Tax Incidence Research Articles

Tax Planning and Investment Pattern of Academicians: A Study of Educational Institutions in Bengaluru

Tax planning involves an efficient application of various provisions and loopholes of tax laws to reduce the incidence of tax and tax burden of an assessee. This research paper aims at studying the investment pattern and the awareness of various tax planning schemes available for investment for academicians. Structured questionnaire was used to collect the data and 385 respondents were selected for the study by adopting stratified sampling technique from private educational institutions across the city of Bengaluru. The study revealed that the level of awareness among the academicians on various tax saving schemes is low and personal factors influence the investment decisions. Further, bank deposits are preferred investment avenues.

Führt eine Senkung der Grunderwerbsteuer zu niedrigeren Wohnkosten?

Until 31 August 2006, the nationwide real estate transfer tax rate in Germany amounted to 3.5 % of the purchasing price, regardless of whether the real estate was developed or not. Due to the federalism reform, the jurisdiction for this tax was transferred to the German federal states, which raised the tax rates to as high as 6.5 %. As a result, the real estate transfer tax is criticised as one of the cost drivers of increased prices in German housing markets. In this paper, we discuss the “true” incidence of the real estate transfer tax and of other transaction costs. In doing so, we consider the impact of different market conditions.

Who Bears the Corporate Tax Incidence? Empirical Evidence from India

Against the backdrop of corporate tax policy changes in India, the paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly unrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000–15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. However, the results vary with different proxies of capital used in the models. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.

Reflexões sobre as incidências tributárias no Brasil e suas relações com o desenvolvimento socioeconômico nacional

This essay, based on theories of public finances and the optimal taxation model, sought to reflect on the national tax landscape. Its great motivation was due to the existence of very few studies that deal systematically with the analysis of the various forms of tax incidence and the need for greater attention by the government and society in relation to the National Tax System (STN). The analysis of the current legislation with comparative effect in several published works on the subject was promoted. The placements resulting from the effort of this trial demonstrate that the STN cannot appropriate any of the ideals of the optimal taxation, neutrality, simplicity, progressivity, and fairness model. Finally, some suggestions of the literature for a tax reform in Brazil were discussed and the choice of a system with a high tax burden was highlighted, in the face of the search for a welfare state.Keywords: National Tax System, fiscal policies, tax incidence, regressiveness, socioeconomic development.

Multi‐Factor Effective Corporate Taxation, Firms’ Mark‐Ups and Tax Incidence: Evidence from OECD Countries

AbstractThis paper provides novel evidence on the multi‐factor effective marginal tax rates (EMTRs) for a sample of 17 OECD countries and 11 manufacturing sectors. We use a single framework encompassing capital, labour and energy taxes. Our cross‐country/cross‐sector approach allows us to analyse the contributions of these input factors to the effective tax borne by firms, taking explicitly into account their degree of substitution, their tax incidence and the role of mark‐ups. We find that the labour tax plays a particularly important role in the overall level of the EMTR and that the presence of mark‐ups can significantly alter the levels of the multi‐factor EMTR, although without significantly altering the ranking of countries. We also find that the bulk of the variation in EMTRs is across countries, rather than across sectors (within countries).

Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act

This article examines how the excise tax affects firms’ R&D investment, performance, and market strategy in the US medical device industry. The Affordable Care Act imposed a 2.3% excise tax on medical devices beginning in January 2013, and thus this study compares the medical device firms with other high-tech firms before and after the tax incidence. Using COMPUSTAT data from 2006 to 2015, the author finds that the excise tax reduced R&D investment, sales revenue, gross margins, and earnings for medical device firms. In addition, the excise tax increased their global market sales intensity, global market diversification, and customer diversification in the US domestic market.

Are Canadian Provincial Tax Systems Becoming More Regressive? If So, in What Respects and Why?

There is an extensive literature on the evolution of tax progressivity and the forces shaping it in Organisation for Economic Co-operation and Development nations, but not in Canada. This article addresses these topics for the provinces since 1980. Provincial taxes have become more regressive, but unevenly across tax types and over time. Moreover, among the many commonly cited influences on tax incidence, only interprovincial trade has a strong and broad negative association with tax progressivity. Domestic trade's impact also varies considerably over time and often is the inverse of that discussed in the literature, with receding trade levels associated with rising progressivity. Many domestic influences on incidence are stronger than most transboundary ones.

The Road Cess, Civilizing Missions and the World of the Landholders in Nineteenth-century Bengal

This article follows the debate on the implementation of the road cess in late nineteenth-century Bengal. To understand how ‘cess’ was defined, it enters the discussion on the problematic category of the ‘local’. The debate in the official circles mainly addressed two questions: whether ‘cess’ was a legal tax or not, and whether cess should be a local tax or a centralized one. The thematic division of the article coincides with the chronology of the road cess in India. The Bengal District Road Cess Act was passed in 1871. The debate on the appropriate incidence of the tax—whether its burden was to be borne by travellers on these roads, or by landholders for the construction of the roads—had intensified by the 1850s. Decades earlier, in the 1810s, the revenue officers of Bengal set out to inquire into the probable existence of a road tax in Shahabad district of Bihar. This article will trace the protracted stages of the history of the road cess in India from the 1780s to 1900, traversing through the theoretical debates on the Permanent Settlement and the practical experiences of cess collection in various districts.

