The most significant problems with the existing system for taxing the profit of multinational companies stem from two related sources. First, the underlying ‘1920s compromise’ for allocating the ...rights to tax profit between countries is both inappropriate and increasingly hard to implement in a modern economic setting. Second, because the system is based on taxing mobile activities, it invites countries to compete with each other to attract economic activity and to favour ‘domestic’ companies. The OECD Base Erosion and Profit Shifting (BEPS) initiative essentially seeks to close loopholes rather than to re‐examine these fundamental problems. As a consequence, it is unlikely to generate a stable long‐run tax system. We briefly outline some more fundamental alternative reforms.
We build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on ...equilibrium hours of work. We find that changes in taxes have large aggregate effects on hours of work. Moreover, we find that there is no inconsistency between this result and the empirical finding of small labor elasticities for prime age workers. In our model, micro and macro elasticities are effectively unrelated. Our model is also consistent with other cross-country patterns.
This article focuses on historiography concerned with changes and continuities in the tax systems in Central America and Chiapas between 1760 and 1840. Relatively little research has been undertaken ...on the latter years of the colonial period, and more attention has been focused, especially in recent years, on the first decades after Independence. The historiography underlines the importance of tax systems for the configuration of the state and the rest of society. The studies considered refer principally to state liquor and tobacco monopolies, tribute and direct contributions, alcabala, the expropriation of ecclesiastical property, and debt. Variations in the relative importance of these income sources in the different territories is examined. The authors propose avenues for future research in the field.
A historiografia que trata das mudanças e continuidades da tributação na América Central e Chiapas entre 1760 e 1840 é o objeto das reflexões deste artigo. As investigações realizadas no final do período colonial são relativamente poucas e tem havido mais atenção, nomeadamente nos últimos anos, nas primeiras décadas após as independências. A historiografia destaca a importância da tributação para a configuração do Estado e do restante da sociedade. Os estudos contemplados enfocam principalmente os monopólios estaduais de fumo e bebidas alcoólicas, tributos e contribuições diretas, a alcabala, a expropriação de bens eclesiásticos e a importância da dívida. As variações na importância relativa dessas fontes de renda nos diferentes territórios são comparadas e contrastadas. Caminhos para pesquisas futuras neste campo são propostos.
La historiografía que se ocupa de los cambios y las continuidades en la fiscalidad en Centroamérica y Chiapas entre 1760 y 1840 es el objeto de las reflexiones en este artículo. Las investigaciones realizadas sobre el final del periodo colonial son relativamente pocas y ha habido más atención, notablemente en años recientes, sobre las primeras décadas después de las independencias. La historiografía resalta la importancia de la fiscalidad para la configuración del Estado y del resto de la sociedad. Los estudios contemplados se enfocan principalmente en los monopolios estatales del tabaco y el aguardiente, el tributo y las contribuciones directas, la alcabala, la expropiación de los bienes eclesiásticos y la importancia de la deuda. Se compara y contrasta las variaciones en la importancia relativa de estas fuentes de ingreso en los diferentes territorios. Además, se proponen caminos para futuras investigaciones en este campo.
This Note develops a framework for understanding when policymakers should use equity-informed legal rules—rather than taxes—to redistribute. First, policymakers should choose the most efficient way ...to reduce income inequality, which may involve allocating legal entitlements to the poor, depending upon several factors described in the Note. Second, sometimes legal rules ought to account for non-income characteristics based upon which the tax system would be poorly equipped to redistribute.
We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the United States using a harmonized empirical approach. We find that own-wage ...elasticities are relatively small and more uniform across countries than previously considered. Nonetheless, such differences do exist, and are found not to arise from different tax-benefit systems, wage/hour levels, or demographic compositions across countries, suggesting genuine differences in work preferences across countries. Furthermore, three other findings are consistent across countries: The extensive margin dominates the intensive margin; for singles, this leads to larger responses in low-income groups; and income elasticities are extremely small.
We compute the optimal non-linear tax policy for a dynastic economy with uninsurable risk, where generations are linked by dynastic wealth accumulation and correlated incomes. Unlike earlier studies, ...we take full account of the welfare distribution along the transition to the new steady state following a once-and-for-all change in the tax system. Findings show that accounting for transitional dynamics leads to a more progressive optimal tax system than one would obtain by only comparing steady states. Starting at the U.S. status quo, the optimal tax reform is a slight to moderate reduction in the progressivity of the tax system, depending on how much the policy maker cares about future generations.
Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, ...welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to which the return on investment should be taxed depends on how the internal provision of incentive pay and external monitoring by banks interact in constraining the manager and whether retained earnings or new share issues finance investments at the margin. The results are informative for the design of investment subsidies which might be integrated in corporate tax systems such as an Allowance for Corporate Equity or a cash-flow tax.
•The paper analyzes whether the normal return on investment should be exempted from taxation.•The paper resorts to a corporate agency model with managerial empire-building preferences.•Managerial incentive provision and bank monitoring are considered.•Neither a full nor a partial deductibility of the cost of finance might be optimal.•This contrasts previous research which resorts to the neoclassical model of firm behavior.
A globalized economy raises intricate questions of distributive justice. Some of these have come under scrutiny in the literature. Under what conditions can international trade be regarded as ...respecting norms of fairness? Are wages at the subsistence level a necessary step on the path to growth or a form of exploitation? Who does and who should benefit from the profits generated by the exploitation of natural resources? Yet, one important determinant of global justice, namely questions of international taxation, has received little attention in the philosophical debate. Adapted from the source document.
This paper presents a range of insights from recent literature on how climate-change policies and other environmental policies interact with the fiscal system. It explores four issues associated with ...fiscal interactions. First, it examines how these interactions influence the prospects for a “double dividend:” both an environmental improvement and a reduction in the costs of the tax system. Second, it analyzes how the use of revenues from a carbon tax or from a cap-and-trade system involving auctioned emissions allowances influences these policies' economic costs. Third, it addresses the question whether carbon taxes or cap-and-trade programs represent more efficient sources of government revenue than other, more traditional revenue sources such as income, sales, or payroll taxes. Finally, it analyzes how fiscal interactions affect the choice between CO2 emissions-pricing instruments (carbon taxes and cap and trade) and other climate policy instruments.
This paper quantitatively characterizes optimal tax systems in a model of overlapping generations, when transitional cohorts are explicitly taken into account. We use the recent study of Conesa et ...al. (2009) as an example, but extend it by transitional dynamics. We furthermore develop a general and coherent way of aggregating welfare effects of different individuals and cohorts in the short- and the long-run. Our welfare measure includes the case of a utilitarian social welfare function, yet is not limited to this perspective.
We show that the optimality of a high capital income tax rate along the transition crucially depends on the assumption of a utilitarian social welfare function. This objective of the policy maker comprises implicit redistributive objectives across and within cohorts. Based on pure economic efficiency and insurance effects, however, we find a zero capital income tax rate and a less progressive labor income tax schedule to be optimal. Such a tax system receives political support from initial cohorts. A high capital income tax regime on the other hand does not.
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