This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal ...tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and on expenditure components.
Tax evasion is a pervasive problem in many countries. In particular, some developing countries do not collect even half of what they would if taxpayers complied with the written letter of the law. ...The academic literature has not been oblivious to the need to explain why people pay (or do not pay) taxes. However, the empirical literature has not yet reached consensus. This paper reports the results of a large field experiment that tried to affect compliance by influencing property tax taxpayers' beliefs regarding the levels of enforcement, reciprocity, and peer-effects of the tax system in a municipality in Argentina. Results indicate that those taxpayers that received the deterrence message have a higher probability (almost 5 percentage points) to comply than the taxpayers in the control group. No average effects are found for the other two treatments. However, this average effects masks important results. After receiving the reciprocity and the peer-effects messages, the probability of compliance increased for some taxpayers but it decreased for others according to their underlying distribution of beliefs. The evidence in this paper advances the state of knowledge, may help to reconcile some of the results in the literature, and provides the basis for advancing policies and research on tax compliance in developing countries.
We model the opportunities and incentives generated by international tax differences for international profit shifting by multinationals. The model considers not only profit shifting arising from ...international tax differences between affiliates and parent companies, but also from tax differences between affiliates in different host countries. Our model yields the prediction that a multinational's profit shifting in a country depends on a weighted average of international tax rate differences between all countries where the multinational is active. Using a unique dataset containing detailed firm-level information on the parent companies and subsidiaries of European multinationals and information about the international tax system, we test our model and empirically examine the extent of intra-European profit shifting by European multinationals. On average, we find a semi-elasticity of reported profits with respect to the top statutory tax rate of 1.3, while shifting costs are estimated to be 0.6% of the tax base. International profit shifting leads to a substantial redistribution of national corporate tax revenues. Many European nations appear to gain revenues from profit shifting by multinationals largely at the expense of Germany.
Theft and taxes Desai, Mihir A.; Dyck, Alexander; Zingales, Luigi
Journal of financial economics,
06/2007, Volume:
84, Issue:
3
Journal Article
Peer reviewed
This paper analyzes the interaction between corporate taxes and corporate governance. We show that the design of the corporate tax system affects the amount of private benefits extracted by company ...insiders and that the quality of the corporate governance system affects the sensitivity of tax revenues to tax changes. Analyses of a tax enforcement crackdown in Russia and cross-country data on tax changes support this two-way interaction between corporate governance and corporate taxation.
Taxing Capital? Not a Bad Idea after All Conesa, Juan Carlos; Kitao, Sagiri; Krueger, Dirk
The American economic review,
03/2009, Volume:
99, Issue:
1
Journal Article
Peer reviewed
Open access
We quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks and permanent productivity differences of ...households. The optimal capital income tax rate is significantly positive at 36 percent. The optimal progressive labor income tax is, roughly, a flat tax of 23 percent with a deduction of $7,200 (relative to average household income of $42,000). The high optimal capital income tax is mainly driven by the life-cycle structure of the model, whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system.
Read my lips? Taxes and elections Fuest, Clemens; Gründler, Klaus; Potrafke, Niklas ...
Journal of public economics,
August 2024, Volume:
236
Journal Article
Peer reviewed
Recent research has found distinct electoral cycles in public spending, but the evidence for cycles in taxation is scarce, reflecting a lack of cross-nationally comparable measures of tax reforms. We ...use qualitative data provided by the IMF (Amaglobeli et al., 2018) to compile comprehensive tax reform indicators that cover the entire tax system for 22 countries between 1960–2014, including reforms of tax rates and bases for six tax types. Relating tax reforms to the timing of elections, we find results that are consistent with politicians postponing tax reforms to periods after elections. The results are most pronounced for tax increases, are stronger for tax rates than bases, and are driven by particularly salient tax types (personal income taxes and the VAT).
•We compile comprehensive tax reform indicators that cover the entire tax system.•The sample includes 22 countries between 1960–2014.•The sample includes reforms of tax rates and bases for six tax types.•The results suggest that politicians postpone tax reforms to periods after elections.•The results are pronounced for tax increases and stronger for tax rates than bases.•The results are driven by salient tax types (personal income taxes and the VAT).
We examine whether three tax system characteristics—required book-tax conformity, worldwide versus territorial approach, and perceived strength of enforcement—impact corporate tax avoidance across ...countries after controlling for firm-specific factors previously shown to be associated with tax avoidance (i.e., performance, size, operating costs, leverage, growth, the presence of multinational operations, and industry) and for other cross-country factors (i.e., statutory corporate tax rates, earnings volatility, and institutional factors). We find that, on average, firms avoid taxes less when required book-tax conformity is higher, a worldwide approach is used, and tax enforcement is perceived to be stronger. However, the relations between tax avoidance and all three tax systems characteristics are contextual and depend on the extent to which management compensation comes from variable pay, including bonuses, stock awards, and stock options.
We consider a dynamic Mirrlees economy in a life-cycle context and study the optimal insurance arrangement. Individual productivity evolves as a Markov process and is private information. We use a ...first-order approach in discrete and continuous time and obtain novel theoretical and numerical results. Our main contribution is a formula describing the dynamics for the labour-income tax rate. When productivity is an AR(1) our formula resembles an AR(1) with a trend where: (i) the auto-regressive coefficient equals that of productivity; (ii) the trend term equals the covariance productivity with consumption growth divided by the Frisch elasticity of labour; and (iii) the innovations in the tax rate are the negative of consumption growth. The last property implies a form of short-run regressivity. Our simulations illustrate these results and deliver some novel insights. The average labour tax rises from 0% to 37% over 40 years, whereas the average tax on savings falls from 12% to 0% at retirement. We compare the second best solution to simple history-independent tax systems, calibrated to mimic these average tax rates. We find that age-dependent taxes capture a sizable fraction of the welfare gains. In this way, our theoretical results provide insights into simple tax systems.
No government can announce a tax system and then rely on taxpayers' sense of duty to remit what is owed. Some dutiful people will undoubtedly pay what they owe, but many others will not. Over time ...the ranks of the dutiful will shrink, as they see how they are being taken advantage of by the others. Thus, paying taxes must be made a legal responsibility of citizens, with penalties attendant on noncompliance. But even in the face of those penalties, substantial tax evasion exists. Tax evasion is widespread, always has been, and probably always will be. This essay reviews what is known about the magnitude, nature, and determinants of tax evasion, with an emphasis on the U.S. income tax. It then places this information into a conceptual context, examining various models and theories, and considers policy implications.
We investigate the role played by gender equality in redistributive policies through taxation and in preferences for redistribution. First, at the cross-country level, we study how the historical ...roots of gender equality –i.e., the time of women’s enfranchisement and the role of women in the family– are related with the level of redistribution through taxation. We find that in countries that are historically more gender equal the tax system today is more redistributive. Second, at the individual level, in order to shed light on the cross-country evidence, we investigate whether gender equality is related with overall and/or gender-specific differences in preferences about redistribution. We find that in more gender-equal countries gender differences in redistributive preferences are significantly larger, while their average level does not vary: when gender equality is stronger, women are systematically more favorable to redistribution, whereas there are no significant changes for men. In turn, the component of gender equality driving this result is –not surprisingly– the equality of women and men within the political sphere.
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