Revenue Redistribution Research Articles

Who Benefits from Zero-Ratings? A Brief Note on the South African VAT System

Twenty years after overcoming Apartheid, South Africa still suffers from poverty and inequality. Recent data (Income and Expenditure Survey 2011) indicates that one third of the population lives on less than USD 0.70 per day while the upper tercile has USD 28 available. The country also faces other complex challenges, including high levels of unemployment, a resource-biased economy and low levels of education, and structural reforms are much needed to put the economy on a path of sustained growth. However, structural reforms require a broad consent within society, and inequality, clearly, is a major hindrance to this. By choosing how to collect revenue and how to spend it, South Africa's government has two instruments at their disposal in order to alleviate inequality and facilitate reform. Like most modern economies, South Africa is increasingly relying on indirect taxation. The combined revenue generated by VAT, excise taxes, and the fuel and gas levy, make up 35% of total revenue. In the light of growing income inequality, this development is remarkable as wealthy individuals tend to spend a smaller proportion of their income on consumption. Indirect taxation thus potentially places a relatively higher burden on the poor. To counteract an aggravation of income inequality, a range of commodities, held to be important for the poor, are currently zero-rated under South Africa's VAT system. And some studies find that this policy measure is partly effective in reducing the regressive effect (Fourie and Owen, 1993; Jansen et al., 2012). However, while studies on the regressive effect of VAT are potentially valuable, they are certainly non-conclusive in appraising the welfare consequences of zero-ratings. Increasing the rates on such commodities would not only entail an increased burden on the poor, but also an increase in governmental revenues. Depending on the redistribution of such additional revenues, the poor could either benefit or not from this reform and the conclusion would be fairly independent from the overall regressiveness of the system. In this paper, we re-evaluate the effectiveness of zero-rating as a measure to alleviate poverty in South Africa and extend earlier work by incorporating both sides of fiscal action in our analysis. We clarify the interlink between welfare effects and consumption taxation by retracing a simple model developed by Keen (2013), in Section 2, which we then apply to the South African case. In doing so, we employ data from the most recent Income and Expenditure survey to derive distributions of household spending and governmental spending in Section 3. We conclude in Section 4. (authors' abstract)

Managing redistribution of toll revenue with user heterogeneity

With the explicit consideration of user heterogeneity, i.e., each user has a different value of time (VOT), this paper examines the system efficiency and social equity of toll revenue redistribution in a bi-mode transportation system. Three schemes of distributing the road toll revenue are proposed, which respectively consider efficiency, equity, as well as efficiency and equity together. With mild assumptions, we prove that the number of auto-motorists decreases and the total social cost increases with transit subsidy share when only marginal operating cost of the transit is covered by its fare. However, when average fixed cost of the transit is further covered, the total social cost is a “U” shape curve against the transit subsidy share. Numerical results show that the well designed toll revenue redistribution schemes can make the system more equitable while keeping high efficiency. With the increase of user heterogeneity, the Gini coefficient becomes larger while the total social cost goes down.

Local Sales Tax Revenue Redistribution and Sports: The Case of Major League Soccer in Bridgeview

This study examines the extent to which Toyota Park, a Major League Soccer (MLS) stadium in the Village of Bridgeview, redistributes municipal sales tax revenue by taking advantage of Illinois's highly devolved local government structure. The analysis reveals that Toyota Park and its associated events are not statistically related to the village's sales tax revenue. However, the stadium affects surrounding municipalities' revenue; though, the odds a municipality will be a net winner or loser is nearly even.

