Fiscal Reform Research Articles

Money, its functions and the moral limits of their re-design

ABSTRACT If money is used in a market setting, and if it fulfils its three traditional functions well, this creates normative problems. Arguably, the two most pressing problems linked to markets – inequality and corruption – are partly caused by the prevailing monetary design. Given the history of suggested monetary reforms, one might reasonably hope that, by consciously re-designing the functions of a currency, one might overcome these issues. This essay argues that there are clear moral limits to this. Because of the way inequality and corruption are intertwined via money’s functions, we cannot simultaneously overcome both problems. This also means that even though these problems have monetary causes, they do not have purely monetary solutions, but need to be addressed relying on fiscal or market reform as well.

Developing an integrated microsimulation model for the impact of fiscal policies on child health in Europe: the example of childhood obesity in Italy

BackgroundWe developed an integrated model called Microsimulation for Income and Child Health (MICH) that provides a tool for analysing the prospective effects of fiscal policies on childhood health in European countries. The aim of this first MICH study is to evaluate the impact of alternative fiscal policies on childhood overweight and obesity in Italy.MethodsMICH model is composed of three integrated modules. Firstly, module 1 (M1) simulates the effects of fiscal policies on disposable household income using the tax-benefit microsimulation program EUROMOD fed with the Italian EU-SILC 2010 data. Secondly, module 2 (M2) exploits data provided by the Italian birth cohort called Nascita e Infanzia: gli Effetti dell’Ambiente (NINFEA), translated as Birth and Childhood: the Effects of the Environment study, and runs a series of concatenated regressions in order to estimate the prospective effects of income on child body mass index (BMI) at different ages. Finally, module 3 (M3) uses dynamic microsimulation techniques that combine the population structure and incomes obtained by M1, with regression model specifications and estimated effect sizes provided by M2, projecting BMI distributions according to the simulated policy scenarios.ResultsBoth universal benefits, such as universal basic income (BI), and targeted interventions, such as child benefit (CB) for poorer households, have a significant effect on childhood overweight, with a prevalence ratio (PR) in 10-year-old children—in comparison with the baseline fiscal system—of 0.88 (95%CI 0.82–0.93) and 0.89 (95%CI 0.83–0.94), respectively. The impact of the fiscal reforms was even larger for child obesity, reaching a PR of 0.67 (95%CI 0·50–0.83) for the simulated BI and 0.64 (95%CI 0.44–0.84) for CB at the same age. While both types of policies show similar effects, the estimated costs for a 1% prevalence reduction in overweight and obesity with respect to the baseline scenario is much lower with a more focalised benefit policy than with universal ones.ConclusionsOur results show that fiscal policies can have a strong impact on childhood health conditions. Focalised interventions that increase family income, especially in the most vulnerable populations, can help to prevent child overweight and obesity. Robust microsimulation models to forecast the effects of fiscal policies on health should be considered as one of the instruments to reach the Health in All Policies (HiAP) goals.

Post Implementation Issues of Goods and Services Tax in India

GST was declared as India's second intended attempt. But several months ago, on 1 July 2017, India as a country had made a big leap towards a new order in its tax history which is undoubtedly, one of the important and revolutionary indirect fiscal reforms in Indian history since independence. In addition, the post-GST era has so far seen the exporter numerous blows, errors and incompatibility in archived returns as well as the World Bank calling GST a very complicated tax system. The GST Act prior to its implementation faced the resistance of state governments due to fear of loss of income for state governments. The current GST has certain problems in the system. In addition, there are only two countries apart from India, namely, Canada and Brazil to have applied the dual GST model. In most other countries of the world there is only one single tax system that is VAT or GST. The following study focuses on getting a meaningful idea about The challenges and prospects of post GST application in India and the difference between Indian model of GST and similar taxes in other countries is double GST Model. This study seeks to clarify the problems of subsequent application of goods and services tax in India that how experience in GST raises a larger point, and maybe it highlights a future lesson, about policy reforms. After two years in the time of the pandemic significantly after the closure it has become difficult to manage for businessmen. Meanwhile, the government has been proactive in resolving the problems faced by Indian taxpayers. There are still gaps between the expectation and actual application of GST in terms of a simplified tax structure, ease of doing business, and overall price reduction. This study discusses the main problems of how goods and services tax affects the Indian economy and after the results are applied a thorough understanding of GST in some other countries of the world. In addition, these issues have been raised during the post-implementation period, as well as critically analysing the expectation and the difference between their reality.

