Tax Changes Research Articles

Downward Revision of Investment Decisions after Corporate Tax Hikes

This paper estimates the causal effect of corporate tax hikes on firm investment based on more than 1,400 local tax changes. By observing planned and realized investment volumes in a representative sample of German manufacturing firms, we can study how tax hikes induce firms to revise their investment decisions. On average, the share of firms that invest less than previously planned increases by 3 percentage points after a tax hike. This effect is twice as large during recessions. (JEL D22, E32, G31, H25, H32, H71, L60)

Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

This paper concerns Saez and Stantcheva’s (2016) generalized social marginal welfare weights, which aggregate losses and gains due to tax policies while incorporating nonutilitarian ethical considerations. The approach evaluates local tax changes without a global social objective. I show that local tax policy comparisons implicitly entail global comparisons. Moreover, whenever welfare weights do not have a utilitarian structure, these implied global comparisons are inconsistent. I argue that broader ethical values cannot in general be represented simply by modifying the weights placed on benefits to different people, and a more thoroughgoing modification of the utilitarian approach is required. (JEL D60, D63, D71, H21, H23, I31)

Increased tobacco taxation associated with decreased consumption and bladder cancer incidence.

The temporal relationship between smoking exposure and bladder cancer (BC) diagnosis remains ill-defined. This study aims to cross-correlate and temporally associate changes in United States (US) tobacco tax and consumption with BC incidence. US tobacco consumption, tobacco tax data, and BC incidence rates from 1975-2019 were retrieved. A cross-correlation lag time for tobacco tax and consumption on BC incidence was calculated while controlling for national health expenditure. Proxied lag weighted semi-log linear models to determine the rate of change in BC incidence rates associated with a 1% change in tobacco tax percentages on a national and state level. A 1% increase in tobacco tax was associated with a 1.77% decrease in BC incidence over a 6-year period (R2=0.9687, p=0.00044). 22 states had a statistically significant decline in BC incidences correlated with increasing tobacco taxation. Reduction in BC incidence >0.5% were observed in states along the Western and Eastern US borders. Montana, Utah, Nebraska, Arkansas, and Tennessee did not have decreasing BC incidences from tobacco tax increases. California had the most drastic decline in BC incidence (1.98%). Nationally, tobacco consumption decrease in 1 pack per capita was associated with a 0.47% decrease in BC incidence over a 28-year period (R2=0.984, p=0.00011). Declining US tobacco consumption may indicate significant reduction in BC incidence through 2047. Primary prevention through adaptation of state-legislated tax changes may contribute to a reduction in BC incidence in states lying within the Central US. A national tobacco tax initative can be considered given the improvement in population health.

Demise of fossil fuels part I: Supply and demand

According to United Nations , the world needs to reduce the emission of CO2 and other global warming gases by 45 % by 2030 and to negligible amount by 2050. According to UN, this is necessary to keep the goal of keeping earth temperature not exceeding 1.5 °C compared to pre-industrial level temperatures.To achieve this objective means reducing the fossil fuel consumption. Fossil fuels are largely responsible for emitting CO2; therefore, without significant reduction in fossil fuels consumption by 2050, the net zero emission by 2050 is not possible.One argument advanced in support of reducing fossil fuels consumption is limited supply. Using the principle of “Peak Oil Theory,” proponents state that fossil fuels is a limited resource and the world will simply run out of it. Based on the available data, we demonstrate that supply of fossil fuels is relatively abundant, and we will not run out of fossil fuels in near term. Using shale formations as an example, we demonstrate how the success of drilling horizontal wells with hydraulic fractures have significantly increased the oil and gas resource available for exploitation. To reduce fossil fuels demand, the available solutions include improving energy efficiency, reducing subsidies on fossil fuels, imposing carbon tax and life choice changes. We discuss some of those alternatives. Fossil fuel supply is relatively abundant and only possible solution to reduce the consumption is to reduce the demand. By comparing developed countries' consumption with developing countries’ consumption, we see a pathway where growth in GDP can be achieved without significant increase in fossil fuels consumption. Because of efficiency gains in energy usage, GDP in developed countries continues to grow without increase in fossil fuels consumption. Faster we reach the efficiency stage in developing countries, easier it would be reduce the fossil fuel consumption in the world.

