Capital Tax Research Articles

Debate on Addressing Income and Wealth Inequality among the Australian People

In Australia, the issue of income and wealth inequality has steadily intensified over the past few decades, posing a concerning trend in this developed nation. This rising economic disparity not only impacts the financial well-being of citizens but also affects the national economy and political landscape. John Passant, who is committed to investigating ways to alleviate inequality in Australia, has put forth a tax reform proposal encompassing two distinct approaches--Buffet Rule for both individuals and companies and wealth taxes. However, it is essential to note that two other papers present contrasting viewpoints, casting doubt on the effectiveness of Passant's proposals. These two papers raise specific points of contention, prompting a nuanced and skeptical examination of Passant's suggestions, considering the diverse perspectives and empirical evidence presented. In evaluate, mitigating the income and wealth inequality in Australia necessitates a comprehensive and well-informed approach that takes into account the broader economic and social context.

Wealth Elasticity, Agent Heterogeneity and Fiscal Dynamics

The literature on fiscal policy has identified wealth elasticity of labor supply and agent heterogeneity as the linchpin of shaping different transmission mechanisms for fiscal policy. In this paper, I build these two important edifices on an otherwise canonical business-cycle model to conduct quantitative analyses of various fiscal policies. To underscore the relative importance of agent heterogeneity, I compare results from the model with agent heterogeneity with those from a standard model without agent heterogeneity. I also compare results from changes in wealth elasticity to analyze how the model ingredient delivers different macroeconomic and fiscal dynamics. The main finding reveals that in the context of the model formulated in this paper, the capital tax is the least detrimental to business cycles and fiscal states and the consumption tax is the most appropriate policy tool since it yields positive output and tax-revenue multipliers in the short and long runs. All the results from counterfactual experiments suggest that macroeconomic and fiscal outcomes hinge fundamentally on agent heterogeneity and wealth elasticity. An important value that this paper adds to the literature is to offer results from a comprehensive analysis of all possible fiscal policies by considering both essential forces.

Towards a new architecture for progressive international capital taxation

The application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed at the OECD and released in December 2021 have both strengths and weaknesses for developing countries. Now is the time to address directly the multilateral institutional "architecture" in relation to international tax negotiations. Despite the current geopolitical tensions, the nature of climate change and increased possibility of future health pandemics have made the need for global public goods provision – and thus global tax coordination – even more necessary. Moreover, the GloBe rules reflect the underrepresentation of non-OECD members in the process of the "Inclusive Framework," as evidenced by their absence in key committee leadership, paucity of specialised delegates and lack of explicit voting rights. Therefore, it is correct to welcome the recent UN resolution to work towards a worldwide Tax Convention.

The Ramsey steady-state conundrum in heterogeneous-agent economies

This paper makes two fundamental contributions: (i) We prove that the interior Ramsey steady state commonly assumed in the literature may not exist in a standard Aiyagari model—in particular, a steady state with the modified golden rule and a positive capital tax is shown to be feasible but not optimal under conventional parameter values for the intertemporal elasticity of substitution. (ii) We design a modified, analytically tractable version of the standard Aiyagari model to reveal the necessary and/or sufficient conditions for the existence of a Ramsey steady state. We characterize the basic properties of both interior and non-interior Ramsey steady states and show that researchers may draw fundamentally misleading conclusions about optimal fiscal policy (such as the optimal capital tax rate) from their analysis if an interior Ramsey steady state is incorrectly assumed.

The impact of factor tax structure on firm innovation: evidence from China

ABSTRACT Labor and capital are two of the most fundamental factors of production, and the ratio of labor to capital tax can reflect the structure of factor tax. Despite the existing literature demonstrating the impact of taxation on enterprise innovation, few studies have addressed the effect of changes in factor tax structure on enterprise innovation. Using provincial tax data and listed company data from China between 2006 and 2017, this study empirically tests the impact of factor tax structure on enterprise innovation using the Poisson quasi-linear method. The findings indicate that a higher share of labor tax and a lower share of capital tax tend to inhibit enterprise innovation. Conversely, a higher tax compliance rate for labor tax and a lower compliance rate for capital tax are also unfavorable to enterprise innovation. A non-linear relationship is observed between factor tax structure and enterprise innovation, where a higher share of labor tax and a lower share of capital tax can promote enterprise innovation when exceeding a specific limit. The results of this study have theoretical and practical implications for improving factor tax structure, stimulating enterprise innovation, and promoting economic transformation toward higher quality.

