Fiscal Tools Research Articles

Papa et pecunia: Innocent III’s combination of reform and fiscal policy to finance crusades

This article examines the fiscal policies of Pope Innocent III throughout his pontificate, culminating in the canons of the Fourth Lateran Council. The aim of this analysis is to illustrate that not only was Innocent more fiscally minded than his predecessors, but that he also attempted to utilize fiscal policy as a tool for facilitating the crusade movement. Innocent adapted the fiscal tools of his predecessors while inventing several of his own. These tools included streamlined census-taking, income taxation, crusader vow redemptions/commutations, expanding crusade indulgences, the collection of alms, trade embargoes, clerical reform and more. These tools were designed to aid crusade endeavours, either directly or indirectly, and through crusading achieve the salvation of Christian souls.

Institutional Constraints, Rule-Following and Circumvention: Tax and Expenditure Limits and the Choice of Fiscal Tools During a Budget Crisis

One of the critical questions in local public budgeting and finance is how the confluence of two major developments in the local public sector — the proliferation of tax and expenditure limits or TELs and the widespread budget crisis precipitated by the Great Recession — has affected local governments across the country. This research examines how TELs shape the fiscal behavior of municipal governments, specifically the pattern of use of different fiscal tools to respond to a major budget crisis. The fiscal tools available to local governments to address fiscal shocks include personnel-related budget cuts, service-related cuts, revenue-raising responses, efficiency reforms, fund balance and inter-fund transfer, external borrowing, and inter-governmental approaches. To what extent did cities rely on specific tools and how did TELs influence cities’ fiscal choices? Using the results of a 2015 national survey of municipal governments in the U.S. with a population of 50,000 or more, this study shows that TELs have shaped the fiscal choices of cities in ways that can potentially redefine the relationships among city governments, their workforce, and citizens.

Trends in Public Debt in India: Lessons from Greek Crisis?

There is not much new in the divide in economic literature between fiscal and monetary policy; what is new post-2008 is the emergence of the role of money supply and that of public debt to prominence as the instrument of choice for central banks and the government treasury. To a large degree, money supply and public debt now eclipsed the central role variables such as tax and interest rates had played in the setting of economic policies in countries both developed and developing. While literature is evaluating how the change in the role of these stock parameters to that of policy variables will play out, this article takes up the more mundane task of examining only one of them, which is public debt in the context of India. We believe that there is a key reason to do so. The Indian government has not used public debt as an active policy tool, so far, even as several countries have begun to do so ( Mohanty, 2012 ). Instead, it has held on to a general desideratum of the need to reduce it; borne out of the scare of the balance of payments crisis of 1991. But 25 years after the crisis, it is important to examine if there is a conscious understanding within the government for the need to measure and deploy public debt especially as the room for active deployment of other fiscal tools, namely taxation is circumscribed. By FY14 India’s public debt (centre and states combined), as percentage of GDP, stood at 66.7 per cent; it was 70.6 per cent in FY09. For the sake of comparison, the world’s most indebted countries include Greece, of course, with its general government net debt at 173 per cent of its GDP. Others in the top 20 include Italy, Egypt, Portugal, Spain, France, the United Kingdom, Japan and the United States of America. By current estimates, India does not rank amongst the most indebted countries of the world. But is the position, one of strength or of a passive arrival that offers little or no policy direction to the government? Moreover, this article also argues that in the absence of such direction, there has been a build-up of debt in the economy instead of a reduction. Most of that build-up has been sought to be balanced by recourse to non-tax revenue. As fresh options to tap non-tax revenue dry up, public debt could emerge as the new pressure point for the economy.

