’ operations. Using firm-level data, we provide new empirical results supporting this hypothesis.     

The impact of endogenous tax treaties on foreign direct investment: theory and evidence

Abstract .  This paper investigates the effect of tax treaties on bilateral stocks of outward FDI. For this purpose we employ a numerically solvable general equilibrium model of trade and multinational firms to study the impact of tax treaties on both welfare and outward FDI. The model indicates under which factor endowment configurations countries gain in welfare when implementing a tax treaty. This motivates an empirical specification of the endogenous selection into implementing new tax treaties. Using data of bilateral OECD outward FDI between 1985 and 2000, we find a significant negative impact of newly implemented tax treaties on outward FDI stocks.     

The demand for tax haven operations

What types of firms establish tax haven operations, and what purposes do these operations serve? Analysis of affiliate-level data for American firms indicates that larger, more international firms, and those with extensive intrafirm trade and high R and D intensities, are the most likely to use tax havens. Tax haven operations facilitate tax avoidance both by permitting firms to allocate taxable income away from high-tax jurisdictions and by reducing the burden of home country taxation of foreign income. The evidence suggests that the primary use of affiliates in larger tax haven countries is to reallocate taxable income, whereas the primary use of affiliates in smaller tax haven countries is to facilitate deferral of U.S. taxation of foreign income. Firms with sizeable foreign operations benefit the most from using tax havens, an effect that can be evaluated by using foreign economic growth rates as instruments for firm-level growth of foreign investment outside of tax havens. One percent greater sales and investment growth in nearby non-haven countries is associated with a 1.5 to 2% greater likelihood of establishing a tax haven operation.     

The effects of regional tax and subsidy coordination on foreign direct investment

This paper analyses the effects of a regionally coordinated profit tax or location subsidy in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional coordination can lead to two types of welfare gain. First, for investments that would take place in the union in the absence of coordination, a coordinated tax increase can transfer location rents from the firm to the union. Second, by internalising all of the union's benefits from foreign direct investment, a coordinated tax reduction can attract more welfare-enhancing investment than when member states act in isolation. Depending on which motive dominates, tax levels may thus rise or fall under regional coordination.     

Income misattribution under formula apportionment

Alternatives to the current system of separate tax accounting, such as the proposed Common Consolidated Corporate Tax Base in Europe, would apportion a firm's worldwide profits using formulas based on the location of employment, capital or sales. This paper offers a new method of evaluating the accuracy of these apportionment rules and the ownership distortions they create. Evidence from European company accounts indicates that apportionment formulas significantly misattribute income, since employment and other factors on which they are based do a very poor job of explaining a firm's profits. For example, the magnitude of property, employment and sales explains less than 22% of the variation in profits between firms, and the prediction estimates from using such a formula exceed half of predicted profits 64% of the time, and exceed twice predicted income 11% of the time. As a result, the use of formulas rewards or punishes international mergers and divestitures by reallocating taxable income between operations in jurisdictions with differing tax rates. The associated ownership distortion is minimized by choosing factor weights to minimize weighted squared prediction errors, for which, based on the European evidence, labor inputs should play little if any role in allocation formulas. But even a distortion-minimizing formula creates large incentives for inefficient ownership reallocation due to the enormous variation in profitability that is unexplained by formulary factors, implying that significant resource allocation costs would accompany European adoption of formulary apportionment methods.     

企业统计制度改革的误区及其思考

企业统计是企业统计人员收集、汇总企业生产经营过程中的有关数据和情报，进行整理之后提供给各级领导，使领导掌握企业的生产和经营的具体情况，作为下步的调度和决策依据。本文主要分析目前我国企业在统计制度改革过程中存在的一些误区，提出自己的建议。     

Modelling aggregate personal income tax revenue in multi-schedular and multi-regional structures

This paper derives analytical expressions for aggregate personal income tax revenue obtained from a multi-schedular and multi-regional personal income tax system, with revenue divided among central and regional governments. Aggregate income tax revenue is expressed as a function of characteristics of the distribution of taxable income, making it possible to identify the sources of revenue differences among regions. The approach is applied to the tax structure in Spain, and the effects of income distribution differences among the Spanish regions are examined.