Tax Policy Design Research Articles

On the acceptance of high carbon taxes in low- and middle-income countries: a conjoint survey experiment

Abstract Changing consumption patterns from growing middle-classes with consequent rising energy use and emissions in low- and middle-income countries (LMICs) present key challenges for the energy transition and climate change mitigation. Carbon taxes are an effective policy instrument to counter these developments, yet concerns about low public acceptability hinder their introduction. Here, we seek to fill a research gap and identify publicly acceptable carbon tax designs in LMICs. We provide novel evidence from three conjoint experiments with 2700 middle-class respondents in Ghana, Peru, and the Philippines. We show that overall, the majority in all three countries supports even high taxes of USD-PPP 75/tCO2 per year, irrespective of specific policy design features. The support for a very high tax rate is especially high if revenues are recycled for environmental purposes. Thus, governments in LMICs have political leeway to finance the transition to a low-carbon economy via carbon taxes. Moreover, revenue recycling for the poorest receives high support from important subgroups. These insights are crucial to achieving an effective, acceptable, and just carbon tax policy design.

Technological Changes and Countries’ Tax Policy Design: Evidence from Anti–Tax Avoidance Rules

Technological Changes and Countries’ Tax Policy Design: Evidence from Anti–Tax Avoidance Rules

Tax policies with a human rights perspective: towards greater tax justice

Purpose: The main objective of this study is to analyse tax policies from a human rights perspective. Motivation: This study is inspired by the observation of crises that appeal to us, revive existing challenges, and lead us to re-evaluate public services. In connection with the causes and consequences of these contexts, this study formulates a new approach to taxation practices, connecting the design of tax policies with their capacity to contribute to the realisation of economic, social, and cultural human rights. Design/Methodology/Approach: The research was carried out following a methodology that includes a review of the relevant literature, the analysis of the work of international institutions in the field, and the examination of international and regional legal frameworks for the protection of human rights, in connection with states’ obligations to provide adequate services. Main findings: Tax justice stands as a pillar to ensure that states, through the management of public resources, can fulfil their obligations in the mitigation of economic and social inequalities and in the funding of rights and public services. Practical implications/Managerial impact: The changes resulting from globalisation, transnational trade, offshoring of production and, among others, advances in digitalisation, make it necessary to analyse the validity of the foundations of our tax systems towards achieving the long-awaited tax justice. This study aims to contribute to the consolidation of the basis for this necessary connection between tax policies and human rights. Novelty/Contribution: This study argues that only those tax policies that integrate a human rights perspective can be considered optimal for achieving tax justice.

Blockchain technology integration in tax policy: Navigating challenges and unlocking opportunities for improving the taxation of Ghana's digital economy

In an era marked by a profound digital transformation of economies worldwide, Ghana stands as a vivid example of a nation at the crossroads of taxation evolution. The country's tax policies are undergoing a significant shift to adapt to the burgeoning digital economy, with a keen focus on capturing and regulating the ever-expanding revenue streams generated through online enterprises. This research explored the potential of integrating blockchain technology with tax policy. Unstructured and semi-structured interview questions were designed to obtain insight into the problem. A survey was conducted to obtain views on the variables that explained the potential of integrating blockchain technology with tax policy to enhance the effectiveness of taxing online enterprises in Ghana. The study used correlation analysis to confirm propositions derived from preliminary interview and the review of literature. It was found that while blockchain offers significant advantages in bridging the gap for effective online taxation in Ghana, there are challenges which include institutional and regulatory conformity issues, technical integration and alignment incompatibility, and inadequate stakeholder engagement. This result may be useful in the design of tax online tax policy in Ghana and other jurisdictions with similar socio-economic environment.