COMPETITION IN TAXATION AND THE FORMS OF ITS IMPLEMENTATION AMONG THE SUBJECTS OF THE RUSSIAN FEDERATION

The article considers competition in taxation as the condition for territories’ development and the forms of its implementation among regions. Studies of the theoretical aspects of competition in taxation emergence allowed concluding that primarily social relations are its basis. The author defines the concept of competition in taxation as the process of competitive privileges regulation while dealing with public law establishments to share the tax base by attracting mobile production factors and other advantages to achieve sustainable competitiveness. The author also adds her own features to the classification of competition in taxation. The application of this classification helps deeper understanding of this phenomenon in its versatility. Considering tax competition among the Russian Federation subjects in finance-budget sphere allowed seeing several stages in the development of competence in taxation among regions from its implementation through violence to the correct application of fiscal policy tools. The research revealed the main prerequisites of the development of regional competition in taxation in Russia, and provided the ways and measures of its regulation among the RF regions by the state. The duality of the implementation of regional taxation competition’s inner potential is demonstrated through the main directions of its ultimate impact via the fiscal and regulation functions. Considering the forms of the implementation of tax competition among the RF regions provided the opportunity to prioritize among the regional taxes, which allow influencing the competitive advantages of the territories in order to attract investors in their regions. The review of the regulations of all regional authorities allowed making a conclusion about the existence of different positions on participation in competition in taxation. The research demonstrated that most efficient and available forms of taxpayer involvement are establishing additional benefits on regional taxes, differentiation of the income tax rate (its regional part), and that most regions using the tools of competition in taxation bet on the increase of investment attractiveness of their territory Highlights 1. Competition in taxation is the process of regulation of competitive privileges in the process of social establishments interaction aimed at the sharing of tax bases at the expense of involving mobile production factors and other advantages in order to achieve and keep sustainable competitiveness 2. It is expedient to add two more characteristics — the parameters’ size and the vector of the impact — to the tax competition classification 3. The vertical tax competition by offering tax benefits has objective limitations at the present stage in the Russian Federation 4. There are various positions among the subjects of the Russian Federation on participating in tax competition, most regions rely horizontal competition in taxation through the means that support investment activity at their territory For citation Troyanskaya M. A. Competition in Taxation and the Forms of its Implementation among the Subjects of the Russian Federation. Journal of Tax Reform , 2017, vol. 3, no. 3, pp. 182–198. DOI: http://dx.doi.org/10.15826/jtr.2017.3.3.039 Article info Received October 1, 2017 ; accepted November 13, 2017

The Early Modern Medical-Military Complex: The Wider Context of the Relationship Between Military, Medicine, and the State

In his final televised address to the American people in 1961, US President Dwight Eisenhower famously warned about the danger that the posed to freedom, peace, and democracy. Although Eisenhower's rhetoric proved controversial, the idea that nexus of legislators, national security agencies, the armed forces, and weapons manufacturers wielded undue influence over the direction of US foreign and domestic policy complements scholarly investigations into the consequences of war on political, economic, and social developments in different kinds of states and societies across time and space. Recent research on the military-industrial complex referred directly to Eisenhower's assessment with the aim to uncover the post-war relationship between arms industries, the US army and government. (2) Understood as confluence of profit and policy that undermines the public's overall welfare, the idea of military-industrial complex was mainly adopted by critics of public spending in the interest of the military establishment and big corporations in the US during the Cold War era. (3) Whether or not this concept is used to argue against the generally detrimental effect to the public good of combined corporate and establishment interests, it draws attention to the mutual dependency of government, military, and business interests. Although the idea of military-industrial complex was shaped by US defence and social politics after World War II and rooted in the socio-economic realities of highly industrialized democratic society, it resonates with previous developments in the complex relationship between economy, military, the state, and society. The notion of military-industrial complex also raises questions about the long-term connections between the public sector, the military, and private business; the organization and administration of public spending and contracting; as well as corruption and the potentially dysfunctional nature of public-private partnerships. I. MILITARY ENTERPRISE, BUREAUCRACY, AND STATE FORMATION For the early modern period, the ongoing debate about the military revolution, (4) discussions about the fiscal-military state, (5) and research on military entrepreneurship and the role of the state are pointing in similar direction. (6) They all take the interconnectedness of warfare and the military, the state, and other economic and social actors for granted, but focus on different aspects of the connections. While the military revolution debate is underpinned by tactical and strategic concerns and emphasizes the importance of technological and administrative innovation in the military, discussions about the role of the fiscal-military state focus on models for collecting revenue and state spending, which were behind the expansion of armies and navies. They assume that both military innovation and the creation of new fiscal tools to finance warfare were crucial in the process of state formation and the expansion of the bureaucratic state into ever more areas of social and economic life during the eighteenth century. (7) Scholarship on the business of war has different focus. It is more interested in how resources were mobilized for early modern warfare, how armies were managed and their supply organized. (8) This research shows that while the early modern state could act in entrepreneurial ways, private finance and suppliers remained crucial to war efforts. With regard to the Netherlands, Pepijn Brandon recently challenged the assumption that the growing demands of early modern military technology, tactics, and organization only allowed centralized states to carry out warfare at large scale. He admits that the rather decentralized government of the Dutch Republic relied on the methods of the fiscal-military and the contractor state in financing and supplying its armies. However, this was only possible in system where state and private interests went hand in hand, which lets Brandon characterize the Dutch Republic as a brokerage state in its continuous involvement of economic elites in the execution of its warring tasks. …

