Building a computable general equilibrium tax model for Italy

In this paper, we develop a multi-sectoral computable general equilibrium tax model for Italy allowing for a number of fiscal tools. We illustrate the methodology for modelling and accommodating the full range of direct and indirect taxes into the national general equilibrium model. In particular, we build a commodity tax matrix by commodity, source, user and tax type; and a production tax matrix by industry and tax type. We also put a special emphasis on the institutional sector accounts, incorporating a detailed system of equations. Our model provides a powerful tool for acquiring new insights in fiscal policy analysis, through the assessment of tailored tax reforms, which can consist of either changes in tax rates and tax bases for indirect and direct taxes. Finally, to validate the model we perform an equalizing Value-Added-Tax rates reform. We find that a budget-neutral uniform tax rate reform would be GDP and welfare improving. However, results across agents and sectors vary.     

The impact of tax reforms on unemployment in a SMOPEC

This paper analyzes revenue-neutral tax reforms for a small open economy which is constrained to a balanced current account and whose producers have market power on the world market. We consider origin-based and destination-based commodity taxes as well as taxes on income, the payroll, and on an imported factor of production. Our main findings are the following. First, the strength, and for some parameter constellations, even the sign of the employment effect of tax reforms varies with the degree of openness of the economy. Second, the indeterminacy of the sign of the employment effect crucially hinges on the presence of an internationally mobile factor. The central mechanism underlying our results are adjustments of the real exchange rate which have repercussions on wage and price setting and therefore on employment.     

Tax Principles and Coordination of Trade and Domestic Policies Under Imperfect Competition

We construct an exporting monopoly model to compare destination‐ and origin‐based commodity taxes in a context of a trade and domestic tax reform. We show that an export tax reduction and a change in destination (resp. origin) tax that fix the world price is strictly Pareto‐improving (resp. deteriorating), which holds whether markets are integrated or segmented. This result may provide a new rationale for preferring the destination‐based consumption tax to the origin‐based production tax that has been discussed in the literature of tax harmonisation and tax competition.     

Revenue-increasing and welfare-enhancing reform of taxes on exports

The loss of revenue from a reduction in export taxes has been a concern for trade policy reform in many developing countries. We discuss a strategy for selective reform of taxes on exports that enhances welfare and increases revenue. The strategy involves a reduction in the export tax on a given commodity with an offsetting increase in production tax to keep the producer price unchanged. This strategy is especially promising for exportables with a net subsidy on domestic consumption due to high export taxes and low consumption taxes.     

Revenue-maximizing tax rates in personal income taxation in the presence of consumption taxes: a note

This article computes revenue-maximizing tax rates in personal income taxes in the presence of consumption taxes. It finds that the traditional Laffer analysis, which neglects the effects of marginal tax rates on consumption, overestimates the magnitude of revenue-maximizing tax rates. The bias caused by this oversight is computed.     

TAXING SWEETS: SWEETENER INPUT TAX OR FINAL CONSUMPTION TAX?

Policymakers are considering various policies to reduce obesity and its associated costs, including consumption taxes on high‐calorie foods and specifically sweetened foods. We investigate two tax policies to reduce added sweetener consumption: a consumption tax on sweetened goods and a sweetener input tax. Both tax instruments can reach the same policy target of reducing added sweetener consumption and are found to be regressive. The tax on sweetener inputs targets sweeteners directly and leads to a loss in consumer surplus that is only one‐fifth of that caused by the final consumption tax. Previous analyses have overlooked this important point. (JEL I18, Q18)     

Are contributions of time and money substitutes or complements?

This article empirically investigates the relationship between donations of time and money using Canadian tax policy reforms that changed the tax price of charitable donations. The 1988 reform where a charitable tax deduction was converted to a credit and the 2000 reform in provincial income taxes provide tax price variations plausibly exogenous to individuals’ unobserved heterogeneity. Our estimates on cross-price effects imply that individuals make more time donations as the tax price of charitable donations increases and hence money and time donations are substitutes, as some theories would imply. This contrasts with earlier findings using cross-sectional data.     

