Tax system and informal economy: a cross-country analysis

This article analyses determinants of informal economy. By using qualitative aspects of tax systems, first, we create a ‘Smithian’ tax system index based on Adam Smith’s four maxims. Then, using this index and other control variables, we study determinants of informal economy. We use unique panel data set that is constructed by using various sources. After taking into account the endogeneity of tax burden and GDP per capita, our results show that ‘Smithian’ tax system index does not significantly affect informal economy. Our results suggest that rule of law, complexity of a tax system and tax burden affect informal economy negatively, while labour market regulations affect positively.     

The hard shadow of the Greek economy: new estimates of the size of the underground economy and its fiscal impact

This article presents new estimates of the Greek underground economy and explores the link between the underground economy and aggregate debt. We show that the Greek underground economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the underground economy is positively related to the debt-to-GDP ratio, implying that fighting the underground economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.     

A spatial model of corporate tax incidence

Using a unique, self-compiled data-set on international tax rates, we explore the link between taxes and manufacturing wages for a panel of 66 countries over 25 years. We find, controlling for other macroeconomic variables, that wages are significantly responsive to corporate taxation. Higher corporate tax rates depress wages. Using spatial modelling techniques, we also find that tax characteristics of neighbouring countries, whether geographic or economic, have a significant effect on domestic wages. We test for, and reject, spatial autocorrelation in our model using a modification of the Moran-I test statistic that accounts for country-specific fixed effects in a panel data setting. Our article fits in with the new economic geography literature as well as the urban economics literature which attempt to explain the spatial distribution of wages.     

A Test of Strategic Trade Policy in the Semiconductor Industry: The Impact of Japanese Policy on U.S. Firms

This paper analyzes a multinational corporation that may use tax evasion and profit shifting as a means to minimize tax liabilities. Our main finding is that profit shifting may occur even when tax rates are the same across countries. This will be the case whenever there is a tax differential in effective tax rates resulting from differences in tax enforcement. In this context, profit shifting occurs to enable tax evasion in a country where tax enforcement is less harsh. Moreover, for a given differential in tax rates, differences in tax enforcement may either accentuate or dampen profit shifting. Importantly, the predictions regarding the direction of profit shifting that would result in our set-up may contrast sharply with those of the preceding literature.     

Using Empirical Point Elasticities to Teach Tax Incidence

Using point elasticities rather than using either arc elasticities or slopes of demand and supply curves provides the best method for teaching students about the economic impacts of excise taxes. Not only does a point-elasticity approach simplify theoretical analysis of tax impacts, but it also allows instructors to take advantage of publicly available empirical estimates of demand and supply elasticities to show students how theoretical results can be applied to real-world tax policy issues. To illustrate these advantages, the authors use several available estimates of point elasticities of demand and supply of raw sugar to calculate the economic impacts of a recently proposed penny-per-pound tax on raw cane sugar grown in the Florida Everglades.     

Puerto Rico in the 1970s and 1980s: Crisis of the Development Model

In his institutional economic essay on "Taxation in Chicago and Philadelphia" (published in 1895) John R. Commons addresses property tax assessment. He demonstrates that the revenue is not just a question of the tax rate and the distribution of the tax burden but also one of constitutional requirements and how the taxes are assessed. His essay is reviewed with regard to his later work, subsequent Institutional Economics, and the social provisioning of the market for professional tax advice. The degree of liabilities is defining characteristics of the differences between the United States and Germany.     

中国税制的国际竞争力研究

国际税收竞争是经济全球化发展的产物,是各国以税收为载体、以促进本国经济增长为目的的竞争,其实质是经济竞争。在此,基于国际税收竞争视角,重点对中国税制的国际竞争力进行评析,分析表明中国税制具有一定的国际竞争力,但诸多方面仍有待完善。在此基础上,借鉴国际经验建立具有竞争性的中国税制,确定合理的宏观税负水平,同时还需加强"税收文化"的建设,建立国际税收协调机制,以应对日益激烈的国际税收竞争。     

Is the Sky the Limit? Can Japanese Government Bonds Continue to Defy Gravity?

This paper presents a simulation model based on the growth rate, the inflation rate, and the consumption tax rate in the future. Future tax revenues and fiscal expenditures are projected using regression models estimated from past data. The fiscal situation is called unsustainable if the outstanding amount of Japanese government bonds (JGBs) becomes higher than the level of private sector financial assets. We focus on the general account of the central government, which is the source of JGB issues. We find that the higher the economic growth, the more likely it is that the fiscal situation is sustainable. When a larger portion of interest income is reinvested in JGBs, the chance is higher that the fiscal situation is sustainable. Most importantly, raising the consumption tax to 20% guarantees fiscal sustainability in most cases. Our analysis shows that without a consumption tax hike beyond the 10% rate, a fiscal crisis will be almost a certainty, even with a real economic growth rate of 2% despite a shrinking labor force. A reasonably quick hike of the consumption tax, namely a hike by 1% a year, up to 20%, combined with high or moderate economic growth rates, seems to keep the economy out of a fiscal crisis, where a moderate growth rate is defined to be generated by a productivity increase per working‐age population of 1.9%, which was the average during the Koizumi years.     

柔性行政在税收执法中适用的可行性分析

随着中国改革开放的深入和社会主义市场经济体制的日益完善,传统刚性行政执法那种僵化、忽视行政相对人权益的弊端日渐显露,通过对近几年执法现状的回顾,人们对行政执法问题进行了重新反思,柔性行政执法被提上日程。柔性行政执法以其灵活性强、注重行政相对人意愿的优势弥补了刚性行政执法的缺陷,而税收行政执法一向被认为是具有强制性的,柔性行政执法在税收执法当中是否具有可行性,很多人抱着怀疑态度,因此需要从理论的高度对税务柔性行政执法存在的正当性、合理性及必要性进行认识。     

China’s value-added tax reform,firm behavior and performance

China reformed value-added tax (VAT) by removing investment from the tax base in northeastern provinces in 2004, which is a “natural experiment” of its tax system. Using difference-in-differences method, this paper for the first time investigates the impact of VAT reform on China firms’ fixed asset investment, employment behavior, innovative activities, and productivity, and furthermore discusses the impact of firm behavior on industrial structural upgrade and employment with a firm-level panel data of large and medium-sized manufacturing enterprises in China. We find that VAT reform significantly promotes firms’ fixed asset investment, and increases firms’ capital-labor ratio and productivity; while enhancement of firms’ productivity is mainly achieved by means of substituting labor with capital, rather than independent technology innovation; meanwhile, VAT reform distinctly decreases employment. Our findings have essential policy implications on the extension of VAT reform in the entire China.