Assessing the international spillover effects of capital income taxation

Changes in capital taxes by one economy spill onto other economies with internationally mobile capital. We evaluate these impacts using a two-region, intertemporal general equilibrium model. The foreign economy's unilateral reduction in corporate income taxation has positive but small effects on U.S. welfare. In contrast, unilateral reductions in personal income taxation impose large negative spillovers. The differences result from CIT being source-based and PIT residence-based. The CIT cut reduces tax burdens to U.S. residents who invest abroad, while the PIT cut reduces foreigners' tax burdens only. Through general equilibrium adjustments neglected in simpler models, the PIT cut lowers U.S. residents' welfare.     

Globalisation,taxation and inequality

Today's tax systems, in which value-added taxes and payroll taxes play a prominent role, are largely creations of the 1950s. We need to invent modern tax systems adapted to the reality of the 21^st century: the growing importance of capital and the rise of inequality. This article reviews some of the challenges involved with increasing the progressivity of tax systems in a globalised world and discusses how these challenges could be overcome. I make the case for new and more ambitious forms of international cooperation and for modern forms of wealth taxation.     

International interest withholding taxation: Prospects for a common European policy

In 1989 the European Union member states rejected a proposal to introduce a minimum interest withholding tax of 15 percent. Some Union member states, however, remain keenly interested in bringing about some minimum level of international taxation of interest income. This suggests that member states will be asked to reconsider the issue in the near future. This paper first examines the effects of interest withholding taxes on financial markets. It then reviews some of the main aspects of potential tax reform in this area. A major challenge for any future proposal will be to satisfactorily integrate the banking system into a common interest withholding scheme.     

Intra-mediterranean trade relations in the 1980s

This paper deals with an important problem of trade policy confronted by the countries of the Mediterranean Basin: what should be their goals and strategy in the 80s for trading links with other neighbouring countries, regions or trading superpowers?     

Education policies and optimal taxation

This paper studies the design of education policies in a setting in which optimal redistributive labor taxation is available. It is usually argued that the crucial parameter to guide education policy is the complementarity of education and ability. This is true only when labor supply is fixed or when income taxes are not allowed. I show that, if labor supply is endogenous and if the government can tax income in a nonlinear way, the crucial parameter is how the education elasticity of wage changes with ability. Taking the elasticity criterion into account, education subsidies are optimal in cases in which, under the complementarity criterion, education taxes would be optimal. To do this, I use an asymmetric information setting that motivates nonlinear taxation of income and education. JEL Classification H21 · H23 · H52 · I28     

Optimal commodity taxation with duty-free shopping

International travellers are frequently offered the opportunity to purchase a certain quantity of goods duty-free. Individuals differ in their opportunities to benefit from duty-free shopping, and we focus on the implications of these differences for optimal commodity taxation within a version of the optimal tax model of Mirrlees (Review of Economic Studies, 38, 175–208, 1971). We show how duty-free alters the constraints on the use of commodity taxes to reduce the distortionary costs of income taxation or to reflect externalities. Beyond characterising optimal taxes in the duty-free regime, we discuss conditions under which allowing duty-free would increase or reduce social welfare.      

Disability insurance and optimal income taxation

This paper studies the design of disability insurance scheme when agents differ in their privately known productivity. We extend the Diamond and Mirrlees (1978) two period model to allow for agents differing ex-ante in their productivity and characterize the optimal nonlinear tax transfer that maximizes a utilitarian welfare function when per-period earnings and age are observable while individuals’ productivity and health status are not observable. We show that the induced tax/benefit scheme should exhibit a marginal income tax that decreases with age for some agents. A marginal subsidy on the young high productive income may be desirable. While the disability scheme always involves the old low productive agents to be indifferent between working and claiming disability benefits, this result is not always true for the old high productive agents. JEL Classification H55 · H23 · E62     

Nordic dual income taxation of entrepreneurs

The paper shows how entrepreneurial taxes interact with the career choice of individuals, the quality of entrepreneurs, and their investment behavior. It is particularly relevant to differentiate the early effects on start-up enterprises with substantial uncertainty from the tax effects on mature firms where the uncertainty is resolved. Conditions are derived for the Nordic dual income tax to be neutral and they are found to be stringent. Profit expectations matter. The Nordic dual encourages (discourages) the establishment of new enterprises by entrepreneurs who anticipate high (low) profitability.     

The theory of optimal taxation: what is the policy relevance?

The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong administrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theory may be easier to obtain than previously believed. The paper also points to the strong similarity between optimal commodity tax rules and the rules for optimal source-based capital income taxation.      

Intangible investment and Ramsey capital taxation

The standard analysis of optimal fiscal policy aggregates different types of assets into a unique capital good and all types of capital taxes into a unique capital tax. This paper considers a disaggregated framework: an economy with corporate and dividend taxes, where firms invest in both tangible and intangible assets (which can be expensed or sweat). In our setup, firms can always respond to changes in the timing of taxation. We find that the optimal long-run policy features zero corporate taxes and positive dividend taxes, with labor and dividend taxes being identical. Moreover, the initial capital levy is relatively small.     

Faculty perspectives on international taxation topics

This paper presents perspectives of accounting faculty members on the relative importance of topics that should be presented in a one-semester graduate level international taxation course. Understanding of international taxation has become an increasingly critical part of the tax and accounting practices of the big four and other major public accounting firms as well as to U.S. multinational business firms. Therefore, college and universities may find it useful to provide at least some coverage of international taxation topics in a separate course or as part of other courses in their tax and accounting programs. If a separate course is offered, an important consideration of which topics should be covered in the course, since there are more topics than can be reasonably covered in one course. This paper analyzes the responses of members of the American Accounting Association's International Accounting Section to a survey of which topics should be included in a one-semester international tax course. Results are compared with those of prior studies to determine whether and the extent to which perspectives have changed over time and based on the type of survey respondent. Findings of this paper will offer guidance regarding topic selection to the accounting faculty members who are charged with developing an international taxation course. The findings may also be of interest to anyone concerned with international business in general and taxation in particular.     