Using Rich Lists to Study the Super-Rich and Top Wealth Inequality: Insights from Switzerland

Abstract We present a new data set we built based on Swiss rich lists going back to 1989. We show, among other things, that 60% of the super-rich are heirs—a fraction twice as large as in the US—and that wealth mobility at the very top has declined significantly. We find that top 0.01% wealth shares are higher than previous estimates based on wealth tax statistics suggest. At the same time, we argue that rich list data lead to overestimating wealth inequality. While rich lists are valuable to study the super-rich, we recommend to use reported wealth figures with caution.

Emission inequality: Comparing the roles of income and wealth in Belgium and the United Kingdom

Many studies have investigated the distribution of greenhouse gas emissions associated with household consumption, highlighting that richer households have a substantially larger carbon footprint than poorer households. While these studies have typically used income or household expenditures as a proxy of households’ living standards, the association between emissions and wealth has hardly been studied. Wealth is not just an important component of households’ material living standards, known to be imperfectly correlated with income and expenditures, but it is also a very relevant dimension for climate policies. For instance, affluent households have more scope to invest in reducing emissions (e.g. insulation of their homes). Therefore, in this paper, we compare the inequality of emissions over wealth groups as well as groups defined by other living standard concepts such as income, expenditure and the joint distribution of income and wealth to add a focus on wealth to the analysis of emission inequality. Our study focuses on Belgium and the United Kingdom, which differ considerably in their level of wealth inequality. Our results highlight that the social distribution of emissions varies between expenditures, income, wealth and the joint distribution of income and wealth, with per capita emissions being more strongly associated with the joint distribution of income and wealth than with income alone. We also show that a significant share of households has both low income and low wealth, and may thus be lacking the means to prepare for a carbon-neutral future. Although increasing wealth taxation could provide much-needed revenues for low carbon investments, our results suggest that it would have a lower direct impact on the level of emissions and emission inequality compared to increasing taxes on high incomes.

Optimal fiscal policy under finite planning horizons

We propose a novel framework that revisits the seminal Chamley-Judd zero capital taxation result in light of bounded rationality stemming from a finite policy planning horizon and structural frictions in fiscal institutions. We show a mechanism that generates positive optimal capital taxation in the long run. Our numerical results indicate that the current tax system in the United States could be near-optimal in a constrained environment where policymakers exhibit limited policy planning horizons and imperfect altruism toward household welfare under subsequent governments.

Analysis of Current Tax, Deferred Tax, and Deferred Tax Assets on Earnings Management

The goal of this study is to examine the impact of current taxes, deferred taxes, and deferred tax assets on earnings management. The research focuses on companies operating in the industrial sector listed on the Indonesia Stock Exchange during the years 2020, 2021, and 2022. A sample of 20 companies is selected using purposive sampling. Data processing involves multiple regression analysis assisted by Eviews 13 and Microsoft Excel. The findings indicate that current taxes have a significant positive impact on earnings management, while deferred taxes and deferred tax assets do not have a significant positive impact on earnings management. The implications of this research highlight the role of current taxes, deferred taxes, and deferred tax assets as detectors to track the movements of managers who have engaged in earnings management in the financial reports of companies, particularly in the income statement section.

Public infrastructure provision in the presence of terms‐of‐trade effects and tax competition

AbstractThis paper analyses and compares the performance of resource taxes and capital taxes in financing public goods while considering the positive effects of public expenditure on firm productivity. It is motivated by Franks et al. (2017), who argue that the advantage of the resource tax consists in its potential to reap foreign resource rents. I employ an analytical general equilibrium framework of identical resource‐poor countries, where local firms use internationally mobile capital and a net imported resource in production as well as local public infrastructure. The latter is financed solely by either taxing the input of the resource or capital. The choice of the policy instrument is exogenous to policy makers and symmetric across countries. I find that expenditure on infrastructure renders the impact of fiscal policy on the terms of trade ambiguous under resource taxation and negative under capital taxation. Moreover, public expenditure weakens the outflow of factors moderating the deficit of public spending caused by tax competition. This holds for both policy scenarios. Considering both effects simultaneously, resource taxation cannot generally be identified as the policy to provide higher provision or efficiency. A numerical exercise shows cases for higher provision of either policy.