Can changes in corporate income tax rate affect corporate innovation?

The relationship between corporate income tax rates and innovation is a critical international issue. Existing studies often overlook the potential mechanisms of market competition and productivity heterogeneity. This paper addresses these gaps by integrating these elements into a unified mathematical analysis framework. Using China's corporate income tax reform as a quasi-natural experiment, this study empirically tests the model. The findings reveal that decreases in tax rates significantly foster innovation, while increases have the opposite effect. The underlying mechanism involves market competition, with the impact of tax changes being more pronounced in firms with higher productivity. This study deepens the understanding of the nexus between corporate income tax and innovation, providing new insights to refine tax policies that promote innovative economic development globally.

The Effect of Capital Gains Taxes on Business Creation and Employment: The Case of Opportunity Zones

The Tax Cuts and Jobs Act of 2017 established a new program called Opportunity Zones (OZs) that reduces or eliminates capital gains taxes on investment in a limited number of low-income Census tracts. We provide a model illustrating how a change in capital taxation affects employment in existing and new establishments. We then use establishment-level data to show that, in its first two years, the OZ designation increased employment growth relative to comparable tracts by between 3.0 and 4.5 percentage points in metropolitan areas. The job growth occurred in multiple industries and persisted into 2021 rather than quickly disappearing. However, most of the jobs created by the program were likely taken by residents who live outside of the designated tracts, consistent with only 5% of U.S. residents working in the same Census tract as the one in which they live. This paper was accepted by Tomasz Piskorski, finance. Funding: The authors are grateful for the financial support of an award from UW-Madison’s Fall Research Competition. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.03223 .

Improving tax control: tax risks and control data

The article is devoted to new opportunities for using digital technologies of the Federal Tax Service, analysis of changing, in connection with this, requirements for accounting programs, innovative methods of conducting analytical work of tax authorities to identify deviations and gaps in key reporting indicators, financial statements provided by taxpayers with others available to tax controllers , databases. Within the framework of the article, the author reveals changes in tax and financial reporting requirements that came into force in 2024 and provides recommendations regarding possible risks that the Federal Tax Service pays attention to during desk audits. The author also formulates how taxpayers should act in order to protect their organization from claims and sanctions of the Federal Tax Service.

Impact of Regulatory Reforms on Business Transformation: A Study of Indian Industries

This study explores the intricate interplay between regulatory reforms and business transformation in the context of Indian industries. Specifically, the research delves into recent changes in taxation, labor laws, and corporate governance, aiming to discern their impact on organizational strategies, structures, and operations. Utilizing a mixed-methods approach, which involves qualitative analyses of regulatory shifts and quantitative assessments of business performance metrics, the study seeks to provide holistic insights. By examining sectoral variations and conducting in-depth interviews and case studies, this research contributes original knowledge to academic scholarship and imparts practical implications for businesses navigating dynamic regulatory landscapes. The anticipated findings aim to illuminate the adaptability and resilience of Indian industries, thereby advancing our understanding of the complex relationship between regulatory reforms and business transformation in this distinctive context.

Assessment of aircraft leasing efficiency: An airline perspective

This research contributes to the theory of assessing aircraft leasing efficiency from an airline's perspective by revising factors influencing leasing decisions and developing an integrated approach to modelling aircraft leasing decisions. Despite the extensive research on aircraft leasing appraisal, modelling tools for informed decision-making require constant updates regarding the attributes to be included and approaches to uncertainty conditions. The key contribution of this research supports the ongoing discussion of the practical deployment of management science in the aircraft leasing field, aiding the industry in quickly adapting to changing market conditions. The research includes brief analyses of key performance indicators in the aircraft leasing industry to identify trends and a literature review to justify the current factors influencing leasing decisions. It is demonstrated that integrating operational modelling into aircraft leasing assessment can provide a data-driven justification for the importance of new, fuel-efficient aircraft in achieving sustainability goals and maintaining operational profitability. The sensitivity analysis further illustrates the robustness of the model and solution, and its capacity to generate scenario assessments reflecting varying conditions such as changes in demand, taxes, fuel costs, and other airline expenses. The simulation of a hypothetical example based on data from airlines’ business intelligence platforms reveals that significant initial fixed leasing payments, including taxes, can negatively impact an airline's ability to modernise its fleet through leasing. Fuel efficiency, zero customs duties and VAT on aircraft leasing, and sufficient capital to cover fixed leasing costs are the main drivers stimulating fleet modernisation and can be justified by a slight increase in expected profits.