Strategies and Public Policies for Economic Recovery Post-Pandemic: The Role of Taxation According to Qualitative Studies

This qualitative synthesis investigates the role of taxation in post-pandemic economic recovery, aiming to provide insights into effective policy strategies. Drawing upon a systematic review of qualitative literature from diverse disciplines such as economics, public policy, and taxation theory, the study explores the multifaceted nature of taxation's impact on recovery trajectories. Methodologically, the research employs thematic analysis to identify key themes and patterns emerging from the literature. The findings highlight taxation's critical role as a revenue-generating mechanism for governments facing fiscal deficits post-pandemic. Moreover, the study elucidates taxation's redistributive function in mitigating income inequality and promoting social cohesion through progressive tax policies. Tax incentives emerge as crucial tools for stimulating investment and innovation, fostering economic dynamism amidst recovery efforts. However, caution is advised against onerous tax regimes that may impede economic growth. Overall, the research underscores the importance of adopting a balanced and forward-thinking approach to tax policy design, considering the diverse needs and challenges facing economies in the aftermath of the pandemic.

Interregional Value-Added Tax in the Era of E-Commerce: Tax Policy Design Based on Big Data from Online Retailing

Interregional Value-Added Tax in the Era of E-Commerce: Tax Policy Design Based on Big Data from Online Retailing

Does the South African Carbon Tax Incentivise Mines to Invest in Solar Photovoltaic?

The aim of this study was to evaluate the adequacy of South Africa’s carbon pricing policy in incentivising adoption of Solar photovoltaic in South African mines. A qualitative study was conducted to evaluate the adequacy of South Africa’s carbon tax policy design to encourage adoption of solar photovoltaic in mines. The study further establishes the carbon pricing level that will induce South African miners to invest in Solar photovoltaic through a net present value simulation. A review of South Africa’s Carbon Tax regime highlights that the policy shortcomings can be attributable to low carbon prices, excessive free emission allowances, and continued subsidy support of fossil fuels. Furthermore, the carbon price needs to exceed cost of abatement to encourage investment in decarbonisation measures. A net present value simulation finds that a carbon price of ZAR 668.62 per tonne of CO2 would need to be levied to incentivise mining entities to invest in solar photovoltaic. The study recommends higher carbon prices be levied for carbon for emissions to encourage mining entities to adopt solar photovoltaic renewable energy. The paper contributes to tax policy scholarship on designing a carbon pricing model for South Africa’s mining sector. Decarbonising the mining industry, a significant contributor of GHG emissions, will advance the decarbonisation efforts of South Africa.

Off-premises demand elasticities for pure alcohol in five Latin American countries: The case of Argentina, Chile, Costa Rica, Honduras, and Uruguay

Background and AimsThere is ample evidence from high-income countries that fiscal policies such as alcohol taxes can affect the consumption of alcohol by increasing alcohol prices. In the case of Latin American countries, much less is known about how sensitive alcohol demand is to alcohol price changes. This study aims to expand the evidence base on the sensitivity of off-premises pure alcohol demand to price and expenditure increases in five Latin American countries: Argentina, Chile, Costa Rica, Honduras, and Uruguay, which have different socioeconomic profiles and alcohol consumption patterns. Design and settingCross-sectional study MeasurementsThe price and expenditure elasticities were estimated using an Almost Ideal Demand System (AIDS). Own price and expenditure elasticities for off-premises pure alcohol were estimated using representative household surveys, which collect data on households' expenses to construct the consumer basket of goods and services used to calculate the consumer price index (CPI) for the country. FindingsOwn price elasticities of off-premises pure alcohol for all countries were negative, inelastic, and significant at 1 %. They were -0.418 for Argentina; -0.656 for Chile; and for Costa Rica, Honduras, and Uruguay, they were equal to -0.608, -0.509, and -0.32, respectively. Expenditure elasticities were positive and significant at 1 %, except for Costa Rica, which was significant at 10 %. They were equal to 0.865 in Argentina; 0.943 in Chile; 1.182 in Costa Rica; 0.874 in Honduras; and 0.857 in Uruguay. Elasticities for Costa Rica should be interpreted cautiously, as there is insufficient geographical price variability to identify the demand correctly. ConclusionsResults were consistent with previous literature for countries from other regions. Governments should expand this study to measure total demand elasticities to improve the design of alcohol tax policies.