The impact of the 2008 German corporate tax reform: A dynamic CGE analysis

In this paper we develop the dynamic CGE model, ifoMod, which is designed to analyse the impact of fundamental tax reforms and in particular capital income tax reforms for Germany. The model is in line with neoclassical growth theory and features all important behavioural interactions between the four major building blocks of an economy including the firm and household sector, the government and the rest of the world. We consider firms of different legal forms which all face an intertemporal investment problem, a financing problem w.r.t. the optimal choice of debt and equity financing as well as a factor input problem when deciding on the optimal amount of different skill types of labour employed. We show the impact of different types of taxes on the behavioural margins of firms and households. The conducted simulation shows the impact of the latest German corporate tax reform of 2008 on the German macroeconomic variables such as investments, GDP, consumption and household's welfare.     

Does labour supply respond to a flat tax?

We exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on the labour supply of men and women. We apply a weighted difference‐in‐difference regression approach and instrumental variables to estimate labour supply functions using a panel dataset. The mean regression results indicate that the tax reform led to a statistically significant increase in hours of work for men but had no effect on work hours for women. However, we find a positive response to tax changes in both tails of the female work hour distribution. We also find that the reform increased the probability of finding a job among both men and women. Despite significant variation in individual responses, the aggregate labour supply elasticities are trivial. This suggests that reform‐induced changes in labour supply are an unlikely explanation for the amplified personal income tax revenues that followed the reform.     

资源税计征方式的探讨

随着近几年国际、国内资源价格的过快变动,资源税从量计征的局限性凸显。十八届三中全会提出要加快资源税改革,实行资源有偿使用制度和生态补偿制度。为此,探讨资源税从价计征的改革就显得尤为重要。在对资源税从量定额征收与从价定率征收方式的比较分析后,认为应针对不同资源的供求状况,对于供求状况不稳定、同质产品价格差异较大、计量单位不规范的消费品,按从价定率方式征收;对于供求基本平衡、同质产品价格差异不大、计量单位规范的消费品,按从量定额方式征收。但作为总体趋势,应更多地采用从价税形式的资源税。     

Green tax reforms and habits

Using a dynamic general equilibrium model, we explore the role of habit formation when analyzing green tax reforms under the double dividend hypothesis. We assume increases in energy taxes and adjust capital taxation in a revenue-neutral framework to evaluate the effects on welfare. Since the existence of an environmental dividend is uncontroversial, we mainly focus on the efficiency dividend. Our findings show that, when taxes on household energy consumption increase, habits and transitional dynamics alter household decisions, and change the efficiency dividend. However, when the tax increase is on energy used as an input, reform always induces a welfare cost in terms of efficiency. In this case, habits play a less important role.     

Multilateral Reforms of Trade and Environmental Policy

The paper analyzes environmental tax policy reform using a competitive model of world trade that includes production‐generated environmental damage (pollution) and trade tariffs. The authors examine the feasibility of Pareto‐improving multilateral reforms of environmental taxes, and show that any environmental tax reform that is mutually welfare‐improving when compensating lump‐sum transfers are assumed is also welfare‐improving when a suitable tariff reform (but no transfers) is combined with the tax changes. Several specific reform proposals are developed. These results expand the feasible set of mutually improving policy proposals for international policy initiatives.     

Capital and Consumption Tax Reforms in a Small Open Economy

The effects of a reform in capital and consumption taxes on private welfare and government tax revenue are examined for a small open, capital‐importing economy. A trade‐off between private welfare and tax revenue is encountered in maximizing social welfare. Nonetheless, lowering capital taxes and raising consumption taxes can increase both private welfare and tax revenue if the initial tax rates are not optimal. In addition, a tax reform by this fashion is a likely response to a rise in the foreign rate of return on capital.     