A Welfare Ranking of Multilateral Reductions in Real and Tariff Trade Barriers when Firms are Heterogenous

AbstractTrade liberalization comes about through reductions in various types of trade barriers. This paper introduces, apart from the customary real trade costs (i.e. iceberg and fixed export costs), two revenue generating trade barriers (i.e. an ad valorem tariff and a trade license) into a standard heterogeneous‐firms‐trade model with Pareto distributed productivities. We derive analytical welfare rankings of all four liberalization channels for an equal effect on two openness measures, for any trade cost level and while all four barriers are simultaneously present, i.e. for any initial equilibrium. We show that when openness is measured at retail prices, not border prices, the welfare rankings are sensitive to the degree of efficiency in revenue redistribution, e.g. the share of tariff revenues wasted on rent‐seeking activities. As a result, multilateral tariff reductions can switch from the least to the most preferred mode of liberalization. Among the other three barriers we establish a universal welfare ranking for any strictly positive level of revenue redistribution and for either measure of openness.

Comprehensive Pricing Model of Urban Traffic Air Pollution Based on Bi-Level Programming

In order to reduce the negative impact of urban traffic air pollution, this paper firstly analyzes the relationship between urban traffic air pollution and vehicle speed, after providing the relationship model, the paper establishes a comprehensive pricing model of urban traffic air pollution based on bi-level programming, the model considers the traffic air pollution pricing, and includes the factors of congestion pricing, bus fee, pricing revenue redistribution on improvement of public transport services and the expansion of road capacity. The case study shows that the implementation of comprehensive pricing of urban traffic air pollution can reduce traffic pollution and unreasonable traffic flow, which is conducive to the sustainable development of the city.

Traffic Behaviors Simulation under Congestion Pricing Revenue Redistribution Strategy

On the basis of behavioral model under congestion pricing revenue redistribution, this paper proposes the general idea, process of the simulation and designs the essential simulation module of congestion pricing revenue redistribution based on the Multi-Agent technology and Starlogo. Traffic behaviors are simulated under the situation that congestion pricing revenue is used to raise the level of bus service and extend the road capacity. Also the simulation is compared with other two situations with and without congestion pricing. The results demonstrate that this method overcomes the localization of the traditional micro traffic flow simulation model, and the traffic flow of congesting section can be effectively reduced and distributed more optimal.

Is it in China's interest to implement an export carbon tax?

Considering the dual context of China's domestic willingness to have a cleaner export structure and the widespread concern among developed countries that carbon leakage from developing countries, particularly China, could threaten their own climate policy effectiveness; this paper uses the SICGE model to investigate the economic rationale of taxing direct CO2 emissions of export in China. With an export carbon tax set at 200 yuan/t CO2, three policy scenarios were studied, where the tax revenue is: undistributed; redistributed neutrally to stimulate investment; and redistributed neutrally to stimulate consumption. According to the model, the economic and climate effects of the different policy scenarios are not particularly distinguishable. The economic impacts are slightly negative while the effect on the export structure is significant: the export of major energy-intensive products decreased and the export of certain sectors (labour-intensive or with higher value-added) increased, resulting in a cut of 3.77% in total direct CO2 emissions from exports. The revenue redistribution to stimulate consumption is shown to be the optimal scenario choice, which was confirmed by further sensitivity tests. By reviewing related WTO laws, this paper concludes that a clearly designed export carbon tax with a comparable carbon price is in China's own interest, while lessening the carbon leakage concerns of developed countries.

Marginal-Cost Vehicle Mileage Fee

The vehicle mileage fee is a strong candidate to mitigate the funding gap in surface transportation caused by the declining purchasing power of fuel tax revenue, the emergence of hybrid and electric vehicles, and more restrictive corporate average fuel economy standards. This study computes the vehicle mileage fee on the basis of the marginal cost of travel and internalizes various externalities such as congestion, infrastructure deterioration, pollution emissions, and greenhouse gas emissions. Multiple regression models and discrete choice models are developed on the basis of the 2009 National Household Travel Survey data to analyze the impacts of the proposed marginal-cost vehicle mileage fee on vehicle ownership, fuel efficiency, vehicle miles traveled, energy consumption, emissions, and equity. In addition, the sensitivity of these impacts to exogenous fuel price volatility is estimated quantitatively. Results show that with consideration of all aforementioned externalities, the marginal-cost vehicle mileage fee by vehicle make and model would range from 7.7 to 9.1 cents/mi, which is much higher than the per mile equivalent of the current fuel taxes (about 1.2 cents/mi). Household vehicle use behavior is much more sensitive to the marginal-cost vehicle mileage fee than vehicle ownership decisions, with a significant (27.1%) reduction in vehicle miles traveled, but a minor increase in vehicle fuel efficiency (up to 4.2%). Nevertheless, the marginal-cost vehicle mileage fee can reduce energy consumption and pollution or greenhouse gas emissions by about a fourth. These sustainability benefits are even more significant if fuel prices continue to increase. Without consideration of the benefits from revenue redistribution, lower-income households, as expected, would be hurt more than higher-income households (1.3%).

