Progressive taxation,tax exemption,and corporate liquidation policy

This paper develops a real options model of a firm that operates in continuous time with an infinite horizon. The firm receives stochastic profit flows that are subject to progressive taxation. Tax progression arises from an exogenously given tax exemption threshold that makes the average tax rate increase with the tax base. The firm possesses an option to liquidate its operation, which is optimally exercised when the firm's profit flow reaches an endogenously determined threshold level (the liquidation trigger) from above. We show that the firm's liquidation trigger under progressive taxation increases with either a reduction in the tax exemption threshold or an increase in the corporate income tax rate. Corporate income taxes are thus not neutral when tax schedules are progressive.     

Company taxation and tax spillovers: Separate accounting versus formula apportionment

It is observed in the real world that taxes matter for location decisions and that multinationals shift profits by transfer pricing. The US and Canada use so-called formula apportionment (FA) to tax corporate income, and the EU is debating a switch from separate accounting (SA) to FA. This paper develops a theoretical model that compares basic properties of FA to SA. The focal point of the analysis is how changes in tax rates affect capital formation, input choice, and transfer pricing, as well as on spillovers on tax revenue in other countries. The analysis shows that a move from SA to FA will not eliminate such spillovers and will, in cases identified in the paper, actually aggravate them.     

Optimal indirect taxation with a restricted number of tax rates

This paper analyzes the optimal structure of indirect taxation when the number of available tax rates is smaller than the number of taxable commodities. Such a constraint requires to choose the levels of tax rates and the groups of commodities that will be taxed at equal rates (or exempted). In a partial equilibrium framework, with a single agent and a low amount of tax collection, it is shown that the process of allocation of commodities to groups depends on both price elasticities and consumption spendings. Still, the optimal tax structure displays a weak form of the inverse elasticity rule; consumption spendings influence the size of the fiscal base, and may lead to many tax exemptions.     

Environmental taxation for environmental regulation and fiscal policy: An analysis of a Clinton-type BTU tax

This paper provides an empirical study of energy taxes for achieving environmental and fiscal policy objectives. Based on an energy tax structured like Clinton's 1993 BTU tax proposal, we demonstrate that the optimal tax will be higher the greater the environmental costs associated with energy consumption and the larger the economic distortions associated with alternative revenue-raising policies. Greater environmental damages and higher revenue-raising costs also have a fiscal policy implication; they shift the least-cost tax mix for raising additional revenue toward energy taxes and away from conventional tax alternatives.The authors wish to acknowledge the assistance of two anonymous referees, who provided very helpful feedback. We also wish to acknowledge outstanding research assistance from Tracy Terry of the School of Public and Environmental Affairs, Indiana University Bloomington. Of course, the results and conclusions of the paper are the authors' exclusively.     

Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada

We study corporate income taxation when firms operating in multiple jurisdictions can shift income using tax planning strategies. Because income of corporate groups is not consolidated for tax purposes in Canada, firms may use financial techniques, such as lending among affiliates, to reduce subnational corporate taxes. A simple theoretical model shows how income shifting affects real investment, government revenues, and tax base elasticities, depending on whether firms must allocate income to provinces or not. We then analyze data from administrative tax records to compare the behavior of corporate subsidiaries that may engage in income shifting to comparable firms that must use the statutory allocation formula to determine their taxable income in each province. The evidence suggests that income shifting has pronounced effects on provincial tax bases. According to our preferred estimate, the elasticity of taxable income with respect to tax rates for “income shifting” firms is 4.9, compared with 2.3 for other, comparable firms.     

Rationality and intertemporal choice

The alleged problems associated with self-control, hyperbolic discounting and other examples of seemingly irrational intertemporal choice are examined in the context of an evolution-based neurobiological model that emphasizes the role of the biological evolution of big brains and language and the cultural evolution of institutions. There is no utility function in the brain; it has no central-planner, in fact, the brain is a self-organized complex system, a decentralized spontaneous order. This spontaneous order is coordinated, much like an economy, by a distributed network that maintains and makes available the discounted net value of various options to decentralized and specialized areas in the brain when making decisions. Further, that decision making is embodied and embedded in the decision making environment. For humans, an important part of that environment is the social environment consisting of institutions and other components of culture. It was, in part, the evolution of this environment that made long-range planning possible. Additionally, it is very often the lack of embedded experience with the environment that leads to what seems to be irrational intertemporal choices. In fact, under close examination the evidence for consistent irrational intertemporal choice is weak.     

房地产开发企业土地增值税的税收筹划研究

税收筹划是房地产开发企业财务管理的重要内容。对于房地产开发企业来说,筹划空间最大、最直接的税务筹划就是对土地增值税的筹划。本文重点阐述利用增值税临界点进行税收筹划、借款利息的筹划实务、代收费用处理过程中的税收筹划、将出租变为投资进行税收筹划、合法利用土地增值税减免政策五项内容。     

Increasing marginal impatience and intertemporal substitution

For infinite-horizon models with recursive preferences the condition known as increasing marginal impatience is often adopted, but the condition is not fully understood in the literature. This paper shows that increasing marginal impatience is equivalent to the intuitive property that the substitutability between the consumption levels in two different periods is a decreasing function of the distance between the periods.     

Subjective random discounting and intertemporal choice

This paper provides an axiomatic foundation for a particular type of preference shock model called the random discounting representation where a decision maker believes that her discount factors change randomly over time. For this purpose, we formulate an infinite horizon extension of [E. Dekel, B. Lipman, A. Rustichini, Representing preferences with a unique subjective state space, Econometrica 69 (2001) 891-934], and identify the behavior that reduces all subjective uncertainties to those about future discount factors. We also show uniqueness of subjective belief about discount factors. Moreover, a behavioral comparison about preference for flexibility characterizes the condition that one's subjective belief second-order stochastically dominates the other. Finally, the resulting model is applied to a consumption-savings problem.     