Environmental taxation and the double dividend: A reader's guide

There has been considerable debate as to whether the revenue-neutral substitution of environmental taxes for ordinary income taxes might offer a double dividend: not only (1) improve the environment but also (2) reduce certain costs of the tax system. This paper articulates different notions of double dividend and examines the theoretical and empirical evidence for each. It also connects the double-dividend issue with principles of optimal environmental taxation in a second-best setting.A weak double-dividend claim-that returning tax revenues through cuts in distortionary taxes leads to cost savings relative to the case where revenues are returned lump sum-is easily defended on theoretical grounds and (thankfully) receives wide support from numerical simulations. The stronger versions contend that revenueneutral swaps of environmental taxes for ordinary distortionary taxes involve zero or negative gross costs. Theoretical analyses and numerical results tend to cast doubt on the strong double-dividend claim, although the theoretical case is not air-tight and the numerical evidence is mixed.     

Redistributive taxation and social insurance

This paper studies the role of social insurance as a redistributive mechanism in presence of an optimal (linear or general) income tax. It considers a second-best setting with two unobservable individual characteristics: ability, measured by the wage rate and risk, measured by the probability of incurring a loss. It shows that both tax progressivity and the optimal level of social insurance crucially depend on the correlation between ability and risk.This paper has been prepared for the IIPF 51 st Congress held in Lisbon, August 21–24, 1995. The authors are grateful to F. Gahvari, M. Lundholm, M. Marchand, J.-C. Rochet, P. Sørenson and the referees for their comments.     

Optimal taxation with home production

Optimal taxes for Europe and the U.S. are derived in a realistically calibrated model in which agents buy consumption goods and services and use home capital and labor to produce household services. The optimal tax rate on services is substantially lower than the tax rate on goods. Specifically, the planner cannot tax home production directly and instead lowers the tax rate on market services to increase the relative price of home production. The optimal tax rate on the return to home capital is strictly positive and the welfare gains from switching to optimal taxes are large.     

Alcohol taxation and regulation in the European Union

This article surveys alcohol consumption, taxation and regulation in the European Union (EU). It uses the estimates of cost-of-illness studies to gauge the external costs of harmful alcohol use. In all but one member state, the costs exceed alcohol excise duty collections. An optimal alcohol excise is difficult to design, because the welfare gains from a reduction in socially costly heavy drinking must be balanced against the welfare loss from a fall in moderate drinking. This suggests that while an alcohol excise increase may be efficiency improving, complementary regulatory measures, which focus on specific problem groups, should be an important element of the policy package. A case can also be made for reducing wasteful cross-border shopping by raising the minimum duties on wine, beer and spirits, preferably in line with their relative alcohol content.      

Capital income taxation and economic growth in open economies

Can reductions in domestic capital income taxes attract foreign capital and, at the same time, foster economic growth? Using a two-country overlapping generations model with endogenous growth and internationally mobile capital, this paper shows that the effect of domestic capital taxes on the international allocation of capital and on the rate of economic growth do not necessarily go in the same direction. A country can attract capital by reducing its taxes, but this may lower the rate of economic growth depending on the elasticity of saving to the net-of-tax interest rate and on the effect of taxes on domestic factor productivity.     

Imperfect competition and the optimal combination of ad valorem and specific taxation

While it has long been recognized that under imperfect competition ad valorem and specific taxation differ in their effects, the optimal combination of the two instruments has received little attention. This paper shows how combining the two taxes can eliminate the welfare loss due to imperfect competition by inducing profit-maximizing firms to charge the appropriate Ramsey price.     

Income shifting and U.S. international trade in goods statistics

Intrafirm trade represents greater than one-third of total U.S. international trade in goods. Since these are not arm’s-length transactions, trade policymakers have voiced concerns that income shifting may distort international trade in goods statistics through the manipulation of transfer prices. Using country-level data on intrafirm exports and imports, we estimate a path analysis that simultaneously tests how and to what extent tax-motivated transfer pricing and real investment decisions affect intrafirm trade in goods statistics. Contrary to speculation, we do not find an economically significant relation between transfer pricing and intrafirm trade in goods statistics. In contrast, we find that tax-motivated location decisions create a 21 (20) percent or $819.7 ($927.1) million difference in mean intrafirm exports (imports) between the U.S. and a low- and high-tax country. This study provides trade policymakers with relevant information about the extent to which real investment decisions and accounting manipulations affect intrafirm trade in goods statistics and contributes to the international trade and income shifting literatures.     

Optimal taxation and redistribution in an OLG model with unemployment

This paper concerns redistribution via nonlinear income taxation in an overlapping generations model with two ability-types. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by involuntary unemployment. We show that the policy instruments that are used to calculate the marginal labor income tax rate for each ability-type give rise to intertemporal tax base effects. In addition, since the relationship between the employment and the capital stock implies intertemporal production inefficiency at the second best optimum, imperfect competition in the labor market may itself justify capital income taxation.      

关于贸易收汇和贸易出口真实性与一致性的研究

贸易收支是异常资金流入与流出的重要渠道之一,异常资金流动会导致贸易收汇和贸易出口所对应的资金流与货物流之间的匹配出现偏差。本研究探索了有关贸易收汇和贸易出口真实性与一致性非现场监测的非参数分析方法,并利用此方法对江苏省2007年贸易收汇和贸易出口之间真实性和一致性的情况进行了实证分析。