Real Firms in Tax Systems

Economic analysis of taxation often assumes a homogeneous, usually perfectly competitive production sector in which individual firms are immaterial. This paper discusses some recent developments bringing key characteristics of real firms into the analysis of tax systems, which include enforcement rules and remittance regimes alongside tax rates and bases. Introducing more realistic firms into the analysis of tax systems has enabled progress in understanding the role of information in tax administration, the tradeoff between production efficiency and minimizing the administrative costs of tax collection, the consequences of remittance responsibility, and the fundamental role of firm heterogeneity in tax incidence.

Corporate Tax Incidence in India

The paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly uncorrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000-15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.

Implementation of Article 20 of the World Health Organization Framework Convention on Tobacco Control.

Background & objectives:Article 20 of the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) deals with surveillance and research on all tobacco products including smokeless tobacco (SLT). Here we describe the availability of indicators related to SLT among 180 Parties to the convention (countries ratifying the WHO FCTC are referred as Parties to the Convention).Methods:Data on SLT use among adults and adolescents and SLT-related economic and health indicators among Parties were obtained through rigorous literature search. Data analysis for high-burden parties was done using SPSS.Results:Nearly 92 per cent (166) of the Parties reported SLT use prevalence among adults or adolescents at national or subnational level, of these nearly one-fifth of the Parties (20.5%) were high-burden Parties. Comparable SLT tax incidence rate was available for 19.4 per cent (n=35) Parties, and SLT attributable morbidity and mortality risks of major diseases were available for only five per cent (n=10) of Parties.Interpretation & conclusions:SLT use is a global epidemic widespread among Parties to the Convention. There are a data gap and dearth of research on SLT-related issues. Parties need to monitor SLT use and related health and economic indicators regularly at periodic intervals.

Value Added Tax and Vat Flat Rate Scheme in Ghana, Any Cascading Implications

Ghana in 2017 introduced a new VAT flat rate scheme (VFRS) of 3% for retailers as against the existing normal rate of 17.5%. Debate, similar to that VAT, as to the tax incidence and the cascading effect on businesses in the distribution chain ensued. The Revenue Authority and retail businesses are content that VFRS will mitigate the tax burden of consumers and simplify its calculation. Other business houses posit that the tax is upon tax with cascading effect on prices. Literature comparing charges of VAT and VFRS on a product in distribution is limited. Literature is reviewed with models testing any cascading effect of VFRS on consumers and the effect on tax revenue. The paper concludes that the incidence of VAT is on the consumer with no cascading effect. VFRS is charged onto the final consumer of the product. VFRS can mitigate the tax burden on consumers? dependant on the market orientation, type of industry and business environment. Government can use VFRS to stabilize the economic environment in the event of market failure for tax optimality. The paper will enhance policy on optimizing tax revenue with different tax rates at different production sectors of the economy.

PROGRESSIVIDADE DO IMPOSTO DE RENDA DA PESSOA FÍSICA NO BRASIL: REALIDADE OU MITO?

O corrente artigo tem por objetivo demonstrar o baixo grau de concretização dos princípios da isonomia tributária e da capacidade econômica do imposto de renda da pessoa física (IRPF) no Brasil sob a ótica da progressividade. Utilizando metodologia de pesquisa qualitativa e método indutivo, parte-se do estudo do significado e da efetividade da progressividade do IRPF, associando-a aos princípios da isonomia e da capacidade econômica. Conclui-se que há reduzido grau de progressividade na incidência do IRPF, em razão de tratamento favorecido e não progressivo dispensado aos rendimentos de capital em detrimento dos rendimentos do trabalho. Dados históricos demonstram ainda a mitigação deste atributo em razão da redução da quantidade de faixas e da diferença entre os limites máximo e mínimo das alíquotas.

Sufficient Decisions in Multi‐Sided and Multiproduct Markets

AbstractWe show that in many models where firms make multiple decisions, analysis can be made more tractable by re‐formulating the model into one in which each firm makes a single choice, which we call a sufficient decision. The transformation allows application of standard techniques in these settings, including pass‐through for tax incidence and upward pricing pressure for merger analysis. The transformation works because the assumption of profit maximization links the firms’ decisions together. Examples include models of monopoly and oligopoly in two‐sided markets, where a natural sufficient decision may be the number of transactions that the firm facilitates, and multiproduct markets.

Unemployment, rural–urban migration and environmental regulation

AbstractThis paper develops a general equilibrium model that incorporates specific features pertaining to developing countries: a large informal sector and rural–urban migration. A calibrated version of the model is used to study the effects of energy tax changes and a reduction in agricultural‐sector energy subsidies on labor market outcomes. The results indicate that the incidence of energy taxes is partly shifted on to the rural sector through rural–urban migration. The results thus highlight the importance of modeling the features particular to developing countries and the economic general equilibrium effects when assessing the impact of environmental taxation in those countries.