Pengaruh Perencanaan Pajak, Aset Pajak Tangguhan dan Beban Pajak Tangguhan terhadap Manajemen Laba

This research aims to analyze and test the influence of tax planning, deferred tax assets and deferred tax expenses on earnings management. The population in this research is non-cyclical consumer companies listed on the Indonesia Stock Exchange (BEI) in 2018-2022. The method used in this research is a descriptive research method with a quantitative approach using secondary data, namely in the form of financial reports and annual reports. The sampling technique in this research is purposive sampling. Based on predetermined criteria, a total of 26 Consumer Non-Cyclicals companies were listed on the Indonesia Stock Exchange (BEI) for the 2018-2022 period. The analysis techniques used in this research are descriptive analysis, panel data regression model testing, classical assumption testing, multiple linear regression testing and hypothesis testing. The results of this research show that deferred tax planning and deferred tax expenses have no effect on earnings management. Meanwhile, deferred tax assets have an effect on earnings management. Then, simultaneous research on tax planning, deferred tax assets and deferred tax expenses influences earnings management.

Pengelolaan Laba dalam Sektor Consumer Non-Cyclicals: Peran Aset Pajak Tangguhan, Skala Perusahaan, dan Leverage di Bursa Efek Indonesia

This research aims to empirically prove the influence of deferred tax assets, company size and leverage on earnings management. This research was conducted at a Consumer Non-Cyclical sector company. The research method used is quantitative. The type of data used is secondary in the form of annual financial reports published on the Indonesia Stock Exchange (BEI) for 2018-2022. Samples were collected using purposive sampling. The number of companies used as research samples was 28 companies with a research period of 5 (five) years, so that 140 observation data were obtained. Data processing uses the Eviews 12 Statistical Program by collecting related data then analyzing descriptive statistics of regression model estimates, model suitability tests, classical assumption tests, coefficient of determination (R 2) panel data regression analysis, F statistical tests and t statistical tests, Results The t statistical test for the variable deferred tax assets partially influences earnings management, but company size and leverage partially have no influence on earnings management. F test results: Deferred tax assets, company size and leverage simultaneously influence earnings management.

Redistributive Capital Taxation Revisited

This paper uses a rich quantitative model with endogenous skill acquisition to show that capital-skill complementarity provides a quantitatively significant rationale to tax capital for redistributive governments. The optimal capital income tax rate is 67 percent, while it is 61 percent in an identically calibrated model without capital-skill complementarity. The skill premium falls from 1.9 to 1.84 along the transition following the optimal reform in the capital-skill complementarity model, implying substantial indirect redistribution from skilled to unskilled workers. These results show that a redistributive government should take into account capital-skill complementarity when taxing capital. (JEL D31, H21, H23, H24, H25, J24, J31)

Grundsteuer-Reform – auch für das Bundesmodell keine Verfassungskonformität

Abstract After the Federal Constitutional Court declared the previous property tax system unconstitutional in 2018, eleven federal states chose the so-called federal model as the new procedure. It continues to be based on the valuation of properties using the modified Valuation Act. This assumes static value ratios, which may have become significantly outdated and no longer contribute to equal taxation. In addition, the character of the property tax as a special wealth tax is extremely antiquated and is no longer constitutional.

The Influence of Tax Planning, Tax Avoidance, and Deferred Tax Assets on the Value of Financial Sector Companies

The primary objective of this research is to investigate the impact of tax planning, tax avoidance, and deferred tax assets on the valuation of enterprises operating within the financial industry. The used dataset comprises panel data obtained from firms that are publicly listed on the Indonesia Stock Exchange (IDX) during a certain timeframe. The used statistical technique for analysis is multiple linear regression. The findings indicated that the factors of tax planning, tax avoidance, and deferred tax assets did not have a statistically significant impact on the company's worth when considered collectively. However, it is worth noting that the impact on the company's value is mostly influenced by deferred tax assets, whereas tax planning and tax avoidance do not have a substantial effect.

Mechanism of State Direct Salary per Capita Taxation in the Belarusian Provinces of the Russian Empire in the First Half of the 19th Century

The article discusses the legal mechanism of state direct salary per capita taxation in the Belarusian provinces of the Russian Empire in the first half of the 19th century. The place and role of Belarusian lands in the per capita taxation system of the Russian Empire is determined. It has been established that, in general, the legal mechanism of per capita taxation on Belarusian lands in the first half of the 19th century for peasants and townspeople was identical to the taxation process in the European part of Imperial Russia. The regional specificity of the per capita taxation system in the Belarusian provinces of the Russian Empire boiled down to the presence of a number of categories of the population that were exempt from paying the per capita tax or had temporary tax breaks, and was characterized by a significant proportion of Jewish townspeople among the per capita tax payers. At certain periods of time, certain social and ethno-confessional (Jews) groups of the tax-paying population had special per capita salaries. In certain periods of time, certain social and ethno-confessional (Jews) groups of the tax-paying population had special per capita salaries. In addition, until 1851, the per capita tax of the rural population included a duty for the right to freely distill and sell wine. Differences are noted in the principles of allocation of per capita salaries in individual Belarusian provinces. The share of Belarusian provinces in the accrued per capita taxes of Imperial Russia has been revealed. t is concluded that on the eve of large-scale reforms in the 1860s. The Belarusian region had a low degree of burden with direct poll taxes within the vast Russian state. Attention is drawn to the fact that the state capitation taxation system gave rise to fiscal-serfdom oppression.

