Tax Incidence Research Articles

Excise tax incidence: the inequity of taxing obesity and beauty

ABSTRACT The estimation and analysis of the distribution of the negative health impacts of certain commodities subject to excise taxes in Belize and the distribution of the burdens of the excise taxes across households of different income levels are the focus of this article. Particular attention is given to the taxation of soft drinks and cosmetics. We examine the income distribution and tax revenue impacts using the commodity data from the household expenditure survey by and the effective tax rates expressed as a percentage of the value of the final consumption of each item. As in many developing countries, taxes on alcoholic beverages and tobacco products are found to be regressive. The most regressive excise taxes are on soft drinks and cosmetics. Households across the economy pay more in excise taxes on cosmetics than they do on either alcoholic beverages or tobacco products. Relative to the level of household expenditures, the burden of the excise taxes on cosmetics is highest for households in the lowest quintile of total expenditures. The impact of soft drinks in creating obesity is likely to be much greater for high income households whose total consumption per household is twice that of low-income households.

Tax Revenues in Low-Income Countries

Abstract We quantitatively investigate the welfare costs of increasing tax revenues in low-income countries. We consider three tax instruments: consumption, labour income and capital income taxes. The analysis is based on a general equilibrium model featuring heterogeneous agents, incomplete financial markets, and rural and urban areas. We calibrate the model to Ethiopia and decompose the welfare costs into their aggregate and distributional components. We find that changing taxes alter the composition of demand. This, together with limited labour mobility, causes the incidence of higher taxes to fall disproportionately on the rural population, regardless of the instrument. Consumption taxes are the instrument with the largest welfare loss.

The Mechanics of the Alcabalas: Reform, Local Bargaining, and Dwindling Taxation in New Granada, 1750–1810

AbstractThis article studies the mechanics of sales taxes in the viceroyalty of New Granada (present-day Colombia, Ecuador, Panama, and western Venezuela) during the second half of the eighteenth century. Advocating a careful examination of the accounting, institutional, and fiscal practices of North Andean customs houses, it provides an extensive discussion on how tax records can be harnessed to study the scope and nature of Bourbon reforms and to measure trade flows. The article pursues three interrelated goals. First, it studies the impact of local negotiations and jurisdictional fragmentation on local rates and revenue collection, providing new insights into the concrete mechanisms of tax bargaining. Second, the study reinterprets data on the main North Andean entrepôts of trade to measure fiscal cycles, real tax pressure, and tax incidence. Proposing a new method for examining customs records, this research shows how fiscal concessions and economic cycles led to diminishing fiscal revenues. Finally, the research places the viceroyalty within the broader context of fiscal change in the Spanish Empire, arguing that the region collected fewer revenues not only because of its comparatively smaller economic activity but also because the combination of custom and reform yielded lower taxation rates and unique fiscal structures.

Implicit Tax, Tax Incidence, and Pretax Returns

ABSTRACTWe investigate the relation between tax rates and pretax returns by showing how implicit tax, tax incidence, and tax capitalization change in response to a tax rate change. We examine these issues in the context of both financial assets and real investments made by corporations in a competitive equilibrium in which all investments earn the same after-tax rate of return. Results show that the pretax return increases in the statutory tax rate due to an explicit tax rate effect and decreases due to a cost of capital effect; the net effect is ambiguous. In contrast, the implicit tax rate is weakly increasing in the statutory tax rate. We also relate our findings to the empirical literature on the effects of taxes on pretax returns.JEL Classifications: H22; H25.

Democratic responsibility in the digital public sphere

Democratic responsibility in the digital public sphere

Additive linear modelling and genetic algorithm based electric vehicle outlook and policy formulation for decarbonizing the future transport sector of Bangladesh

