Income tax reform for a globalized world: The case for a dual income tax

Countries that are industrialized, or becoming so, must adopt tax systems that are capable of raising considerable amounts of revenue efficiently, equitably and with administrative simplicity, while at the same time coping with the competitive features of a globalized world economy. A component of that tax system will be direct taxation of households alongside general sales and payroll taxation. This paper addresses the role that capital income taxes should play in the income tax system. Arguments for the preferential treatment of capital income are summarized, and a case is made for adopting a schedular approach in which capital and labor income are taxed according to separate rate structures. The particular case of the dual income tax system used in the Nordic countries is advocated whereby capital income is taxed at a low, flat rate and non-capital income is taxed progressively. It is argued that this system best combines the objectives of a good tax system in an internationally competitive environment.     

Taxes and Pensions

Pension benefit rules depend on individual history far more than taxes do, and age plays a much larger role in pension determination than in tax determination. Apart from some simulation studies, theoretical studies of optimal tax design typically contain neither a mandatory pension system nor the behavioral dimensions that lie behind justifications commonly offered for mandatory pensions. Conversely, optimizing models of pension design typically do not include annual taxation of labor and capital incomes. After spelling out this contrast and reviewing (and rejecting) zero taxation of capital income based on the Atkinson‐Stiglitz and Chamley‐Judd results, this article raises the issue of tax‐favored retirement savings, a topic where the two subjects come together.     

Tax Base Elasticities: A Multi-State Analysis of Long-Run and Short-Run Dynamics

We examine the relative dynamic responses of state personal tax revenues and sales tax bases to changes in state personal income. Our econometric analysis, which includes separate analyses of long-run and short-run dynamics for each state, permits the estimation of asymmetric short-run responses depending upon the relationship between current and expected tax base growth. Results indicate that the average long-run elasticity for income taxes is more than double that for sales taxes. Most states have asymmetric short-run income elasticities, which are again greater for income taxes than for sales taxes. However, a joint analysis of long- and short-run dynamics reveals that neither tax is universally more volatile. After calculating state-specific income elasticities for both taxes, we employ cross-section regression techniques to explain the variation in elasticities across states. Several policy factors are found to be important, including elements of tax bases and rate structures.     

China's value-added tax reform, capital accumulation, and welfare implications

This paper analyzes the effects of China's upcoming value-added tax (VAT) reform of removing investment from the tax base on capital accumulation and the welfare of the rich and the poor. Three alternative methods to make up for the loss of tax revenue are considered. The VAT reform with consumption tax being endogenous increases capital accumulation and the utility of both the rich and the poor. The VAT reform with the labor income tax rate being endogenous increases capital accumulation; and it decreases the utility of the rich and increases the utility of the poor (increases the utility of both the rich and the poor) if the rich has a higher rate or the same rate of time preference (if the rich has a lower rate of time preference). The VAT reform, accompanied by a cut in transfers to the poor, has no effect on capital accumulation if the rich and the poor have the same rate of time preference; it decreases (increases) capital accumulation if the rich has a higher (lower) rate of time preference; and it increases the utility of the rich and decreases the utility of the poor.     

Dual Income Taxation: A Promising Path to Tax Reform for Developing Countries

The dual income tax combines a progressive tax on labor income and a lower flat tax on income from capital. Unlike flat tax systems, a dual income tax provides developing countries greater flexibility in addressing tax competition while retaining progressivity. Countries could use the move to a dual income tax system not just as an opportunity to rationalize the taxation of income from business operations and investment but also as a vehicle for broader reform of their tax systems.     

Uncertainty and Optimally Uniform Commodity Taxes

This paper examines the implications of uncertainty for the structure of optimal commodity taxes in the presence of a linear income tax. Consumers face uncertain income and commit to consumption of some goods before the resolution of uncertainty and to others after. Preferences are separable between labor and consumption goods. We prove that optimal commodity taxes are (i) uniform within the category of noncommitted goods if their subutility is logarithmic; (ii) uniform within the two categories if both subutilities are logarithmic; and (iii) nonzero across categories, with the tax rate on precommitted goods being lower than the tax rate on noncommitted goods.     