Capitalization of local government grants on land values: Evidence from Tokyo metropolitan area, Japan

This study investigates the capitalization effect of intergovernmental fiscal transfers from central to local governments on land prices. Using a drop in the size number of fiscal transfers following fiscal reform in the early 2000 s, this study examines the extent to which unconditional fiscal transfers to municipalities in the Tokyo metropolitan area are attributed to land prices. The result shows that the decline in the transfer has decreased the land prices in the municipalities. Furthermore, reducing one unit in the per capita grant reduced the value of housing area per capita by one or more units, even if the real discount rate was assumed to be as low as 2%. Therefore, the fiscal transfer reform more negatively affects the benefits of residing in a municipality in the area than the reduction amount in the transfer.

When Harmful Tax Expenditure Prevails over Environmental Tax: An Assessment on the 2014 Mexican Fiscal Reform

This article examines the role of environmental taxation in mitigating environmental problems and contributing to sustainability in Mexico. It focuses on environmental tax revenues and tax expenditures since the 2014 Public Financial Reform (PFR), according to pro- or anti-environmental orientation. The research carried out combines the study of the regulation of the selected tax instruments, their classification and the empirical analysis of the tax revenues and tax expenditures associated with the different taxes over the periods of validity of the taxes and benefits studied, using the databases of the CIAT and the Mexican SHCP. A critical analysis addresses the weak environmental function of environment-related taxes (IEPS, ISAN…), as well as the late implementation and reduced impact of the carbon and pesticide taxes introduced in 2014. The evolution of tax incentives and expenditure is thoroughly examined by examining both environmental measures, which have evolved positively but within a very reduced level, and the most prevalent tax expenditure measures, with harmful impacts to the environment. Based on the results obtained, long-term structural changes in the Mexican tax system are suggested. As for the short to medium term, profound changes in tax expenditure are proposed to eliminate of those tax benefits harmful to the environment, introduce of tax benefits for circular activities (e.g., repairing, reusing and remanufacturing) and broaden the carbon tax base and rates. The conclusions include recommendations for moving towards a systemic green tax reform that assists the transformation towards a sustainable economy.

Direct Taxation in the European Union Countries (II)

The importance of the topic lies in the role played by taxation and fiscal reforms in this field for the economic development of the states around the globe especially as this paper focuses on the Member States of the European Union, which record different levels of taxation and where there are still quite a few different approaches to taxation, despite sustained efforts towards convergence. The involvement of our country in this process of European integration is based on removing the inconsistencies and failures of previous reforms, as well as reconciling the objectives of efficiency, effectiveness and equity that are the foundation of an optimal tax system.

ФОРМУВАННЯ ДОХОДІВ МІСЦЕВОГО БЮДЖЕТУ В УМОВАХ БЮДЖЕТНО-ПОДАТКОВИХ РЕФОРМ В УКРАЇНІ

The article investigates the problem of local budget revenues formation in the context of fiscal reforms in Ukraine. The authors provide definitions of such concepts as "local budget", "budget revenues", "own and fixed revenues of local budgets". The composition of local budget revenues is determined and the peculiarities of their change due to budgetary and tax changes during 2001-2020 are considered. Relevant in this paper is the separation of these changes in a table, which is related to the new versions of the Budget Code, as well as the division of revenues into own and fixed. The impact of budget and tax reforms on filling the revenue side of local budgets, especially revenues from local taxes and fees, is described. The significance of the decentralization process for local budgets in terms of stages of its implementation has been studied. The importance of the personal income tax as the main budget-forming tax in the fixed revenues of local budgets and the change in the norms of its deduction to different levels of local budgets in the process of budget and tax reforms are highlighted. The importance of associations of territorial communities in order to increase their financial independence is described. Emphasis is placed on the importance of adopting a number of bills on the procedure for paying personal income tax, which contribute to the fair distribution of this tax between different territorial communities. The research is to determine the dependence of changes in local budget revenues on changes in budget and tax legislation of Ukraine.