The Impact of Tax Rebate on Used Car Market: Evidence from Thailand

AbstractTax incentives are one of the most important fiscal tools at the government's disposal that can be used to influence the economy. Often, policies are targeted to spur investment in durable goods. In this article, we focus on the impact that a primary‐market tax incentive has on the secondary market for durable goods – specifically, the automobile market. Using a first‐car tax rebate scheme implemented in Thailand in 2011 as a natural experiment, we find that the policy reduces the listing prices of used cars in the tax‐eligible category by 6.75% to 10.31%.

Analysing job creation effects of scaling up infrastructure spending in South Africa

ABSTRACTIn a first for South Africa, this article draws on literature on infrastructure productivity to model dynamic economy-wide employment impacts of infrastructure investment funded with different fiscal tools. Using a dynamic computable general equilibrium model, the South African investment plan is modelled, given the infrastructure externality. Alternative fiscal scenarios to finance the policy are modelled in the article. In the long run, unemployment decreases for all types of workers under one of the scenarios. In the short run, only elementary occupation workers benefit from a decrease in unemployment; for the rest, unemployment rises.

Economic Governance in the Euro Area: Balancing Risk Reduction and Risk Sharing

The unchecked build-up of imbalances during the 2000s exposed the euro area to the risk of sudden stops. Such risk materialized in 2009-10 and its consequences were amplified by the absence of adequate institutions. Europe embarked on a thorough process of reforming its economic governance. We review the measures taken concerning sovereigns and banks since 2010 and discuss possible ways forward on both fronts. We argue that, while significant progress has been achieved, a lot of ground remains to be covered. In general, reforms have favoured risk reduction over risk sharing. As a result, in the face of exceptional circumstances, the euro area is not equipped with the fiscal tools necessary for macroeconomic stabilization; moreover, banking union lacks common financial backstops. Only further risk (and sovereignty) sharing can avoid harmful pro-cyclical excesses.

Effectiveness of macroeconomic policies in the contextof closed and open economies

IntroductionMonetary and fiscal policies have long been the important instruments for policy makers to achieve their macroeconomic goals like economic growth with price stability and exchange rate stability and economic development. Monetary policy is the policy used by the central bank to control the liquidity in the market which involves controlling inflation, exchange rate oscillations through various monetary instruments like CRR, SLR various interest rates and open market operations. Likewise finance ministry uses fiscal policy to achieve its objectives like economic growth and development through various fiscal tools like public revenue, public expenditure and public borrowings.According to traditional macroeconomic theories, fiscal policy is more effective in the case of fixed exchange rate system and monetary policy is more effective under flexible exchange rate system. Economists usually compare the effect of both these policies on different economies under different exchange rate regimes and different economic systems. The reason behind is both the policies are equally important to achieve major and common macroeconomic goals like economic growth (growth rate of GDP) and economic development directly or indirectly through GDP. In case of economic growth and development, fiscal policy can be applied directly and results can be obtained immediately, but monetary can be applied directly for economic growth through decreasing rates and it is difficult to apply monetary policy directly to achieve development goals. It is possible only through decreasing interest rate and its impact on investment, employment and income. Also it will take some time to achieve the development goals. That's why it is always necessary and important to test the effectiveness of fiscal and monetary policy in the economy. In order to analyses the effectiveness of macroeconomic policies on the economy; this study uses Money Supply (M1), Interest rate (R), Government expenditure (G), Taxation (T) and Exchange rates (E) for analysis.In the last few centuries countries across the world have been increasingly engaging with one another in terms of trade. The advent of mass production techniques and discovery of new technology and hence greater demand have opened up several fronts in global trade. Countries which earlier were self-sufficient became reliant on others. Much of the work in economics had an underlying assumption that the nation was a closed economy.Several new models were proposed by various eminent economists like Mundell-Fleming, Trevor Swan and other models widely followed in international macroeconomics. Globalization has only accelerated the process of higher trade between nations. The western world was the first to embrace the concept of open economy. Many Asian countries like South Korea and Singapore adopted the open economy in early 1960s. Asians giants India and China have been relatively late in adopting the open economy model. India freed the control of government over key sectors in the 1990s reforms that had restricted the interaction of India with foreign nations.Opening up of the economy brings in several benefits. However, due to limited governmental control over the functioning of the economy now it becomes difficult for the policy makers to strike a balance between governmental interference and market forces. Due to various factors, the effectiveness of a policy may or may not produce the desired effects. It becomes more important to consider the implications and the behavior of such policy actions. Analyzing the effect of macroeconomic policies under different exchange rate regimes may provide clue towards taking appropriate measures.The impacts of these decisions seem to have profound effect on several key economic parameters and hence their analysis assumes considerable significance. The present paper is structured as follows: Introduction and significance of the study are given in Section 1. …