THE DIVERSITY IN THE DECISION FACILITATES COOPERATION IN THE SEQUENTIAL PRISONER'S DILEMMA GAME

The condition of cooperation in social conflicts of interest has been an interesting topic. On the one hand people usually desire to make their own profit. On the other hand, they mutually cooperate. This fact has motivated many researchers. Some solutions for this question have been proposed, and particular studies indicate that the diversity in decision-making or relationships promotes cooperation. In this research, we achieve the diversity by utilizing the novel method that refers to the mechanism of correction regarding each probability that every strategy comes to the representative by decision-making of group. This mechanism works when difference between the probability of the first and others becomes quite large. If once every group adopts this corrected decision, he/she achieves mutual cooperation of high level in the sequential prisoner's dilemma game in case the number of strategies (= players) is within the definite range. We also note that this game can effectively describe the property of evolution of strategy only with a small number of players. When each group has many players, in contrast to previous research, the decision with correction also has an effect on the suppression of prevalence of defection. In addition, we also show that the decision of this model is analogous to the system of redistribution of revenue, which provides balance of strength between several teams in professional sports.

Bottleneck congestion pricing and modal split: Redistribution of toll revenue

The paper examines the question of the redistribution of toll revenue as seen in a bottleneck congestion model. Our objective is to analyse the impact of this redistribution on total cost and on modal split between railroad and road. Following Tabuchi’s two-mode model (Tabuchi, T., 1993. Bottleneck congestion and modal split. Journal of Urban Economics 34, 414–431.), we integrate a redistribution of toll revenue towards public transport into our study. In this context, we investigate two kinds of road toll regimes: a fine toll and a uniform toll. We will consider two types of railroad fare: when it is set equal to the marginal cost and when it is set equal to average cost. These models allow us to show that toll policy to be more efficient as long as toll revenue is directed towards public transport when the railroad fare is equal to average cost.

GROWTH EFFECTS OF CONSUMPTION AND LABOR-INCOME TAXATION IN AN OVERLAPPING-GENERATIONS LIFE-CYCLE MODEL

We study labor-income and consumption taxation in an overlapping-generations model featuring endogenous growth due to interfirm investment externalities. Consumption, saving, and labor supply display life-cycle features because mortality and labor productivity are age-dependent and because annuity markets may be imperfect. The government's method of revenue recycling critically affects the growth consequences of taxation. Purely consumptive government spending has a negative impact on growth. Redistribution of tax revenue from dissavers to savers may lead to an increase in growth due to beneficial intergenerational transfer effects.

Development and Inspiration of Road Congestion Pricing Revenue Redistribution Theory Research

Road congestion pricing revenue redistribution is the key problem and frontier research of road congestion pricing development. This paper reviews the history and latest achievements of the social welfare theory, public support theory, and revenue redistribution strategy theory which are related to road congestion pricing revenue redistribution. Then, suggestions of the implementation in urban road communication are proposed. The theory research and practice of road congestion pricing revenue redistribution indicate that policy suggestions and corresponding methods of implementation of this strategy should be presented aiming at resolving the unfair problem of welfare redistribution and enlisting support of public based on the consideration of traffic efficiency firstly. This strategy is proved to be effective in enhancing the feasibility and validity of road congestion pricing strategy, and moreover in improving the road congestion and increasing the transportation efficiency.

