We study attitudes towards the introduction of hypothetical new taxes to finance the cost of the COVID-19 pandemic. We rely on survey data collected in Luxembourg in 2020. The survey asks for the agreement of respondents over: a one-time net wealth tax, an inheritance tax, a temporary solidarity income tax, and a temporary increase in VAT. All questions include different and...
This article proposes a new approach to estimate the informal economy (IE) by using Structural Equation Modeling (SEM). Using a Monte Carlo Simulation and empirical analysis of the Italian IE as an example, we provide general conclusions on the reliability and limitations of the SEM approach to estimate the IE. Practical guidelines on how to apply this method and the way to deal...
In 2002, the Finnish government introduced an earnings disregard experiment aimed at improving the incentives of low-income individuals who receive last-resort social assistance. The aim of the experiment was to reduce unemployment by providing social assistance clients better incentives to receive at least temporary or part-time work. This paper evaluates the employment effects...
In this paper, we investigate the impact of the COVID-19 pandemic on German household income in 2020 using a micro-level approach. We combine a microsimulation model with novel labour market transition techniques to simulate the COVID-19 shock on the German labour market. We find the consequences of the labour market shock to be highly regressive with a strong impact on the...
We study the effects of a tax deduction for lifelong learning, exploiting exogenous variation in the effective costs of lifelong learning due to jumps in tax bracket rates. We use a regression kink design and tax return data on the universe of Dutch taxpayers. Low-income individuals show no response, but high-income individuals are more likely to report lifelong learning...
I extend the theory of tax incidence under Cournot-Nash oligopolistic competition to study the effects of an ad valorem sales tax on Web services that are provided free of charge to users, and produce advertising space sold to businesses. Ads are more valuable to advertisers the more users are served by a Web service. Users have ads-neutral preferences and Web companies compete...
This paper investigates firms’ responses to threshold-dependent intensity of tax enforcement. We use administrative tax return data over the entire population of German firms and exploit industry variation in firm size thresholds applied by the tax administration. In our setting, each threshold marks a considerable spike in audit intensity and hence should create strong...
Higher tax enforcement is consistently associated with lower informality in the literature, whereas the evidence is mixed for other factors affecting informality. We review the literature on the effect of tax enforcement on informality and provide further evidence in the form of subsample tests of the effect of tax enforcement identified in Liu-Evans and Mitra (Econ Lett 182:122...
We set up a simple model of tax competition for mobile, highly-skilled and overconfident managers. Firms endogenously choose the compensation scheme for managers, which consists of a fixed wage and a bonus payment in the high state. Managers are overconfident about the probability of the high state and hence of receiving the bonus, whereas firms and governments are not. When...
We study the impact of fiscal revenue shocks on local fiscal policy. We focus on the very volatile revenues from the immovable property gains tax in the canton of Zurich, Switzerland, and analyze fiscal behavior following large and rare positive and negative transitory revenue shocks. We apply causal machine learning strategies and implement the post-double-selection LASSO method...
This paper assesses to which degree housing purchase subsidies are capitalized into property prices. Using a large-scale micro-dataset on German house prices, I exploit the introduction of a new subsidy scheme in the state of Bavaria. My difference-in-difference estimations at the Bavarian interstate border indicate that the prices of single-family homes increased by...
We investigate whether controlled foreign corporation (CFC) rules influence cross-border merger and acquisition (M&A) activity on a global scale. CFC rules are one main anti-tax avoidance measure and potentially lead to immediate taxation of foreign subsidiaries’ income at parent level. Analyzing a large M&A data set and detailed self-compiled CFC rule data from 27 countries...
The aim of this paper is twofold. First, it provides a comprehensive assessment of the financial disincentives to enter formal employment implied by the design of the tax-benefit system in five Latin American countries: Bolivia, Colombia, Ecuador, Peru, and Venezuela. Then, it analyzes the extent to which formalizing informal workers would contribute to increase fiscal capacity...
Drawing on data from mid-19th century Britain, this paper studies strategic interaction among local governments in the choice of welfare benefits under the Poor Law, the local welfare system of the time. The paper exploits a national reform that reduced the length of residency required for welfare eligibility, which should have increased the incentive for welfare migration and...
This paper compares the implications of tax system and public borrowing limit asymmetries for the welfare cost of business cycles and interregional consumption risk sharing in a two-region fiscal union. We identify the welfare-improving and risk-sharing-improving designs of the regional tax systems and borrowing limits. We find that the choice of public borrowing limits is more...
In a monopolistically competitive model with production externalities, where individuals voluntarily provide offsets which compensate for degradation of environmental quality caused by their income earning activities, this paper examines how an increase in the population size affects the equilibrium levels of environmental quality, offsets, and net contributions. Whether labor...
The world runs a trade surplus with itself: the reported values of exports exceed the reported values of imports. This is logically impossible but a well-known empirical fact. Less well-known is the fact that, in recent years, the EU has a trade surplus with itself that amounts to more than 80% of the global surplus. In this paper, we show that this EU self-surplus is worth a...
This study explores the implications of rising markups for optimal Mirrleesian income and profit taxation. Using a stylized model with two individuals, the main forces shaping welfare-optimal policies are analytically characterized. Although a higher profit tax has redistributive benefits, it adversely affects market competition, leading to a greater equilibrium cost-of-living...
If an individual’s health costs are U-shaped in weight with a minimum at some healthy level and if the individual has both self-control problems and rational motives for over- or underweight, the optimal paternalistic tax on calorie intake mitigates the individual’s weight problem (intensive margin), but does not induce the individual to choose healthy weight (extensive margin...
The literature on tax competition has argued that tax base equalization, which reduces regional disparities in tax bases, can serve as a means of internalizing horizontal and vertical fiscal externalities. This argument assumes that each government relies on a single tax base (a regional tax on mobile capital and a federal tax on savings). This paper considers the case in which a...
Based on a survey of 2500 US adults, we show that serious illness or job losses caused by the COVID-19 pandemic increase support for temporary progressive levies or structural progressive tax reform, controlling for socioeconomic and demographic characteristics. People who reveal preferences for spending items (more on police, military, border protection; less on education...
We study the impact of the media negativity bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are significantly more compliant than the control group. Instead, the exposure to negative news does not prompt any...
We use a large administrative tax-returns panel dataset merged with a tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior of a large sample of Italian self-employed taxpayers. Results from operational audits do not suffer from the fact that taxpayers are aware that they have been randomly selected for research purposes and...
In a setting in which an agent has a behavioral bias that causes an underestimation or an overestimation of the health consequences of sin goods consumption, the paper studies how a social planner can affect the demand of such goods through education and taxation. When only optimistic consumers are present, depending on the elasticity of demand of the sin good with respect to...