Testing the Environmental Kuznets Curve Hypotheses in Chinese Provinces: A Nexus between Regional Government Expenditures and Environmental Quality.

With rapid economic growth, the Chinese government expenditures at various levels have increased adequately. At the same time, the environmental quality in China has deteriorated significantly. In this study, provincial-level data for 31 Chinese provinces during 2007–2017 are used to investigate the impacts of government expenditure on the emissions of three specific measures of environmental degradation. The main objective of this study is to examine the influence of government expenditures, economic growth per capita, environment protection expenditure, and added second-sector value on environmental quality by measuring sulfur dioxide (SO2), chemical oxygen demand (COD), and ammonia nitrogen emissions (AN). Moreover, the study applied the generalized method of moments (GMM) and the fully modified least square (FMOLS) to estimate the co-integration relationship among the underlying factors. The results demonstrate a significant direct effect of government expenditure on improving environmental quality overall in the Chinese provinces, which increases with the level of economic growth. However, the results also confirmed the inverted N-shaped relationship between the pollution factor and economic growth per capita. Our key findings lead toward the manifestation and emphasis of the importance of appropriate policies for restoring government expenditure and, at the same time, strengthening the relationship between the industrial sector and environmental policy standards. Significantly, governments in developing countries should allocate larger budgets for environmental projects in their fiscal reforms for the sake of moving to greener and more inclusive economies with low-carbon activities.

Statecraft and incremental change: Explaining the success of pension reforms in the United Kingdom

How were comprehensive pension reforms in the UK successfully developed, enacted and implemented from 2002 to 2015, despite changes in government composition and the financial crisis? Why were they not subject to policy conflict, electoral competition and policy reversal? Drawing on actor-centred historical institutionalism and thirty interviews with key actors, we demonstrate the critical role played by a limited number of politicians and policy entrepreneurs and their ideas and agency. Institutional continuity with the Beveridgean policy legacies of the pension system and the United Kingdom’s `growth regime’ enabled a coalition space to open up for policy agreement. between the government and Opposition parties, and for partisan electoral competition over the reforms to be `bracketed’. The incremental and interlocking nature of the reform package reduced interest group opposition and enabled a centralisation of decision-making power. A long-term timeframe for reform cemented the formation of an elite coalition and buttressed political control. Cross-party support for the reform package, coupled with judicious phasing of the implementation of auto-enrolment and fiscal reforms, enabled it to withstand the impact of the financial crisis and the austerity that followed it, and to minimise opposition among the critical electoral constituency of older voters. The dominance of the reform process by political actors and policy entrepreneurs in the UK nonetheless came at a price, as institutional continuity and incrementalism foreclosed alternative reforms. We demonstrate the importance of political statecraft and policy entrepreneurship in the UK pensions’ reform process, but within boundaries set by its institutional context.

Local Legitimacy and Tax Policy: Qaids as Part of a Composite State in Colonial Tunisia

AbstractThe colonial history of Tunisia has long been dictated by colonial sources that made the qaid (an official in charge of fiscal attributions), from the viewpoint of the capital city, a local notable and often a prevaricator. This study proposes to reconsider the relationship between government and regional power in the colonial context by drawing on the recent work of Ottoman studies about provincial elites. The article studies the fiscal reforms of the interwar period in a cereal-growing region of Tunisia, relying on sources in Arabic produced by the qaids, namely the administrative correspondence between local authorities, the prime minister, and colonial controllers. This article describes the role of qaids in the negotiation between national law and local specificities and finally highlights the role of decentralization and a local way of thinking about the state in the 1930s. It contributes to colonial history and the history of taxation by highlighting the territorial fractures in North Africa and the agency of local actors under the protectorate.