Road pricing and agglomeration economies: a new methodology to estimate indirect effects applied to the Netherlands

A congestion charging scheme may be a good alternative for infrastructure investment to improve the allocation of road usage over different user groups, thereby enhancing economic welfare. However, a congestion charge also increases the costs of traveling, thereby possibly inducing agglomeration effects (Arnott in Congestion tolling with agglomeration externalities, paper presented at Conference in Honor of Kenneth A. Small, University of California, Irvine, 2007). Agglomeration effects in relation to infrastructure investment can be substantial (Venables in J Transp Econ policy, 2007) and they can be estimated using a spatial computable general equilibrium model (Brocker in Ann Reg Sci 32, 367–387, 1998). Agglomeration effects of congestion charging are, however, difficult to assess using this approach because the government revenue from the congestion charge should be redistributed to the population. This redistribution of government revenue may be either agglomeration- or dispersion-augmenting and thereby change the agglomeration effects significantly. In this paper, we propose a methodology based on a spatial computable general equilibrium model to estimate the agglomeration effects of congestion charging with an agglomeration-neutral redistribution effect. In this manner, we do take the redistribution effect into account without letting it interfere with the effect of the congestion charge. This is important because we only want to evaluate the congestion charge, independent of the chosen redistribution scheme. In our application of the proposed methodology for the Netherlands, agglomeration benefits are found to be substantial and have, in general, the opposite sign as the relative cost change.

Ambiente, pessoas e labor: APLs além do desenvolvimento econômico na mineração de opalas em Pedro II, no Piauí

Este artigo propõe que políticas públicas voltadas para arranjos produtivos lo0cais (APLs) têm um importante potencial para melhorar o desempenho dos pequenos garimpos e minas de gemas no Brasil, desde que integrem questões ambientais e sociais às ações voltadas ao desenvolvimento econômico. Esse argumento é baseado no estudo empírico dos problemas socioambientais enfrentados pelo APL de opalas em Pedro II, no Piauí. O estudo foi desenvolvido através da metodologia de estudos de caso, envolvendo extensa revisão bibliográfica, pesquisa em documentos do APL e entrevistas com vários integrantes do arranjo. Entre os resultados da pesquisa, foram identificadas algumas questões que vêm inibindo o pleno desenvolvimento do APL, como as condições de trabalho e a mitigação dos impactos ambientais, cujas melhorias dependem de recursos humanos e financeiros, bem como de vontade política. Entretanto, um segundo grupo de questões suscita um debate mais amplo, que envolve outros APLs de base mineral, como o equilíbrio de forças entre os diferentes elos da cadeia produtiva, a criação de alternativas econômicas no caso da exaustão das jazidas existentes, a tributação das atividades minerais e o redesenho dos procedimentos de licenciamento de atividades minerais, para que estas se dêem de maneira mais sustentável.

Growth Effects of Consumption and Labour Income Taxation in an Overlapping-Generations Life-Cycle Model

We study labour-income and consumption taxation in an overlapping-generations model featuring endogenous growth due to inter-firm investment externalities. Consumption, saving, and labour supply display life-cycle features because mortality and labour productivity are age dependent and because annuity markets may be imperfect. The government’s method of revenue recycling critically affects the growth consequences of taxation. Purely consumptive government spending has a negative impact on growth. Redistribution of tax revenue from dissavers to savers may lead to an increase in growth due to beneficial intergenerational transfer effects.

Commodity Tax Competition and Industry Location Under the Destination- and the Origin-Principle

We develop a model of commodity tax competition with monopolistically competitive internationally mobile firms, transport costs, and asymmetric country sizes. We investigate the impacts of non-cooperative tax setting, as well as of tax harmonization and changes in the tax principle, in both the short and the long run. The origin principle, when compared to the destination principle, is shown to exacerbate tax competition and to erode tax revenues, yet leads to a more equal spatial distribution of economic activity. This suggests that federations which care about spatial inequality, like the European Union, face a non-trivial choice for their tax principle that goes beyond the standard considerations of tax revenue redistribution.