Analysis of Individual Income Tax Compliance in China from the Perspective of Behavioral Economics

As an essential theory for studying the decision-making of “actors,” behavior economics can effectively analyze the problem of individual income tax compliance from the perspective of taxpayers’ psychology, which is of great theoretical significance for improving taxpayers’ willingness to comply. From the prospect theory, endowment effect, and mental accounting, the 2018 individual income tax reform can help enhance the level of voluntary personal income tax compliance and strengthen the tax compliance level; maintaining tax publicity helps to increase habitual individual income tax compliance level, optimizing tax service helps to increase the level of cooperative individual income tax compliance. In the future, we can further optimize the design of individual income tax policies, intensify tax publicity, and improve the quality of tax services. In the future, we can further optimize the design of individual income tax policies, increase tax publicity, and improve the quality of tax services to increase individual income tax compliance.

The Consequences of Tax Changes: The Evidence on Tax Multiplier in Russia

The information about tax changes’ effects on aggregate output is highly important for economic policy, especially in times of economic contractions. Russian economy underwent the series of tax changes during 2003–2020. For better tax policy design, it is necessary to understand and to evaluate the effects of this changes on aggregate output, which is the purpose of this study. To solve the problem of endogeneity we use two methods– “narrative approach” and “classical” approach. The first one uses data on exogenous, not driven by economic conditions, tax changes from official documents and forecasts. The second one uses cyclical component of the aggregate tax receipts as tax shocks indicator. Using both methods we estimated a VAR model of Russian economy for period 2003–2020. The implementation of “narrative approach” did not provide any significant effect possibly due to vulnerability towards the measurement error. Based on the classic approach we found that tax changes affect output with a 1-year lag and a 1 percentage point shock of aggregate tax receipts to GDP ratio lowers output growth by 0.7–0.88 percentage points. This result is robust to inclusion of additional factors in the model. The results are mostly consistent with existing research. Implementation of “narrative approach” proved to be restricted in Russia. “Classical” approach allows to conclude that tax changes could serve as an appropriate tool of countercyclical policy in Russia. On the other hand, increasing tax burden in times of downturn could be highly harmful for recovery. These results should be interpreted taken into consideration the limitations of the VAR method used.

Complexity of Tax Aspects in Carbon Tax Implementation

The focus on carbon tax has been central in efforts to reduce greenhouse gas emissions. The use of carbon tax policies as a vital tool to address climate change has been implemented in many countries, including Indonesia. However, the implementation of carbon taxes involves a series of complex challenges. This research aims to examine the complexity of tax aspects that pose challenges in the process of implementing carbon tax policies in Indonesia and the strategies the Indonesian government can employ to overcome these challenges. The research adopts a qualitative approach, collecting data through literature review. It explores the multidimensionality and complexity of carbon tax aspects, encompassing policy design, socio-economic impacts, and administrative constraints. The research findings indicate the need for an integrated carbon tax policy design, focusing on setting appropriate rates and ensuring fair revenue allocation. Evaluating the social and economic impacts of carbon taxes becomes a crucial part of understanding the extensive consequences that may arise. Involvement from industries and other stakeholders in the policy design process is an essential element in addressing this complexity. The study also emphasizes the necessity for improvements in administrative infrastructure and monitoring systems to ensure that carbon taxes are not only effective but also accountable in significantly reducing carbon emissions

Common Sense of a Wealth Tax

Thomas Paine’s writing helped spur the American colonies to independence and ensure that the new nation would be a republic, not a monarchy. In light of the renewed interest in wealth taxes, this article provides a close examination of Thomas Paine’s wealth tax proposal in the second volume of The Rights of Man. Unlike Paine’s proposal to tax inheritances, his 1792 proposal to tax wealth on an annual basis is often overlooked. The article identifies Paine’s various design specifications, provides original estimates of the impact of Paine’s wealth tax proposal within his own time period and as applied to billionaires today, and discusses ambiguities in the proposal. The article then places Paine in conversation with the contemporary wealth tax policy debate and demonstrates how Paine informs both the design and evaluation of tax policy. Lastly, the article clarifies the relationship between democratic ideals and taxation, portraying tax policy as a normative expression of republican ideals.