Direct Taxation in the European Union Countries (I)

The importance of the topic lies in the role played by taxation and fiscal reforms in this field for the economic development of the states around the globe especially as this paper focuses on the Member States of the European Union, which record different levels of taxation and where there are still quite a few different approaches to taxation, despite sustained efforts towards convergence. The involvement of our country in this process of European integration is based on removing the inconsistencies and failures of previous reforms, as well as reconciling the objectives of efficiency, effectiveness and equity that are the foundation of an optimal tax system.

Does fiscal decentralization improve energy and environmental performance? New perspective on vertical fiscal imbalance

Chinese-style fiscal decentralization and vertical fiscal imbalance may cause substantial incentive distortion, which is not beneficial for public environmental governance. Based on China's provincial panel data from 2000 to 2017, the non-radial directional distance function is used to assess energy and environmental performance, then we examine the impact of fiscal decentralization on energy and environmental performance from the perspective of vertical fiscal imbalance. The results show that the divergence between revenue decentralization and expenditure decentralization leads to vertical fiscal imbalance, which significantly reduces energy and environmental performance. Meanwhile, there is regional heterogeneity in the influence of vertical fiscal imbalance. Vertical fiscal imbalance in the eastern and economically developed regions worsen energy and environmental performance, while the vertical fiscal imbalance in the central, western regions and economically backward regions improve energy and environmental performance since they receive more transfer payments. Different fiscal compensation methods have different impacts on vertical fiscal imbalance. In addition, the influence mechanisms show that vertical fiscal imbalance harms energy and environmental performance by inhibiting industrial structure upgrading and technological innovation and strengthening government intervention. Therefore, to reduce energy and environmental efficiency losses, we recommend deepening fiscal reform and controlling vertical fiscal imbalance.

МЕХАНІЗМИ УПРАВЛІННЯ І РЕГУЛЮВАННЯ НАЦІОНАЛЬНОЇ ЕКОНОМІКИ В СУЧАСНИХ РЕАЛІЯХ

Удосконалення механізмів управління і регулювання економікою пов’язане з потребами сучасного економічного розвитку України. Проблеми, спричинені корупцією, тіньовим сектором і незаконною приватизацією в нашій країні на тлі недосконалих законів, гальмують економічне зростання держави, розвиток її соціальної сфери.Розглянуто і упорядковано наукові підходи щодо взаємодії державного та приватного секторів економіки, впливу державних інститутів на діяльність суспільства, його окремих груп, у яких реалізуються суспільні потреби та інтереси, загальнозначущі цілі та воля суспільства. Акцентовано на відмінності державного регулювання економіки і державного управління економікою та соціальними процесами. Зазначено незавершений характер системи державного регулювання, проаналізовано законодавче забезпечення державного регулювання приватного сектору в Україні, наголошено на необхідності його вдосконалення і підвищення ефективності реалізації національних проєктів. Запропоновано напрями поліпшення взаємодії державного і приватного секторів в Україні та ЄС.Проведено порівняння присутності державного сетору в економіці зарубіжних країн і України. Зроблено висновок, що в багатьох зарубіжних країнах розмір державного сектору є основою економічної стабільності, стійкості й керованості суспільства, національної та економічної безпеки держави, гарантом і економічним фундаментом публічної влади і розвитку різних форм власності, тоді як в Україні відбулося роздержавлення, а управління державною власністю зводиться до приватизації державних підприємств і бюджетного процесу.Зауважено, що державно-приватне партнерство є механізмом, який сприяє інвестиційним проєктам, розвитку відповідної інфраструктури і вдосконаленню соціальної сфери країни, відзначено роль держави в цьому процесі. Завданням уряду є створення необхідних умов для забезпечення партнерства влади і бізнесу, що включає реформування фіскальної сфери, посилення заходів щодо тіньової економіки та корупції.