The Importance of a Medium-Term Budgetary Framework in Enhancing the Sustainability of Public Finances

Globalization has changed traditional systems to scientific systems rapidly. This reform took place every organizational process. Fiscal reforms are the major reforms in the organization. The objectives of fiscal reform is to enhance the quality of fiscal governance and public finance. The fiscal reform also consolidate superior budgetary resources through better disciplinary fiscal policies. These disciplined fiscal policies can be followed by the organizational and legislative measurements. It will leads to the introduction and establishment of new and independent fiscal rules. Now fiscal strategies moving towards the multi-annual budget system. The implementation of multi-annual budget system introduced the medium term budgetary system. The basic aim of this study is to introducing the importance of implementation of medium term budget system and the role of this budget system in public organizations. Fiscal management policies and tools plays important role in the sustainability of public finance in nations.

Fiscal Policy and Economic Inequality in the U.S. States

To what extent can state governments influence economic inequality? How do state fiscal policies of redistribution affect families in different economic situations? Using a large database of state fiscal policymaking tools (taxing and spending) between 1976 and 2006, we examine the effect of these tools on state-level inequality as well as the average incomes of families in different economic groups. We find that state taxing and spending efforts can influence these indicators of economic inequality, though these fiscal policy tools can have differential effects. Spending on unemployment compensation and cash assistance as well as revenue from taxes on corporations is found to reduce state-level inequality. We also find unemployment compensation to positively benefit the bottom 10th percentile of income earners, whereas the inheritance tax helps all income groups. Corporate tax revenue is associated with higher middle-class incomes, whereas income tax revenue benefits both middle and upper incomes. Sales tax revenue positively benefits wealthy earners. Higher property tax revenue is associated with decreased income for all groups. These results suggest that state governments can affect redistribution through fiscal policies by affecting state-level inequality as well as the economic fortunes of different income groups.

Capital, Social Reproduction, and the Rise of Inequality

Abstract Thomas Piketty’s book has the great merit of implementing a global analysis of inequality that compares countries and periods. However, he adopts a definition of social class that overlooks the importance of cultural capital. Furthermore, the role of social movements is relatively marginalized in his account, which also focuses on fiscal tools to the detriment of other forms of regulation. Nonetheless, this innovative and important book opens up new avenues of research in the field of political sociology.

A Four-Step Process to Assess the Fiscal Performance and Sufficiency of State Road Funds

Aging transportation infrastructure and diminishing financial resources are challenging the management of state transportation systems. Policy makers and administrators are seeking fiscal performance measurement tools to better monitor and manage infrastructure. This article discusses and applies a four-step process to examine past revenue and expenditure trends to determine transportation expenditure sufficiency for state road funds, using the Kentucky Road Fund as a template. A comprehensive approach to this issue is utilized by demonstrating several possible measures of sufficiency and then presenting some future scenarios. Expenditures across various facets of the transportation system are then analyzed with a number of performance metrics as well as construction cost measures to estimate sufficiency. Finally, short-term forecasts of several revenue scenarios are presented to provide context for possible future funding levels under the current revenue regime. The Kentucky case study provides a template to analyze state road funds and potentially draw conclusions as to the continued solvency and state of transportation infrastructure. As policy makers better understand the sufficiency of road fund resources to meet transportation priorities, they will better understand the costs of meeting future transportation needs and the opportunity costs of diverting transportation resources to other policy priorities.