Tax policy design in a hierarchical model with occupational decisions

AbstractThis research examines the impact of occupational choices and tax evasion on the tax administration policy in a hierarchical tax model. The economy has two sectors, wage-earners and self-employment, with evasion only possible in the latter. Incorporating occupational decisions produces a smaller marginal tax rate and a larger budget for the IRS. However, the resources are still insufficient to audit all self-employed, resulting in distortions in occupational choices favoring self-employment. These distortions prevent production efficiency from achieving the optimum level, indicating that the Diamond-Mirrlees theorem is not applicable in this context. Finally, applying differential taxation represents a Pareto improvement, but it results in higher taxes for self-employment.

Addressing the Ability of Tax Systems to Accommodate Financial Product Innovation: So Far, Have the Measures Adopted Been Effective?

The author raises questions on the ability of tax systems to accommodate or respond to financial product innovations, by analysing whether they comply with three rules of thumb for tax policy design, namely: neutrality, simplicity and stability. From such a perspective, the author argues that the approach adopted contributes to having a more non-neutral, complex and unstable environment.

Tax amnesties and the insurance effect: An experimental study

Many countries grant exemption from legal prosecution under certain conditions, allowing for voluntary disclosures regarding tax evasion. Empirically, tax amnesties appear most successful when accompanied by an increase in enforcement efforts as they help evaders to adjust to the new circumstances. Time-limited amnesties are frequently repeated and, in some countries, even made permanent. Anticipated tax amnesties can, however, serve as an insurance against a rise in the detection probability, potentially leading to less and not more tax compliance. We test the behavioral relevance of this insurance effect in an experimental tax game and find that it indeed decreases overall tax compliance by about 9-10 percent, highlighting its relevance for the design of tax policies. A high predictability of amnesties may work to their detriment.

Nudges, Boosts, and Sludge: Using New Behavioral Approaches to Improve Tax Compliance

This paper discusses current developments in tax compliance research, with a focus on three aspects. First, we summarize empirical evidence on the traditional deterrence or enforcement approach, suggesting that tax audits and fines for noncompliance are critical in taxpayers’ compliance decisions. However, recent research indicates that the effects of deterrence are more nuanced than initially thought, suggesting that other interventions are needed to improve tax compliance. Second, therefore, we discuss research on behavioral approaches to increase tax compliance, starting with research that analyzes the effects of “nudges”, or interventions that use behavioral economics to alter the ways in which the choice architecture facing individuals is communicated to them by the tax administration. As applied to tax compliance, we conclude that nudges have had mixed effects on increasing tax compliance, suggesting that the specific design and implementation of these interventions determine their effectiveness. Third, we extend our discussion to other behavioral economics interventions that have not yet been studied widely in tax compliance research. These include “sludge”, or institutional features that complicate compliance, and “boosts”, or initiatives that target individuals’ competencies and thereby help them to make better decisions. Our central argument is that all three of these behavioral interventions should be utilized in the design of tax policies. However, for these methods to effectively complement traditional deterrence approaches, tax administrations should evaluate them before implementing them in the field. Closer cooperation between administrators and academics should thus be facilitated and encouraged.

Comparing taxes on alcoholic beverages in the Region of the Americas.

Excise taxes represent one of the most cost-effective policies to reduce the harmful use of alcohol. Existing information about their design is limited and no standardized metric has been used to compare tax levels in the Region of the Americas. This study aimed to compare alcohol excise tax policies throughout the Americas, compare tax levels and consider opportunities to improve the impact of excise taxes on alcohol consumption and health. Descriptive analysis using a method developed by the Pan American Health Organization and adapted from the World Health Organization's tobacco tax monitoring. Data were collected by surveying ministries of finance and reviewing tax legislation in effect as of November 2020 in the Region of the Americas. Tax policy design indicators, taxes as a percentage of the retail price of the most-sold brand of beer, wine and spirits, including a weighted average indicator across beverage types, and tax levels per standard drink (10g ethanol) in international dollars at purchasing power parity. Thirty-three countries in the Americas (94%) apply excise taxes on alcoholic beverages, with Argentina and Uruguay not applying them to wine. There is significant heterogeneity in excise tax design across countries and beverage types. Only a third of amount-specific excise taxes are regularly adjusted to avoid erosion. Regional median excise taxes represent the highest share of the price for spirits (21.4%) and the lowest for wine (11.0%). The regional median consumption-weighted average excise tax share across all beverage types is 12.0%. Excise tax shares are generally higher in Latin America than in the Caribbean and Canada. Excise tax levels per standard drink are generally lower for spirits than for other beverages. Alcohol excise tax policies vary significantly across the Americas, often reflecting national consumption patterns. To maximize their public health impact, tax rates could be increased and tax designs improved, particularly to ensure higher tax burdens on high-strength drinks.