The transport sector as a whole plays an important role in the economy of Bangladesh as its contribution to gross domestic product (GDP) stood at 10.98 percent in the fiscal year (FY) 2018-19 with a growth rate of 6.88 percent. However, this sector also accounted for 9.92 percent of the country's total greenhouse gas (GHG) emissions in 2020. This GHG emission is projected to grow by 116 percent by 2030, making decarbonization of transport an urgent priority by uptaking the electric vehicle (EV). Hence, the Government of Bangladesh is presently working towards issuing an EV policy to remove the barriers to accommodate this paradigm shift in the transportation sector. In order to develop an effective policy for scaling up EV uptake in Bangladesh, systematic and detailed forecasting needs to be carried out considering various influencing parameters. In this study, an EV outlook for Bangladesh from 2022 to 2040 has been formulated by applying the concepts of the additive linear programming mechanism. The predictive modelling includes linear growth of ICE vehicles, EV price reduction, and inclusion of carbon tax on ICE cars as contributing factors in this paper. It has been estimated that, with the inclusion of a 40% carbon tax, the forecasted number of EVs would reach around 3,000,000 in the year 2040. The outlook has led to a comparative financial analysis between ICE vehicles and EVs through the establishment of financial modelling. The genetic algorithm optimizes total tax incidence (TTI) that limits the payback period, and hence, reduces the price gaps between EVs and ICE vehicles. Based on the findings of the study, a number of policies are recommended on fiscal and financial incentives to pave the way for increased uptake of EVs in Bangladesh.

The Impact of Intrafirm Incentive Conflicts on the Interplay between Tax Incidence and Economic Efficiency

The Impact of Intrafirm Incentive Conflicts on the Interplay between Tax Incidence and Economic Efficiency

Micro vs. Macro Corporate Tax Incidence

Micro vs. Macro Corporate Tax Incidence

Dynamic Causal Forests, with an Application to Payroll Tax Incidence in Norway

Dynamic Causal Forests, with an Application to Payroll Tax Incidence in Norway

Payroll Tax Incidence: Evidence from Unemployment Insurance

Payroll Tax Incidence: Evidence from Unemployment Insurance

Redistributive Effects of Fiscal Policy across the Income Groups in the Urban-Rural Areas of Pakistan

There exist a large number of studies related to the estimates of government budgetary redistributive effects and its related problems with regard to different countries of the world.1 Studies of the impacts of government expenditures and taxes in Pakistan have been conducted within the framework of either incidence of taxes or the impact of expenditures across the income groups. The studies carried out by Azfar (1972); Jeetun (1978); Alauddin and Raza (1981) Malik and Saqib (1985, 1989) cover different aspects of taxation—tax incidence, progressivity or regressivity of the tax system across the income groups/individuals and regions. These studies did not discuss the expenditure side of the budget. Shirazi (1996) analysed the impact of government transfer programmes (Zakat and Ushr) across the income deciles. Ghaus (1989) studied the incidence of provincial and municipal government service-related expenditure benefits in Karachi metropolitan and therefore, the scope of her study was limited to one city only. Despite the existence of a rich bibliography on the subject of government redistrbutive budgetary effects and its related problems, no study is available which covers the overall redistributive impacts of government budgetary policy in Pakistan. This study explores the impacts of government expenditures and taxes on the distribution of income across various income groups along with net fiscal impacts in the urban-rural areas of Pakistan. The rest of our study is organised as follows. In the following section, Part II, we describe the methodology and data set. In Part III, the results of the study are presented. The Part IV concludes the paper.

The Household Integrated Economic Survey of Pakistan 1990-91:Internal and External Consistency

After the appearance of Morgenstern's The Accuracy of Economic Observations (1950), data quality should be a matter of abiding concern among economists. The present paper highlights the theme by subjecting the Household Integrated Economic Survey (HIES) 1990'91 to a consumer test. From among all remarkable results, a 10 percent "shortfall" of the reported share of workers in agriculture as compared to the Labour Force Survey stands out. Reservations are also made with regard to employment status of workers, income dynamics for employees and self-employed, foreign and domestic reinittances, i(lter-household transfers, improverishment, the marginal propensity to consume, per capita income, and direct tax incidence. If these issues at stake are not inexplicable, at least some elucidation is obviously required. Recommendations for improving HIES data quality emphasise checking on internal and external consistency, and the elucidation of seemingly remarkable results.

Do Commercial Banks in Poland Pass the Bank Tax On to Their Customers?