Trends and Determinants of Household Saving in South Africa

South Africa managed to have a gross saving rate of 30% to GDP before 1994 but 16% in 2009 (compared to China 52%, Russia 22%). No coincidence that China and Russia are among the economies enjoying rapid growth compared to South Africa. Could the prevalence of an ‘aspirational’ culture negatively impact the South African household savings in which consumption is encouraged by access to credit facilities- necessitated by the sophisticated financial sector? Econometric analysis found the following among others to be statistically significant determinants of household saving rate: level of income, uncertainty (expected inflation), public sector savings and financial development collaborating with many other studies. As both saving and consumer behaviour evolve slowly, the study estimated the correlations by means of an error correction model. This allowed me to estimate a long-run correlation between the variables and to model behaviour in the short run and 2SLS for robustness checks. The study results have diverse policy implications and the following proposals can be made: policy makers must consider fiscal tools e.g. tax incentives to encourage savings (this have been introduced in 2012 national Budget for SA), also consumer education on financial matters.

Suggestions for a New Classification of Fiscal Tools

The aim of this study is to identify a set of fiscal tools through which fiscal policy can achieve its goals. Any adjustment policy, including fiscal policy, uses a number of tools in order to make an economic intervention. Some of these tools may have an administrative nature, others economic, etc. In this context, the method we use is to identify a list of the fundamental tools of fiscal policy, based on attributes that define the notion of fiscal instrument.

Fiscal federalism in the European Union: Evolution and future choices for EMU

In order to besustainable as a multilevel system of fiscal and economic governance, EMU faces certain challenges that are common to all federal, multilevel, or fiscally decentralized systems. This paper focuses on three such central challenges: (1) enforcing fiscal discipline; (2) addressing structural inequalities between different euro area economies; and (3) preventing and countering asymmetric shocks. The paper analyses the evolution of the EU's multilevel system of fiscal and economic governance in relation to these three challenges, showing that they have been only partially addressed. If it were to address these obstacles more fully, the EU would face a crucial choice between two ideal models of integration: The "surveillance model", where Member States maintain all taxing power and where the EU is an enforcer of discipline, and the "classic fiscal federalism" model, where the EU acquires an independent sphere of fiscal authority, and thus its own fiscal tools for macroeconomic stabilization. The paper analyses the implications of both models andargues that the surveillance model, when taken to its natural conclusion, poses as much of a threat to Member States' autonomy, and presents us with similar democratic legitimacy problems, as the classic fiscal federalism model.

Il problema è il controllo dell'inflazione, non il contenimento della spesa

The problem of mounting public debt should be attributed to the inability to control inflation instead of restricting public expenditures as many economists would suggest. The use of inappropriate monetary and fiscal tools to control inflation have aggravated the problem. In light of new findings, it is suggested that tax-based incomes policies and Lerner's market anti-inflation plan, among others, should be tried out. JEL Codes: E31, E52 Keywords: Analysis, Management, Inflation (Finance), Expenditures, Public, Public expenditures, National debt, Public debts, Inflation (Economics)

The role of foreign direct investment in a globalising economy

The problem of mounting public debt should be attributed to the inability to control inflation instead of restricting public expenditures as many economists would suggest. The use of inappropriate monetary and fiscal tools to control inflation have aggravated the problem. In light of new findings, it is suggested that tax-based incomes policies and Lerner's market anti-inflation plan, among others, should be tried out. JEL Codes: Keywords:

The problem is inflation-control, not spending-control

The problem of mounting public debt should be attributed to the inability to control inflation instead of restricting public expenditures as many economists would suggest. The use of inappropriate monetary and fiscal tools to control inflation have aggravated the problem. In light of new findings, it is suggested that tax-based incomes policies and Lerner's market anti-inflation plan, among others, should be tried out. JEL Codes: E31, E52 Keywords: Analysis, Management, Inflation, Public expenditures, Public debt

Systemic risk from real estate and macro-prudential regulation

There is considerable evidence that boom and bust cycles in real estate are the primary cause of financial crises. This paper develops a model of real estate pricing based on rational behaviour with two regimes. In 'normal times' prices of housing units are determined by the consumers who live in them and are equal to the discounted stream of housing services. In 'boom and bust times' speculators find it profitable to borrow from banks and enter the market. There is an agency problem because banks are unable to fully assess the risk that the speculators are taking and this leads to risk shifting and asset substitution. The result is a bubble in real estate prices in that they are higher than the discounted stream of housing services during the boom phase. This model is then used as the basis for analysing macro-prudential polices designed to prevent the occurrence of such bubbles. These measures include monetary policy, fiscal tools such as real estate transfer taxes, and annual real estate taxes and banking regulation such as restrictions on loan-to-value ratios, countercyclical capital requirements and loan provisions.