Coordinated carbon reduction mechanism and policy design to achieve carbon peak and neutrality goals in the Yangtze River Delta

Carbon emissions reduction has become a major issue in global development. China has adopted various carbon reduction policies since committing to the double carbon target and now requires an effective and systematic collaborative carbon reduction mechanism. The Yangtze River Delta, a developed region in China, is a suitable pilot city for developing such a mechanism. In this study, carbon emissions from the Yangtze River Delta region were analyzed and the pressures to and potential of carbon emissions reduction were summarized. By dialectically analyzing the characteristics of each emissions reduction policy, we proposed the implementation of carbon tax policies. We designed a set of emissions reduction policies suitable for the current Yangtze River Delta region with other mechanisms that promote energy transformation and industrial upgrades and provided ideas for implementing carbon emissions reduction policies nationwide. The design of the carbon tax policy emphasizes collaboration with the carbon trading policy and promotes energy structure transformation and process upgrades to the entire industry. The carbon tax also emphasizes that tax revenue control should have a guiding role. The government should encourage enterprises to actively improve green technology and adjust the energy structure through the rational use of carbon tax revenues.

Sentiment Analysis of Tweets on Soda Taxes.

As a primary source of added sugars, sugar-sweetened beverage (SSB) consumption may contribute to the obesity epidemic. A soda tax is an excise tax charged on selling SSBs to reduce consumption. Currently, 8 cities/counties in the United States have imposed soda taxes. This study assessed people's sentiments toward soda taxes in the United States based on social media posts on Twitter. We designed a search algorithm to systematically identify and collect soda tax-related tweets posted on Twitter. We built deep neural network models to classify tweets by sentiments. Computer modeling. Approximately 370 000 soda tax-related tweets posted on Twitter from January 1, 2015, to April 16, 2022. Sentiment associated with a tweet. Public attention paid to soda taxes, indicated by the number of tweets posted annually, peaked in 2016, but has declined considerably ever since. The decreasing prevalence of tweets quoting soda tax-related news without revealing sentiments coincided with the rapid increase in tweets expressing a neutral sentiment toward soda taxes. The prevalence of tweets expressing a negative sentiment rose steadily from 2015 to 2019 and then slightly leveled off, whereas that of tweets expressing a positive sentiment remained unchanged. Excluding news-quoting tweets, tweets with neutral, negative, and positive sentiments occupied roughly 56%, 29%, and 15%, respectively, during 2015-2022. The authors' total number of tweets posted, followers, and retweets predicted tweet sentiment. The finalized neural network model achieved an accuracy of 88% and an F1 score of 0.87 in predicting tweet sentiments in the test set. Despite its potential to shape public opinion and catalyze social changes, social media remains an underutilized source of information to inform government decision making. Social media sentiment analysis may inform the design, implementation, and modification of soda tax policies to gain social support while minimizing confusion and misinterpretation.

Tax policies and agency costs

AbstractWe show that when large corporations are subject to a different tax system than smaller firms, the agency cost of under‐ and overinvestment is significantly altered. In contrast to the findings in the literature, the gap between the first‐ and second‐best investment trigger prices do not move in lockstep with variations in the corporate tax rate, as in the case of a linear tax system. We show that the gap can either widen or shrink, depending on the tax policy design and regime. In addition, we find that the agency cost under a progressive tax regime is considerably larger than the agency cost under a regressive tax regime when equityholders have to bear all the investment costs. These results are reversed when managers have the ability to issue additional debt to finance the firm's expansion and transfer part of the investment costs to bondholders.