Revenue‐enhancing Trade Liberalization in a Differentiated Duopoly

Existing studies suggest that in developing countries, tax reforms that increase consumption taxes can compensate for shortfalls in revenue from a tariff reduction. However, these revenue‐enhancing tariff–tax reforms have a critical shortcoming—they generally reduce welfare under imperfect competition. This paper shows that tax reforms such as consumption tax reforms do not necessarily have to be implemented to make up for revenue shortfalls from tariff reductions under imperfect competition, because trade liberalization through tariff cuts leads to an increase in government revenue when domestic and imported goods have a high substitutability. This revenue‐enhancing effect of a tariff reduction occurs for a wider degree of product substitutability when initial tariff and consumption tax rates are high. More importantly, we show that even if initial tariff and consumption tax rates are sufficiently low, a tariff reduction still increases government revenue for a low degree of product differentiation under Bertrand competition.     

Project evaluation by potential tax reform

Shadow prices are derived for small open economies with several production sectors experiencing constant returns to scale. Small projects affect the balance of trade, domestic prices (of non-traded goods and factors), and sector scales. Only domestic prices affect welfare, and only if there is not ‘domestic price equalization’. Generally, a project's net benefits depend upon the potential tax (and tariff) reform made possible (or necessary) through the balance of trade effect. Border prices are right for traded goods, but domestic good shadow pricing requires knowing the direction of at least one reversible available tax reform, and presuming optimality with respect to available reforms.     

Ad‐valorem tax incidence and after‐tax price adjustments: evidence from Brazilian basic basket food

Abstract Recent empirical work on tax incidence suggests that after‐tax price responses are independent of the tax change direction. This paper investigates asymmetric price responses to ad‐valorem tax changes in the Brazilian food market for 10 goods in 16 states during the period 1994–2008. Our results suggest that when tax rates increase, tax full shifting occurs for 2 of the 10 goods and tax overshifting occurs for one of the 10 goods; the price response to tax cuts is an undershifting for all goods. Moreover, this last result is similar to our estimation of (average) tax incidence (undershifting). We also investigate the short‐term and long‐term relationships between prices and VAT rate parameters and find that prices seem to respond to tax shocks within four months.     

On selective indirect tax reform in developing countries

The current consensus on indirect tax reform in developing countries favors a reduction in trade taxes with an increase in VAT to raise revenue. The theoretical results on selective reform that underlie this consensus are, however, derived from partial models that ignore the existence of an informal economy. Once the incomplete coverage of VAT due to an informal economy is acknowledged, we show that, contrary to the current consensus, the standard revenue-neutral selective reform of trade taxes and VAT reduces welfare under plausible conditions. Moreover, a VAT base broadening with a revenue-neutral reduction in trade taxes may also reduce welfare. The results raise serious doubts about the wisdom of the indirect tax reform policies pursued by a large number of developing countries.     

Beneficial impact of tax reforms on tax revenue performances in Togo: Myth or reality?

Tax reforms are often motivated by their potential to improve tax revenue mobilization. However, their actual impacts are difficult to quantify. Using cross-country panel data over the period 2000–2021, this article evaluates the impact of the 2012 tax reforms on tax revenue performance in Togo. We follow the Synthetic Control Method (SCM) estimation procedures. After comparing the observed evolution of Togo's tax revenue output in the period 2013–2021 with that of synthetic Togo, our estimates show that an accumulated yearly average gain is about 3.09% of GDP. Hence, the article concludes that after 9 years of reform, the improvement in Togo's tax performance is remarkable. However, more tax-related and institutions-related reforms are crucial to make Togo's tax system more buoyant and sustainably improve tax revenue mobilization.     

Who participates in tax avoidance? Evidence from Swedish microdata

This article empirically examines why not all individuals participate in tax avoidance. We use rich Swedish administrative panel data on all taxpayers, with a link between corporate and individual tax returns and document that few individuals utilize legal and observable tax avoidance opportunities. Our results show that there are several frictions in tax avoidance participation. In addition to monetary benefits from tax avoidance (incentives), the opportunity to participate in tax avoidance (access), as well as information and knowledge about these opportunities (awareness), are important factors for the individual’s tax avoidance decision. We further show that tax avoidance spreads within communities. The impact of the local network is stronger for non-commuters who live and work in the same municipality.