Theoretical background: Bank tax was introduced in Poland in February 2016. As a consequence, several banks with assets surpassing certain value need to cope with the additional burden. Purpose of the article: The aim of the research is to verify whether Polish banks that nominally are subject to the bank tax indeed shifted onto their clients most of the cost connected with this new levy and, thus, now these are the clients who effectively bear the burden of bank tax. Research methods: The analysis is based on monthly data for the years 2010–2021, for which a multilayer comparison of performance of banks subject to the bank tax was made from various perspectives: (1) before and after the introduction of bank tax and (2) with remaining banks not subject to a bank tax – which serve as a control sample. The analysis took into account the composition of Polish bank sector, while focusing on the development of: (1) revenues, costs and income from commissions and charges, (2) revenues and income from interest, (3) level of commissions and charges as well as interest imposed on different bank products, (4) banks profitability, (5) their balance sheet total and (6) ROA. Main findings: The analysis does not confirm increases in revenues of commercial banks and foreign branches following the introduction of the bank levy, whereas the profitability and ROA of these banks worsened significantly. At the same time, the performance of banks not affected by the levy did not deteriorate, which allows to conclude that banks did not manage to shift the cost of bank tax onto their customers. Conclusions are important primarily from the perspective of fiscal policy (they answer the question on effective tax incidence) and supervisory policy (to what extent the introduction of the tax erodes the performance of the banking sector, inhibiting the accumulation of capital determining the level of financial stability).

Progressividade e impactos distributivos do imposto de renda de pessoa física: o caso da China e do Brasil

ABSTRACT This paper aims to evaluate and compare the distributive impact of the personal income tax (PIT) on individual’s income in Brazil and China by measuring the Gini Index before and after this tax incidence. The paper also proposes a methodology for transposing the PIT backets from one country to another. The results show that a more progressive scheme implemented by China, with more brackets and higher rates, does not guarantee reduction of inequality, due to the level of income exemption and to the incomes on which the marginal rates affect. Thus, it can be perceived that the PIT brackets of these two countries deserves revisions if they seek to fulfill the distributive function.

Incidence of taxes as a determining factor on the combined adoption feasibility of photovoltaic microgeneration and the electricity economy tariff in the southeastern Brazil

This article aimed to analyze the factors that guarantee the feasibility adoption of the Electricity Economy Tariff simultaneously using photovoltaic microgeneration in the low voltage group in southeastern Brazil. With the aid of the computational tool HOMER® Energy, it was evaluated in which scenarios the electricity economy tariff combined with photovoltaic microgeneration becomes more attractive to the consumer through the analysis of discounted payback, present value of costs, estimated costs of operation and energy. To have these results, simulations of the ANEEL Conventional and Economy tariffs, without taxes, were compared. Then, the modulation capacity of a residential unit and the increase of the load factor were considered, in the search for an ideal residential load curve, which would guarantee the feasibility. Finally, ICMS and PIS/COFINS were added to the rates approved by ANEEL. The results allowed to conclude that there is a capacity for exploration and immediate growth of photovoltaic microgeneration in the southeastern region of Brazil concerning low voltage consumers immediately. It was also concluded that the tax burden has a greater influence on the economic feasibility of the adoption of Solar Photovoltaic Panels, allied with the distributed generation and that a possible change in consumer habits. The city of Niterói demonstrated to have greater feasibility among those analyzed.

The effect of carbon tax incidence on household energy demand and welfare in the U.S.

This study develops a model based on a general equilibrium framework to assess the excess burden of carbon taxes imposed on energy commodities (electricity and natural gas) among residential sector. The model takes into account labor market distortions from the tax and cross-price effects among energy commodities. Using data from the U.S. Residential Energy Consumption Survey, the own-price and cross-price elasticities of energy commodities are estimated. A substitution effect is found between electricity and natural gas, and omitting this effect would overestimate the excess burden of the carbon tax. The results show that the carbon tax behaves differently in affecting the excess burden for low-, middle-, and high-income households. The excess burden is lower for high-income households than for low-income households at lower pre-determined labor tax rates, but the effect is reversed at higher pre-determined labor tax rates. In addition, the empirical results show that the excess burden is different across the nine U.S. regions, while minor gas price changes have no significant effect on the excess burden.