Tax Avoidance and Tax Incidence

Economists broadly agree that the economic burden of corporate taxes is not entirely borne by shareholders, but also borne in part by employees or consumers. We model corporate tax avoidance in a setting where shareholders do not bear the entire economic burden of the corporate tax. We show the relation between corporate tax incidence and corporate tax avoidance depends on the elasticity of labor supply, the productivity of capital relative to labor, and the tax deductibility of labor and capital. These forces have competing effects, making the association between tax avoidance and incidence an empirical question. Empirically, we find that firms whose shareholders bear less of the economic burden of corporate taxes engage in less avoidance, and that the results are strongest under conditions predicted by our model. Our findings suggest that maximizing after-tax profits might entail less tax avoidance if shareholders do not entirely bear the corporate tax burden.

Incidence of Russian log export tax: A vertical log-lumber model

In 2007, Russia imposed an ad valorem tax on its log exports that lasted until 2012. In this paper, we use a Muth-type equilibrium displacement model to investigate the market and welfare impacts of this tax, utilizing a vertical linkage between log and lumber markets and considering factor substitution. Our theoretical analysis indicates that, without considering the vertical linkage, the negative effects of log export tax on equilibrium price for log producers is underestimated when logs and processing services are gross substitutes, and the direction of bias is uncertain when they are gross complements. Empirical simulations show that the burden of Russian log export tax is shared almost equally between foreign log buyers and domestic log producers and that the tax increases domestic lumber production. Further, the marginal effect of the log export tax on domestic lumber production decreases as Russian domestic demand share of logs increases. Overall, the welfare gains for Russian lumber consumers, lumber producers in the form of quasi-rents to processing services, and tax revenue exceed the loss in its logging sector.

Capital mobility in OECD countries: A multi-level factor approach to saving–investment correlations

While a high saving–investment correlation is one of the most robust empirical regularities in international economics, there has been debate about whether it can be interpreted as evidence of barriers to international capital flows. A high saving–investment association may be observed even in perfectly integrated international financial markets if saving and investment are shifted in the same direction due to a common third factor. Instead of focusing on specific common sources, we estimate factors that are (i) common across all countries and (ii) common within each country, using a multi-level factor model proposed by Choi et al. (2017). By controlling for multi-level factors in the saving–investment regression, we effectively isolate the impact of exogenously increased saving on investment regardless of the nature of common sources. We show that the global and country-specific factors together account for almost 50% of the saving–investment correlation in a panel of 19 OECD countries for 1961–2005, and capital mobility has increased over time particularly in Europe. Our analysis provides a measure of capital mobility which helps assess the effectiveness of policies or incidence of taxes in an open economy.

Tax incidence on competing two‐sided platforms

AbstractWe analyze the effects of various taxes on competing two‐sided platforms. First, we consider nondiscriminating taxes. We show that specific taxes are entirely passed to the agents on the side on which they are levied; other agents and platforms are left unaffected. Transaction taxes hurt agents on both sides and benefit platforms. Ad valorem taxes are the only tax instrument that allows the tax authority to capture part of the platforms' profits. Second, regarding asymmetric taxes, we show that agents on the untaxed side benefit from the tax. At least one platform, possibly the taxed one, benefits from the tax.

PSY24 - Cost-Effectiveness Analysis of Pirfenidone Versus Nintedanib on The Treatment of Idiopathic Pulmonary Fibrosis

To perform a cost-effectiveness analysis of pirfenidone (PFN) versus nintedanib (NDB) on the treatment of idiopathic pulmonary fibrosis (IPF) under the Brazilian private healthcare system perspective. Model results were expressed in a lifetime time horizon. Outcomes were quality-adjusted life years (QALY), progression free survival (PFS) and life years (LY) gained. Treatment's ex-factory prices were obtained from official published lists, by the Brazilian Ministry of Health, considering the incidence of taxes (ICMS 18%). Costs related to disease management, lung transplantation and end-of-life were calculated thru microcosting (resource use was set after a review of the published literature and costs were attributed from official sources). Efficacy data (time to treatment discontinuation, overall and progression free survival) for PFN were extracted from pooled CAPACITY 1 + 2 and ASCEND trials and projected to a lifetime time horizon thru a parametric distribution (Weibull). NDB's data were, then, extrapolated from PFN thru an indirect treatment comparison (ITC), whose calculated treatment effects were used to estimate NDB efficacy outcomes. A probabilistic sensitivity analysis (PSA) was performed to validate model results. PFN and NDB unitary costs were BRL 9,144 (BRL 33.87 per 267 mg tablet) and BRL 14,916 (BRL 248.60 per 150 mg tablet), respectively, according to their list prices. PFN and NDB showed a total cost of BRL 311,158 and BRL 508,203 (PFN-NDB = -BRL 197,045), respectively, on a lifetime time horizon. PFN outperformed NDB on all outcomes, showing incremental results of 0.47 QALY, 0.81 LY and 0.40 PFS gained when compared to NDB. Overall, PFN was dominant on all outcomes when compared to NDB. The majority of the simulations (77%) on the PSA were located on the 4th quadrant corroborating base case results. PFN is dominant and can potentially reduce treatment costs associated with the treatment of IPF when compared to NDB.