(In)Effective tax enforcement and demand for cash

Cash holdings have increased worldwide in recent years. It is well known that a higher tax burden is typically an important factor in explaining an increase in cash holdings. However, the role of tax enforcement is less known. To explore the effect of tax enforcement on cash holdings, we study fiscal reform carried out in a large, developing country. In mid-2013, Mexico tried to raise tax revenues by enrolling more taxpayers and introducing electronic invoices to counter a secondary market in illegal invoices. Based on a transaction-based model of money demand, we find an ambiguous effect of tougher tax enforcement on money holdings. If institutions are ineffective, the model predicts an increase in cash holdings after tougher enforcement. To test this issue empirically, we propose a vector error correction (VEC) specification for money demand. The results suggest that a tax enforcement policy implemented under a weak institutional framework can exacerbate cash holdings.

Local Government Transfer into the Process of Ukraine's European Integration: Achievements of Communities and Losses of the Executive Branch of Power

The obligations assumed by the Ukrainian state by ratifying the association agreement between Ukraine and the European Union have become a reference point for transformations taking place in various spheres of public life, including local self-government. The article analyzes Ukraine's compliance with EU requirements regarding local self-government organisation, achievements in this field, and determining the prospects for reform. The analysis is grouped into four blocks: implementation of administrative and territorial reform; budget decentralisation; optimization of the organization of local public authorities (executive bodies formation of regional (oblast) and district (rayon) councils, the establishment of prefectures); land reform (transfer of land management to communities). The powers of local self-government bodies and state bodies were transformed in implementing municipal, territorial, fiscal and land reforms. However, further reforms are impossible without amendments to the Constitution of Ukraine (regarding the decentralisation of power), the adoption of new legislative acts (on the principles of the administrative-territorial structure of Ukraine, on prefectures), as well as amendments to some existing ones (on local self-government, etc.).

Jacobitism, Coastal Policing, and Fiscal-Military Reform in England after the Glorious Revolution, 1689–1702

AbstractCustoms activity during the 1690s has mainly been studied from a fiscal-military perspective that attributes administrative growth and bureaucratic efficiency to the rise of fiscal necessities in the wake of the Nine Years’ War. This article challenges that view with a focus on the one truly momentous change of the Customs during the 1690s: the establishment of a preventive coastal police. Changes in the Customs were occasioned not primarily by fiscal concerns but resulted from the government's preoccupation with Jacobitism and the successful lobbying of Parliament by the wool interest. As the politics of the wool ban before 1689 demonstrate, coastal policing was a losing bargain in fiscal terms and mainly reflected the interests of certain sections of the merchant community. Fiscal pressures alone do not, therefore, explain the fundamental reform of the Customs in the wake of the Glorious Revolution. The beginnings of systematic coastal policing are instead linked to the rise of Parliament and anti-Jacobite precautions of William III's government. The article offers a new, coherent picture of such changes and calls into question the validity of a central assumption about the rise of the fiscal-military state in Britain after the Glorious Revolution, suggesting a more complicated explanation for fiscal reforms.

Legitimate but "not for me": The role of validation in migrant entrepreneur understanding of COVID-19 business support policies in Shanghai.

COVID‐19 pandemic destroyed lives and the global economy, and in the wake left businesses struggling to re‐open in urban China. The Chinese party‐state implemented fiscal reforms targeted towards small businesses, however little research has evaluated business’ understanding of policies and implementation, particular to the focus on rural migrant entrepreneurs. Therefore, we conducted an ethnographic case study including in‐depth interviews to determine to what extent rural migrant micro‐entrepreneurs understand and adopt COVID‐19 business support policies at two retail markets in Shanghai amid a pandemic. Applying an inductive grounded theory approach, the data demonstrated participants believe policies are legitimate but not for me because I am getihu by myself. We maintain their understanding is a legacy of hukou and is confirmed through the theory of validation including recognition through agreement with significant others including other entrepreneurs and family; corroboration with life experiences in Shanghai; and resonance of their migration story as self‐sufficient entrepreneurs surviving with their own capabilities. They have a degree of certainty their understanding is fact because it has been repeatedly validated through life experiences of a migrant lacking hukou in Shanghai. The study encourages consideration for the migrant entrepreneur context and has important practical implications for policymakers.