Property tax‐induced mobility and redistribution: Evidence from mass reappraisals

AbstractI investigate the effect of property tax changes on homeowner mobility and voted tax rates using a panel of assessment and sales records in Ohio. I use redistributive mass reappraisals that cause changes in an individual's tax price of local services to examine how changes in homeowner's tax bills influence mobility. I find that a $0.10 increase in the price per dollar of services leads to a 5% increase in the likelihood of sale with no change in foreclosure probability. I also find suggestive evidence of increased voted tax rates when the ratio of median to mean taxable value decreases.

Influence of Regulatory Tax Changes on Business Strategies in the Telecommunications Industry

Influence of Regulatory Tax Changes on Business Strategies in the Telecommunications Industry

Changing carbon footprints and the consequent impacts of carbon taxes and cash transfers on poverty and inequality across years: A Peruvian case study

Carbon taxes are key policies to achieve climate goals. Yet, they increase prices especially in the short term, and can affect households’ income depending on their carbon footprints. Cash transfer programs can be used to address adverse social impacts and protect the poorest. However, because carbon footprints, and the consequent tax impacts, may change over time it is important to understand how to design and adapt such cash transfer programs accordingly. As the existing studies focus on single years, we address the gap in the literature in two steps. First, we estimate changes in carbon footprints and their drivers over time; second, we simulate the effects of a carbon tax in combination with cash transfers on poverty and inequality for the years 2004, 2007 and 2011 in Peru. We combine a bottom-up household carbon footprint estimation, and multiple scenarios simulation. We show that, in a context of rapid economic growth, footprints increase over time, particularly for lower deciles. Most importantly, the distributional impacts of a reform combining carbon tax and cash transfers change by year. The paper concludes that, to maximize poverty and inequality reduction, the design of cash transfer programs and tax levels need to be adapted over time.

Distributional Impacts of Tobacco Excise Taxes in Serbia.

Numerous studies worldwide have investigated the impact of tobacco tax increase on household welfare, focusing on concerns regarding potential tobacco taxation regressivity and its effects on the poorest, whereas their scope was limited to the working population. To explore the effects of tax changes on household budgets, accounting for the retired population as well, we employed the modified Extended Cost-Benefit Analysis (ECBA) framework, assuming a 43.6% specific tax increase that fits the EU Tobacco Tax Directive recommendation of minimum EUR 90 excise taxes per 1,000 cigarettes. Our analysis encompassed changes in: 1) tobacco expenditure (accounting for price elasticities by income groups: low-, middle-, and high-income), 2) medical costs linked to smoking-related diseases (utilizing relative risk of morbidity/mortality and smoking-attributable fractions), 3) years of working life (considering the years of working life lost among the working population), and 4) years of pension receipt (accounting for the years of retirement life lost due the premature death). Under an assumed specific excise increase leading to a 22.4% retail tobacco price rise, the net gains in disposable household budgets would be 0.01% for high-income, 1.3% for middle-income, and 2.9% for low-income households. A tax increase would yield a progressive effect on income distribution, benefiting the most economically disadvantaged population thereby contributing to a more equitable income distribution. To effectively reduce tobacco consumption, subsequent smoking-related medical costs, and associated productivity and pension losses, it is recommended that Serbia implement a minimum 43.6% increase in the specific tobacco excise tax.