Tax optimisation in the tax risk management process. Tax-legal analysis and selected managerial issues

ObjectivesThe aim of the article is to theoretically present ways of legally optimising the taxation of entrepreneurs' income, by using the appropriate construction of legal regulations and legal and organisational forms of business. The issues of tax risk in the context of tax management are also presented. The goal of management is to reduce economic risk and to protect against its consequences.Material and methodsResearch in the social sciences, is inspired by numerous and diverse needs. Therefore, we will reduce the existing needs to two main types, to which certain types of research correspond. The first is combined with needs of a theoretical or cognitive nature, that is, it includes all those needs that are associated with the development of a particular science. The second is combined with the various needs of practice.ResultsIncome taxes also have a negative impact on the assets (equity) of entrepreneurs. The reduction in wealth results from the burdening of entrepreneurs with both wealth taxes and corporate income tax in the case of capital companies and, in the case of partnerships, with personal income tax for distributions made to partners.ConclusionsBoth of these risks describe a potential reality, i.e. the possibility of coming into conflict with the tax authorities. Their realisation is random, with the so-called double randomness - both the timing of the event (conflict) and its depth, i.e. the consequences, are unknown. These effects are mainly financial (arrears incurred, financial sanctions, etc.), although loss of credibility, for example, may also be involved. Importantly, both risks are linked to uncertainty, but each with a different one. Speculative risk is linked to the uncertainty of whether an illegal act will come to light.

Economic Globalization, Taxation and Public Expenditures: Evidence From OECD Countries

Globalization shapes the fiscal policies of countries, leading to changes in the structure of taxation and public expenditures. According to the theory of international tax competition, as globalization increases, countries use their tax policies to attract more mobile factors, resulting in tax competition. This competition causes capital tax rates to decrease and labor tax rates to increase, which is known as the efficiency effect of globalization. On the other hand, governments expand the welfare state to compensate for the increased economic risks resulting from globalization. This is known as the compensation effect of globalization. The purpose of this paper is to empirically test these hypotheses using a dataset of 26 OECD countries from the period 1990-2020. The study employed the Driscoll-Kraay estimator, which produces reliable estimates with robust standard errors in the presence of heteroscedasticity, autocorrelation, and cross-sectional dependency issues. The results indicate that economic globalization has a negative effect on corporate tax rates and a positive effect on labour tax rates. Additionally, it was observed that a high level of social spending is linked to an increase in economic globalization. These results emphasise that the efficiency effect and the compensation effect coexist and complement each other rather than being rivals.
 Key words: Globalization, tax competition, public expenditure, panel data 
 JEL Classification: E15, E62, C23

Convergence of shadow economy across U.S. states

ABSTRACT Using a novel shadow economy measure constructed from a two-sector dynamic deterministic general equilibrium model, this paper provides the first piece of evidence on the convergence dynamics of the shadow economy at the U.S. state level over the period 1999–2019. The result of the panel club convergence test demonstrates the absence of absolute convergence but also identifies the presence of six club memberships without an apparent regional conglomeration. Further analysis based on the ordered logit regression uncovers that factors such as gross state product, the share of higher education, government size, the share of union participation, capital tax rate, institutional quality, and unemployment rate significantly influence the club membership of the shadow economy. Understanding these findings is imperative for developing policies to curtail the spread of shadow economies across the states in the U.S.

Capital risk, fiscal policy, and the distribution of wealth

We develop a dynamic model economy where self-employed entrepreneurs allocate their net worth to their firm capital and risk-less government bonds, facing borrowing constraints, uninsurable labour endowment and capital depreciation risk. We derive a numerical approximation of the model’s equilibrium and compare it with a benchmark economy with no capital risk. Unlike labour endowment risk, capital risk reduces aggregate capital accumulation and wages and generates a positive risk premium. Low- (high-) net-worth entrepreneurs, whose consumption depends primarily on labour (financial) income, hold higher (lower) capital risk exposure. These patterns exacerbate inequality by increasing the share of financially constrained individuals and fattening the tails of the net worth distribution. Fiscal policy affects these outcomes by redistributing resources and affecting the risk premium. Capital tax cuts benefit more low- or high-net-worth entrepreneurs, depending on whether taxes on bonds or labour income finance them.