One state, one interest? How a historic shock to the balance of power of the Bundesbank and the German government laid the path for fiscal austerity

Many economies in the Western world have been through a regime shift towards fiscal austerity since the 1970s. Existing scholarship ascribes trends in austerity to globalisation or the influence of a new economic paradigm. This paper develops a different approach by stressing the strategic intervention of central banks in governments’ fiscal decisions. It analyses archival documents from the German Federal Cabinet and the Bundesbank Council over more than two decades (1960–1981) and finds that the fiscal regime was shaped by changes in transnational institutions which the central bank used to strategically expand its institutional power within the larger macroeconomic framework. With the breakdown of the Bretton Woods system, the Bundesbank was able to greatly increase its power resources while the government’s powers diminished. The Bundesbank used its new powers to strategically ‘overreach’ into the fiscal sphere and ‘bargain’ with the government to achieve fiscal reforms. By shedding light on the interactions of global legal and economic developments and the micro-level strategies of state actors, the paper proposes a more complex view of the role of the state and brings state-actor strategies into our understanding of the grand shifts in economic policymaking.

Legacies of mistrust: Why colonial imprints on the implementation of fiscal reforms in Mozambique and Mexico matter

National authorities across Latin America and Sub-Saharan Africa have implemented various forms of fiscal decentralization over the past three decades with equivocal results. The design of such reforms has long rested on theories based on the experiences of high-income countries’ efforts at increasing local autonomy, accountability, and basic service efficiencies. Critics of the global advocacy for fiscal decentralization, however, point to several challenges with its implementation across diverse political economies that differ significantly from those in high-income environments. Nonetheless, these critiques often obscure the impact that colonial regimes and their legacies have on current efforts to fiscally decentralize. In two postcolonial environments where fiscal decentralization projects have unrolled, namely Mozambique and Mexico, we show how colonial imprints remain critical to understanding efforts at fiscal decentralization. Our focus in these cases is on how race-based caste systems introduced under colonial administrations fed the development and evolution of dual governance systems across spaces and peoples that bred mistrust between residents, local authorities and central authorities. We argue that the conflicting rationales in evidence between stakeholders involved in fiscal decentralization projects today are rooted in the social mistrust and power struggles born from these colonial experiences. In conclusion, we contend that fiscal decentralization reforms must explicitly grapple with these spatialized and racialized legacies of mistrust and the diverse rationalities guiding stakeholders in both the design and evaluation of public policies meant to strengthen local autonomy, transparency, and efficiencies.

Distributional effects of carbon pricing in Brazil under the Paris Agreement

This paper assesses the distributional effects of carbon pricing on Brazilian households. We apply a multi-regional Computable General Equilibrium (CGE) model with representation of multiple households according to a family expenditure survey. Important questions for policy makers in Brazil are addressed. What are the economic effects of introducing carbon pricing in Brazil? Is there a double dividend, with economic and environmental benefits, when carbon revenue is recycled through tax rebates? Could carbon revenue contribute to the financing of social spending and to income distribution improvements in Brazil? Results show that carbon pricing avoids further carbon intensive infrastructure lock-in by further promoting biomass in electricity generation and biofuels in the transportation sector. Lump-sum transfers from carbon revenue help boosting income of lower deciles up to +4.5%, while targeting transfers to most vulnerable groups leads to an income growth of +42.2% by 2030. Brazil has a large gap in terms of effective carbon pricing when compared to other countries that could be addressed in the context of the ongoing tax reform debate, with carbon revenue contributing to the financing of social spending. Our analysis examines different policy design options and contribute to the debate about fiscal reform and socioeconomic effects of carbon pricing in Brazil.