Growth and finance: An intertemporal model

Frequently, intertemporal models, for example, Uzawa's (1969) work on growth, are based on the separation of investment and the financing decisions of firms. Finance variables are disregarded. In contrast, along the lines of the theory of imperfect capital markets, the present paper allows for cross-effects between firms' financial structure and the value of firms. A steady-state analysis gives empirical predictions on the relation of investment, finance and debt, and Hopf-Bifurcation analysis establishes the possibility of cyclical paths.     

Externalities and optimal taxation

This paper reexamines the optimal tax design problem (income and commodities) in the presence of externalities. The nature of the second–best, and the choice of the tax instruments, are motivated by the informational structure in the economy. The main results are: (i) environmental levies (linear or nonlinear) differ in formula from Pigouvian taxes by the expressions for the optimal tax on private goods; (ii) externalities do not affect commodity tax formulas (linear and nonlinear) for private goods; (iii) externalities do not affect the income tax structure if commodity taxes are nonlinear and affect it if commodity taxes are linear; and (iv) a general income tax plus strictly Pigouvian taxes are sufficient for efficient taxation if individuals of different types have identical marginal rates of substitution (at any given consumption bundle).     

Fixed effects with interpersonal and intertemporal covariance

The paper considers the estimation of a fixed effects time series-cross section model where errors have both unspecified interpersonal and intertemporal covariance. Efficient estimators in the form of GLS are suggested, which can be implemented on the data in their actual form or in deviations from time-means. As an empirical example, the determinants of new residential construction activity in the New England states of the US during the 80's are investigated. Results show substantial sensitivity to changes in the interest rate and the unemployment rate, whilst responses to changes in income are more muted. Long term factors related to the region are also influential.     

Asset arbitrage and the price of oil

It is commonly understood that macroeconomic shocks influence commodity prices and that one channel for this is the link between interest rates, expected future asset returns and stock-holding. In this paper the link is extended to the petroleum market with the recognition that recorded stocks of oil comprise a small share of annual demand and that the parallel with storable commodities is the decision to produce the oil in the first place, as opposed to holding it in the ground as reserve. Oil reserves are then a key asset in producing countries, which is arbitraged against financial assets. Thus, when the yield on financial assets falls, retaining oil reserves becomes more attractive to producing countries, which then have less incentive to accommodate demand rises, and so the oil price rises. This perspective on oil pricing is modeled in a dynamic multi-region general equilibrium framework in which regional households manage portfolios of assets that include oil reserves. When the model is calibrated to match observed data over two decades, simulation results indicate that asset arbitrage made a large contribution to the high pre-GFC oil price.     

Extraterritoriality of swaps regulation and regulatory arbitrage

Journal of Regulatory Economics - In this paper, we investigate how the extraterritorial applicability of the US over-the-counter derivatives regulation impacts the off-balance sheet positions of...     

Self-selection and Pareto efficient taxation

This paper analyses the set of Pareto efficient tax structures. The formulation of the problem as one of self-selection not only shows more clearly the similarity between this problem and a number of other problems (such as the optimal pricing of a monopolist) which have recently been the subject of extensive research, but also allows the derivation of a number of new results. We establish (i) under fairly weak conditions, randomization of tax structures is desirable; (ii) if different individuals are not perfect substitutes for one another in production, then the general equilibrium effects—until now largely ignored in the literature—of changes in the tax structure may be dominant in determining the optimal tax structure; in particular if the relative wage of high ability and low ability individuals depends on the relative supplies of labor, the optimal tax structure entails a negative marginal tax rate on the high ability individuals, and a positive marginal tax rate on the low ability individuals (the marnitude of which depends on the elasticity of substitution); (iii) if individuals differ in their preferences, Pareto efficient taxation may entail negative marginal tax rates for high incomes; while (iv) if wage income is stochastic, the marginal tax rate at the upper end may be 100%.Our analysis thus makes clear that the main qualitative properties of the optimal tax structure to which earlier studies called attention are not robust to these attempts to make the theory more realistic.     

Irrationality and intertemporal choice in early neoclassical thought

Early neoclassical economists presumed an element of irrationality in the context of intertemporal decision making. W.S. Jevons, Irving Fisher, Alfred Marshall, and A.C. Pigou observed a preference for present over future consumption, and each took this as evidence that consumer 'foresight' or 'will power' was defective. The labouring classes were said to discount future consumption to reflect uncertainty, and such discounting is regarded as 'rational.' But each of these economists focused on an additional, and purportedly 'irrational,' reason for discounting: 'impatience.' Consumers are thus said to make persistent miscalculations when it comes to decisions involving time.
Irrationalité et choix intertemporel dans les débuts de la pensée néo-classique. Les premiers économistes néo-classiques présumaient qu'il y avait un brin d'irrationalité dans le processus de décision intertemporel. W.S. Jevons, Irving Fisher, Alfred Marshall et A.C. Pigou ont observé une certaine préférence de la consommation présente par rapport à la consommation future et en ont déduit que le consommateur manquait de 'prévoyance' et de 'volonté.' On suggérait que les classes travailleuses escomptaient leur consommation future à cause de l'incertitude - ce qui était considé comme rationnel. Mais chacun de ces économistes faisait aussi appel à une raison additionnelle pour escompter la consommation future - l'impatience - un motif jugé irrationnel. On en concluait que les consommateurs faisaient des erreurs persistantes de calcul quand ils prenaient des décisions intertemporelles.