农村居民多维收入流动、税费负担及政策效应——基于面板数据PSM-DID方法的研究

收入流动性是从动态视角衡量居民收入分配公平与否的重要指标,其变动程度受到税收等因素的影响。文章基于2001年至2014年季度和年度面板数据,依据多维收入流动指标,测算出了地区之间农村居民绝对和相对收入流动程度,并利用双重差分倾向得分匹配法（PSM-DID）和工具变量估计法研究了农村税费改革及其他经济社会因素对农村居民收入流动性的影响。研究发现：（1）农村税费改革的政策效应非常显著,实施农业税费减免政策的地区,其农民的绝对收入流动性显著高于未改革地区;（2）税费负担对绝对收入流动性的影响呈现出"倒U型"特征,即当税费负担率为0.167%时,绝对收入流动性达到最大值,若进一步增加税费负担,收入流动性则呈现下降趋势;（3）税费支出变动对相对收入流动性的影响也通过了5%的显著性检验;（4）农村劳动力文化结构、工资收入比重等家庭特征因素对收入流动性的影响具有较大的地区异质性。有鉴于此,在进一步完善税费征收项目监管的同时,依据家庭及地区特征实施差异化的支农惠农政策,切实减轻农民负担,增强农村居民收入流动,实现地区间收入分配均衡。     

Why are more redistributive social security systems smaller? A median voter approach

One of the stylized facts of unfunded social security programsis that programs are larger in size, measured relative to theGDP, the tighter the link between pension claims and past earnings.We provide a political economy explanation of this stylizedfact in a median voter model, where people vote on the socialsecurity tax rate. We compare pension systems with flat-rateand earnings-related benefit formulas. Only flat-rate benefitsredistribute within a generation from high to low income groups.If labor supply is endogenous, they also imply larger efficiencycosts than earnings-related schemes. Using data on eight Europeancountries, we find that the median voter is typically middle-agedwith high income. For these voters, earnings-related systemsare more attractive both because of less intragenerational redistributionand lower distortions in labor supply. The median voter modelis also able to account for a considerable degree of cross-countryvariation in contribution rates.     

The complicit role of local government authorities in corporate bribery: Evidence from a tax collection reform in China

In January 2002, China decided to centralize corporate income tax collection, shifting the collection authority from the local tax bureaus (LTBs) to the state tax bureaus (STBs), for all firms established after December 31, 2001. We exploit this exogenous shock to identify a new cause for corporate bribery, namely, the complicit role of local government authorities. We find that firms whose income taxes are still collected by LTBs after the reform bribe more than similar firms whose taxes are collected by STBs. Such effects are more pronounced for firms located in provinces where government intervention is more prevalent and where judicial system is less independent. Moreover, we find that firms whose taxes are collected by LTBs enjoy lower tax burdens and receive greater tax-related subsidies, especially when they bribe more. Overall, our results highlight the reciprocation between local government authorities and firms in determining corporate bribery.     

Contribution Ceilings and the Incidence of Payroll Taxes

Social security contributions (SSCs) are typically formally split between employers and employees as payroll taxes, levied on earnings at a constant tax rate that applies only up to a ceiling, above which the marginal tax rate falls to a reduced rate, often 0. Such contribution ceilings create a concave kink point in the budget set of workers and hence should generate a dip in the distribution of earnings around the ceiling through labour supply responses (the reverse of bunching expected at convex kink points) but such a dip is not observed empirically. This paper sets out a new approach to infer the incidence of SSCs that exploits the absence of this dip and the fact that (mechanically) the distributions of labour cost (earnings inclusive of all payroll taxes), gross earnings (net of employer payroll taxes) and net earnings (net of both employer and employee payroll taxes) cannot all be smooth around a kink. The other papers in this special issue apply the method to data for Germany, France, the Netherlands and the UK and all find that distribution of gross earnings is smooth around kinks (implying that the distributions of labour costs and net-of-tax earnings are not) even though the concept of gross earnings is irrelevant in the standard static model of labour supply and demand that dominates the public economics literature. This suggests that other features of the labour market, such as wage bargaining based on the gross earnings concept, are relevant for determining the incidence of SSCs.     

International spillover effects of consumption taxation

This paper investigates the international spillover effects of a revenue-neutral increase in consumption taxes coupled with a reduction in wage taxes in a two-country open economy. Many economists feel that the consumption tax would be an improvement over the income tax. This paper provides counterexamples to the conventional wisdom. We show that conversion to a consumption tax may reduce capital accumulation and may transmit a negative externality to the rest of the countries in the world economy under certain conditions: endogenous labor supply and bequests.     