The Rise of Pass-Throughs: an Empirical Investigation

Abstract Almost half of all private employment in the United States is within businesses that do not pay corporate income tax. Instead, business income passes through to the owners’ individual income taxes. This pass-through share of employment has more than tripled since the early 1980s. Using comprehensive, confidential administrative data, this paper highlights five core findings underlying this growth: (1) the rise in pass-throughs is pervasive across industries and states; (2) the pass-through share converges unconditionally across both; (3) entrants’ organisational choices drive 60% of the rise; (4) shifts in firm and organisational dynamics following the 1986 Tax Reform Act show continued effects through the 2000s; (5) organisational forms exhibit high persistence with little life-cycle variation. Our study implies that tax or regulatory policy changes might take decades to manifest fully.

Effect of Tax Policy Changes on Corporate Investment Decisions in Saudi Arabia

Purpose: The aim of the study was to assess the effect of tax policy changes on corporate investment decisions in Saudi Arabia. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study indicated that reductions in corporate tax rates generally lead to increased investment by companies. Lower taxes can free up funds that businesses then use for capital expenditures, research and development, and expansion projects. Conversely, higher tax rates may discourage investment, as they reduce after-tax profits and make certain projects less economically viable. However, the relationship between tax policy and investment decisions is complex and can vary depending on factors such as the overall economic environment, industry dynamics, and the specific details of the tax changes. Overall, though, there is evidence to suggest that tax policy plays a substantial role in shaping corporate investment behavior. Implications to Theory, Practice and Policy: Pecking order theory, agency theory and neoclassical investment theory may be used to anchor future studies on assessing the effect of tax policy changes on corporate investment decisions in Saudi Arabia. Policymakers and corporate leaders should collaborate to design tax policies that align with strategic investment objectives, fostering economic growth, innovation, and market competitiveness. The findings from research studies on the effect of tax policy changes on corporate investment decisions can inform evidence-based policymaking aimed at optimizing tax frameworks for economic resilience and dynamism.

Evolution of Tax Exemption Policy and Pricing Strategy Selection in a Competitive Market

The evolution of tax exemption policies and consumer preferences for low-carbon products affect firms’ optimal pricing strategy selection in a competitive duopoly market. In our study, we build a two-period pricing model to examine the pricing strategy choices between low-carbon and traditional firms. Low-carbon firms offer consumers greater value, improving their overall experience and satisfaction. Given the evolution of government policies from tax exemption to taxation for low-carbon products, we divide the changes in carbon tax into two periods. Since each firm can choose either the uniform pricing strategy (setting the same price in both periods) or the tiered pricing strategy (setting different prices for two periods), four scenarios may occur. Conventional wisdom suggests that a firm’s pricing increases should result in a reduction in consumer demand. Interestingly, our results show that as traditional firm raises prices, consumer demand for traditional products could increase simultaneously in the second period. In such a case, the low-carbon firm selects the uniform pricing strategy and the traditional firm chooses the tiered pricing strategy. Moreover, as tax exemption policies evolve in duopoly markets, the cancellation of the tax exemption policy may intensify competition between traditional and low-carbon firms under certain conditions. Furthermore, given one firm’s pricing strategy, our results show that the other firm could adopt either a uniform pricing strategy or a tiered pricing strategy, which depends on the low-carbon advantage and tax rate.

Political Partisanship and Economic Outcomes: Canada, 1870–2020

Abstract This paper examines the role of partisanship at the provincial and federal levels in relation to the functioning of the Canadian economy. At the provincial level (1976–2019), we find no evidence of a traditional partisan effect but do find evidence weakly consistent with a rational partisan cycle a′ la Alesina. At the federal level (1870–2020), we also find no evidence consistent with a distinctive expansion in output arising when the government is controlled by the left-leaning (Liberal) political party although we again find evidence of a weak rational partisan effect. The former result is reinforced by finding the absence of evidence of partisan changes in federal spending and/or taxation. But while the data do not support a theory of left-right partisan policy over the entire post-Confederation (1867) period of Canada’s history, the data do support distinctive periods of partisan influence on aggregate output. The first is consistent with Sir John A. MacDonald’s post-Confederation conservative government’s adoption of a policy of nation-building based on the railway, immigration, and tariffs. The second is the period between 1885 and 1933 where traditional left-right partisanship is evident and the third is the period following the Great Depression where a distinction between the outcomes arising under left- versus right-leaning parties is no longer apparent.