Options of Intergovernmental Fiscal Relations Reform in the Ukraine

Reform of the system of public finance is a key problem in the transformation processes of the Ukraine’s economy. Development of efficient methods of financial policy is especially important in the context of strategic challenges of economic growth, the competitiveness of the national economy, and convergence of the level of socio-economic development between different regions of the country. Most elements of the modern system of the Ukraine’s public finance were formed as far back as during the Soviet era, under the conditions of command and administrative economy, when neither the state budget, nor the local ones played any active role, but were a mere monetary reflection of the plans of socio-economic development. On the other hand, in market economies, public finance plays an important role in the provision of economic growth and efficient use of national economic resources, as well as in the solution of the problems related to social equity.During recent years, the attempt to reform intergovernmental fiscal relations in the Ukraine have failed either to create a well-balanced system for the distribution of powers between central state authorities and local government, or to elaborate adequate and transparent mechanisms for the formation of local budgets. The reason is that most problems of the local budgets are mostly treated by policy makers and local authorities in the context of the need to provide local budgets with “sufficient” financial resources.We emphasize that creation of an efficient budget system is not limited to a mere re-distribution of revenues between central and local budgets. Investigation of theoretic and methodological foundations of the development of the components of the system of public finance and intergovernmental fiscal relations in the Ukraine let us conclude that such development should be based on the use of economic principles and criteria as to the distribution of powers between the central authorities and local government. Furthermore, a consistent fiscal policy is needed, which would promote not only the convergence between the local budgets’ expenditures, but also, and first of all, the regions’ socio-economic development.

The welfare comparison of corrective ad valorem and unit taxes under monopolistic competition

The ad valorem versus unit tax debate has traditionally emphasized tax yield. On this criterion, ad valorem taxes outperform unit taxes in terms of welfare for a wide range of imperfect competition settings including Dixit–Stiglitz monopolistic competition. However, in a number of policy fields such as environmental, health, and trade economics, policy makers use taxes to reduce the production/consumption volume in an industry, i.e., to correct an externality rather than to improve tax yield. This paper compares the two tax instruments with respect to equal corrective effect in a Dixit–Stiglitz setting with love of variety, entry, exit, and redistribution of tax revenues. We find that unit taxes lead to more firms in the industry, less output per firm, less tax revenue, but higher welfare compared to ad valorem taxes.

International profit shifting within multinationals: A multi-country perspective

We model the opportunities and incentives generated by international tax differences for international profit shifting by multinationals. The model considers not only profit shifting arising from international tax differences between affiliates and parent companies, but also from tax differences between affiliates in different host countries. Our model yields the prediction that a multinational's profit shifting in a country depends on a weighted average of international tax rate differences between all countries where the multinational is active. Using a unique dataset containing detailed firm-level information on the parent companies and subsidiaries of European multinationals and information about the international tax system, we test our model and empirically examine the extent of intra-European profit shifting by European multinationals. On average, we find a semi-elasticity of reported profits with respect to the top statutory tax rate of 1.3, while shifting costs are estimated to be 0.6% of the tax base. International profit shifting leads to a substantial redistribution of national corporate tax revenues. Many European nations appear to gain revenues from profit shifting by multinationals largely at the expense of Germany.

Antidumping Regulation and the Byrd Amendment: Does Revenue Redistribution Dissuade Dumping?

The Byrd Amendment, which redistributed antidumping duty revenue to import competing firms, has been declared an unauthorized “action against dumping”. But does revenue redistribution dissuade dumping? Or is it a strategic trade policy? This paper uses a simple two-period duopoly model to evaluate these issues. An antidumping law provides an incentive for both firms to adjust sales so as to shift the dumping margin in their favor, and revenue redistribution strengthens this incentive for the filing firm. It is found that dumping is generally more prevalent and the dumping margin is larger with revenue redistribution, as a consequence. The profits of the filing (dumping) firm are generally, but not always, higher (lower). Consumers gain in one country and lose in the other, with the gainers and losers depending on the market size difference.