Dynamic Scoring in a Romer‐Style Economy

This article analyzes how changes in tax rates affect government revenue in a Romer‐style endogenous growth model. Lower tax rates on financial income (returns to physical capital and intellectual property) are partially self‐financing primarily because lower financial income taxes stimulate innovation and enhance labor productivity in the long run. In the baseline calibration, about half of a tax cut is self‐financing in the long run, substantially more than in the Ramsey model. The dynamics of the economy's response to a tax cut are very sluggish and, for some variables, nonmonotonic.     

税收政策的变化影响公司资本结构吗？--基于两税合并的经验数据

本文基于我国两税合并的背景,运用区间分析、配对样本T检验、回归分析和倍数差分法等方法,实证检验所得税政策的变化是否对资本结构产生影响,进而验证修正的MM理论是否适应中国资本市场。研究结果表明：所得税税负水平与公司资本结构显著正相关;由于新税法的实行,所得税税率下降的内资公司相应的降低了公司财务杠杆;两税合并前后税率下降的样本公司比税率不变的样本公司的资本结构变动显著要大。综合而言,税收政策能够显著影响公司资本结构决策。     

1992-2003年我国流转税与所得税的发展

分析流转税与所得税近十年的发展变化和未来的增长趋势,结合我国税制改革以来流转税和所得税的发展变化的特点,用实证的方法,拟合流转税和昕得税关于国内生产总值的历史发展轨迹,测算流转税和所得税与各项经济指标的相关系数,具体量化当经济增长一定的条件下,所得税优于流转税的倍数;可建立经济计量模型,得到流转税和所得税应该达到的最优税收比例。     

广东省税收问题探析

广东省税收地位十分重要,连续14年税收总量全国第一,但是广东省税收存在的问题也是不容忽视的。本文充分利用广东省的税收数据,分析了广东省的税负水平与发达国家相比,远远偏低的;广东省的主体税种“生产型增值税”已经不能适应广东省经济发展的需要;广东省内外资企业所得税标准不统一影响了广东省公平竞争的经济环境。     

The limited role of the personal income tax in developing countries

In this paper we examine the re-distributive role played by personal income taxes in developing countries. We begin with some initial reflections on the re-distributive role of the tax system. We then consider the relative success of developed and developing countries in using tax systems to redistribute income. Finally, we examine some alternatives in reforming the personal income tax, as well as options available to developing countries in designing and implementing more progressive fiscal systems.     

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.     

Fiscal Policies and Poverty Incidence: The Case of Thailand

The evidence presented in this paper suggests that moderate, once-only pro-poor fiscal reallocations may have significant effects on both poverty incidence and inequality. The paper simulates the effects of hypothetical reallocations of the total tax burden away from taxes falling heavily on the poor (indirect taxes in general) and towards those falling predominantly on the rich (direct taxes, especially the personal income tax). It performs a similar exercise for hypothetical reallocations of expenditures and for changes in the overall size of taxes and expenditures, deriving the effects that these reallocations have on both poverty incidence (headcount measure) and inequality (Gini coefficient).     

我国税收政策影响初次分配的实证分析

近年来,在我国经济保持持续高速增长的同时,我国居民的收入分配不平等现象也在加剧。税收政策历来都是各国调节收入分配的重要政策杠杆。根据1994～2009年我国的基尼系数、税收收入占GDP比重的时间序列数据,所建立的多元线性回归模型表明,我国现行的以间接税为主体的税制结构,整体上拉大了不同阶层的收入差距。增值税、营业税等税种与基尼系数呈正相关,个人所得税、财产税等直接税也由于征收规模过小、征管存在漏洞等原因,没有充分发挥出直接税应有的收入调节作用。     

Environmental taxation and employment

Summary This paper explores how environmental taxes affect employment. It argues that the case for environmental taxes should rest on environmental grounds rather than possibly favorable employment effects. Using pollution taxes to shift the tax burden away from labor is likely to be difficult for economic, social, and political reasons. Moreover, these taxes are likely to raise the overall tax burden-even if the revenues are recycled as lower distortionary taxes. To stimulate employment, governments should rely on alternative instruments targeted at the labor market.