Tax Incidence and Tax Avoidance*

ABSTRACTEconomists broadly agree that the economic burden of corporate taxes is not entirely borne by shareholders but also borne in part by employees and consumers. We examine corporate tax avoidance in a setting where shareholders do not bear the entire economic burden of the corporate tax. We show that 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 operate through two channels (firm scale and input mix), making the actual association between tax avoidance and incidence an empirical question. We find that firms whose shareholders bear less of the economic burden of corporate taxes engage in less avoidance. Our findings suggest that maximizing after‐tax profits might entail less tax avoidance if shareholders do not entirely bear the corporate tax burden. In particular, when the incidence of the corporate tax falls on the firm, firms avoid more taxes. This tendency is stronger if firms use a higher level of capital input, if the deductibility of the cost of capital investment is limited, if firms have high capital productivity, or if tax enforcement is strong.

Gender norms, landholdership, and rural land use fee and agricultural income tax in Ethiopia

Area-based land taxes – a form of property tax – exist where rural land markets do not exist or do not function well. Understanding how these taxes affect different groups of landholders, including by men and women, is important since a tax based on the land size is likely to have an outsized effect on smaller landholders. However, survey data allowing for an individual- and household-disaggregated analysis has been scarce. Using newly available data on tax payments and self-reported individual land ownership from the Ethiopian Socioeconomic Survey 2018/2019, this paper assessed the gender implications of an area-based rural land use fee and agricultural income tax in Ethiopia. We found that female adult-only households were more likely than dual adult households to be smallholders with less than 0.5 hectare of land, and these smallholders faced the largest per-hectare tax rates. Female-headed- and female adult-only households faced a tax incidence that was 37 % higher than it was for male-headed and dual-adult households. The gender land ownership patterns, norms limiting women’s role in agriculture, household structures, and gender agricultural productivity gaps are likely to result in lower consumption, and consequently, a higher tax burden for women. Finally, we simulated the effect of a hypothetical tax schedule with progressive per-hectare tax rates and exemptions for smallholders, and found that while this would reduce women’s tax burdens, the tax remained to be regressive because of the prevalence of landholdership among poor households. Our study highlights the difficulty of area-based land taxes to be progressive.

Are fuel poverty metrics fit for purpose? An assessment using behavioural microsimulation

This paper contributes to the literature on fuel poverty measurement by analysing the ability of different metrics to identify fuel poor households. We consider existing expenditure-based metrics and recently-developed metrics for multidimensional poverty, and compare three aspects: (a) Their ability to identify households at high risk of experiencing fuel poverty, (b) their ability to identify low income households with a large carbon tax burden, (c) their ability to measure changes in fuel poverty under carbon taxes and compensatory measures, including increases in fuel efficiency. We employ a fully flexible model to quantify demand responses to changes in fuel prices and energy expenditure for residential heating. We find that in general all analysed metrics perform well at identifying the household types frequently mentioned in the literature as fuel poor. Regarding the second aspect (b), we find that in general, the metrics performed badly at identifying vulnerable households with the largest tax burden. Finally, we show that using a multidimensional metric that includes energy efficiency can track changes in fuel poverty under the analysed scenarios, and it generally is a promising approach to measuring fuel poverty. • EASI demand system used to parameterise a microsimulation model. • The incidence of carbon taxes is analysed. • Welfare losses are compared with metrics of fuel poverty. • Multidimensional deprivation methods have the best performance. • Cross price effects are also included when measuring fuel poverty.

The Effects of Mandatory CSR Disclosure on Tax Avoidance and Tax Incidence.

The implementation of China’s mandatory corporate social responsibility (CSR) disclosure in 2008 provides us with a natural experiment setting. In this paper, we examine the effects of mandatory CSR disclosure on the levels of firms’ tax avoidance and tax incidence. By using a difference-in-differences model, we predict and find that mandatory CSR reporting firms tend to be less tax aggressive. Then we test who bears the burden of the effective tax rate increase. It shows that the increase of effective tax rate causes a drop in firm output and imposes a tax burden on the firms’ consumers. The reduction in output also reduces demand for the firms’ inputs and after-tax returns, passing tax burden to suppliers, other stakeholders, employees, and shareholders. In contrast, there is no evidence that the decrease of firms’ tax avoidance activities influences the tax incidence of governments, banks, and other creditors. These findings provide evidence that mandatory CSR disclosure changes firm tax planning activities and indeed influences the costs of various stakeholders.