Impact of tax changes on the risk premium of the WIG index

The presented article provides an empirical analysis of changes in the risk premium of stocks on the Warsaw Stock Exchange in response to changes in tax rates. The analysis uses a structural VAR model, identified with sign restrictions. This method turns out simple to use and proves to be effective in overcoming the problem of predictability of fiscal policy, which is especially important in studies using variables from financial markets. The results show an increase in the risk premium following a sudden tax hike, accompanied only by a temporary reduction in GDP growth. Meanwhile, an anticipated tax hike seems to lower risk premia while being more harmful to GDP dynamics.

Theoretical and methodological aspects of tax analysis for the company

Tax committees routinely scrutinize the accrued tax payments, assessing their dynamics through data extracted from tax registers, financial and tax reports. This analysis unveils various reasons for non-payment of tax liabilities and pinpoints factors influencing the formation of the tax base. Adhering to the provisions of the Tax Code of the Republic of Kazakhstan is crucial for accurately determining the tax base for each type of tax. The analytical process unfolds in stages throughout the reporting year, enabling the tracking of tax liabilities’ dynamics, identification of unpaid amounts, monitoring changes in tax policy, and evaluating the impact of tax changes on the overall tax burden. In addition, it should be noted that all the work of analysts is aimed at preventing tax offences. As sources of analysis we recommend using primary accounting data, tax accounting data in the form of tax registers, financial and tax reporting. A tax analysis is necessary in order to answer the question of how much the company pays taxes to the budget. Based on the tax analysis data, each manager independently determines the optimal tax burden and, depending on this, takes measures for tax planning. Based on the results of the tax analysis, it is possible to determine which taxes are repaid on time, and, if necessary, develop specific measures to reduce the tax burden. Given the evolving landscape of the digital economy in Kazakhstan, the relevance of studying tax analysis becomes imperative. The article comprehensively explores the essence, purpose, and objectives of enterprise tax analysis, delves into the information support necessary for tax analysis, and proposes a systematic approach to indicators for effective tax analysis.

Wpływ kryzysu finansowego na dochody gmin miejskich w Polsce – doświadczenia pandemii COVID-19

The COVID-19 pandemic has given rise to grave economic consequences, especially for the public finance sector, both at the central and local government level. The aftermath of the pandemic-induced crisis began to be felt particularly by local government units (LGUs), which are responsible for the implementation of most public tasks at local level. As a consequence, the role of budget planning increases and the rationalization of public expenditure in response to declining revenues becomes important. This paper is in line with the ongoing discussion on the implications of the COVID-19-induced crisis. Two research goals were formulated. The former was to assess the effects of the crisis caused by the COVID-19 pandemic on budget revenues and indirectly on the financial standing of Polish urban municipalities, and the latter was to identify changes in the structure of urban municipalities budgets in Poland as a consequence of the pandemic. For the needs of the study, we used an indicator analysis of urban municipalities budgets, which allows for a synthetic determination of the financial condition and verification of development decisions. The aim of the research was achieved by analyzing the dynamics of indicators that characterize urban municipalities budget revenue in Poland. The scope of research covered the years 2010–2022. The results and the formulated practical recommendations constitute a complementation of the research on the effects of the COVID-19 pandemic for public finance, in particular the finances of local government units. The analyses demonstrate a shift in the urban municipalities revenue structure in Poland, which is the effect of a decreased share of own revenue, especially tax revenue, and an increase in the share of transfer revenue. This was due to three factors. Two of them were directly related to the COVID-19 pandemic, i.e 1) reduction in tax revenue (mainly from shares in PIT) as a result of the lockdown and the economic crisis; 2) options of support for local governments in the form of increasing transfer revenue. The third factor that contributed to the decline in own revenue are changes unrelated to the pandemic. These include, for example, changes in personal income tax or changes in the “Family 500+” programme.