Tax Policy Research Articles

The political and economic environment promoting growth in American wealth inequality

AbstractWealth inequality around the world is high and rising. In this paper, we argue that wealth inequality in the United States has been exacerbated by an environment favourable to the ultra‐wealthy. Three distinctive changes in the economic and political landscape have fostered the increase in inequality. First, campaign finance law abruptly changed after the Citizens United Supreme Court decision. This decision gave the ultra‐wealthy an outsized influence on American politics. Second, an increase in competition for executive talent drove CEO salaries to new heights. Demand increased for executives with general leadership skills as corporations grew larger, increasing competition in the market for executive talent. Third, because tax policy in the United States is subject to lobbying influences, those at the top of the wealth distribution are favoured, leading to further concentration in wealth. Our empirical results are consistent with the view that these changes resulted in an increase in disparity, shifting wealth from the 99% to the 1%.

Public Revenues and Educational Sector Productivity in Nigeria

This study examined the influence of public revenue on the productivity of the educational sector, focusing on how various tax policies and expenditures impact education’s contribution to the Gross Domestic Product (GDP), focusing on the role of Company Income Tax (CIT), Education Tax (EDT), Research and Development Investment (R&DI), and Capital Expenditure (CAPEX). Using annual data spanning from 1994 to 2023, the study employs econometric techniques, including the Autoregressive Distributed Lag (ARDL) model, to analyze the relationship between these variables and the education sector’s economic performance. The findings reveal that CIT and EDT positively influence the education sector’s contribution to GDP, suggesting that these forms of taxation play a crucial role in funding educational activities and stimulating economic growth within the sector. Additionally, R&DI and CAPEX exhibit mixed effects on the education sector, with lagged investments showing a more significant impact on economic performance over time. It was recommended that there is a need by policy makers and stake holders for continued efforts to create a conducive fiscal environment for businesses operating in the education sector, including favorable tax policies and incentives to stimulate investment and innovation. Keywords: Nigerian tax system, educational sector, Company Income Tax, Education Tax, Capital Expenditure.

Welfare‐Reducing Integration Under Emission Taxes and Endogenous Competition Mode

ABSTRACTThis study examines asymmetric supply chain competition between integrated and non‐integrated supply chains under emission taxes when firms choose competition mode in the final goods market endogenously. We find that higher emission taxes may lead the non‐integrated downstream firm to adopt aggressive pricing to induce its upstream firm to lower prices, leveling competition with an integrated one. When the non‐integrated chain integrates, however, quantity contracts become dominant strategies, which might distort welfare under lower emission taxes if both environmental damage and product substitutability are sufficiently high. Our finding indicates the welfare‐reducing effects of government interventions post‐integration when emission tax policy and endogenous competition mode are relevant.

Non-Smoke Tobacco Consumption in India: A Cost-Benefit Analysis

This study evaluates the economic and social impacts of non-smoke tobacco consumption in India and compares them with the tax revenue generated by the government from this industry. Non-smoke tobacco products, such as chewing tobacco and pan masala, are associated with various health and environmental problems, such as oral cancer and littering. The study uses the concept of externalities to analyse the costs and benefits of non-smoke tobacco consumption for the society and the government. Based on available data and assumptions, the study estimates the expenditure on oral cancer treatment and cleanliness, and the revenue from direct and indirect taxes on non-smoke tobacco products. The study finds that the government collects more revenue than it spends on mitigating the negative externalities of non-smoke tobacco consumption, but the social costs are still significant. The study suggests that the government should implement more effective tobacco taxation and control policies to reduce the consumption and harm of non-smoke tobacco products.

An Interval Fuzzy Programming Approach to Solve a Green Intermodal Routing Problem for Timber Transportation Under Uncertain Information

This study investigates an intermodal routing problem for transporting wood from a storage yard of the timber harvest area to a timber mill, in which the transfer nodes in the intermodal transportation network have multiple service time windows. To improve the environmental sustainability of timber transportation, a carbon tax policy is employed in the routing to reduce the carbon emissions. Uncertain information on the capacities and carbon emission factors of the transportation activities in the intermodal transportation network is modeled using interval fuzzy numbers to enhance the feasibility of the routing optimization in the actual timber transportation. Based on the above consideration, an interval fuzzy nonlinear optimization model is established to handle the specific routing problem. Model defuzzification and linearization are then conducted to obtain an equivalent formulation that is crisp and linear to make the global optimum solution attainable. A numerical experiment is conducted to verify the feasibility of the proposed model, and it reveals the influence of the optimization level and service time windows on the routing optimization, and it confirms that intermodal transportation is suitable for timber transportation. This experiment also analyzes the feasibility of a carbon tax policy in reducing the carbon emissions of timber transportation, and it finds that the performance of this policy is determined by the optimization level given by the timber mill and is not always feasible in all cases. For the case where a carbon tax policy is infeasible, this study proposes a bi-objective optimization that can use Pareto solutions to balance the economic and environmental objectives as an alternative. The bi-objective optimization further shows the relationship between lowering the transportation costs, reducing the carbon emissions, and enhancing the reliability on capacity and budget by improving the optimization level. The conclusions provide managerial insights that can help the timber mill and intermodal transportation operator organize cost-efficient, low-carbon, and reliable intermodal transportation for timber distribution, and support sustainable forest logistics.

Property Tax Policy and Housing Affordability

Property Tax Policy and Housing Affordability

DIGITALIZATION OF THE TAX SYSTEM IN EUROPE

In the context of the highly increasing dispersion of technology in the European economic environment, the interaction of citizens with the public sector is changing rapidly. European countries have significant differences on the tax collection, generating economic effects under a complex fiscal system. The purpose of this study is to analyse the effects of digitalization on the VAT compliance gap in the European Union countries. The analysis considers the VAT compliance gap as the dependent variable and examines the influence of E-government activities of individuals via websites as an independent variable, as a relevant indicator of digitalization. The research approach methodology consisted in EViews Granger causality tests for the collected data from the EU sources, for a period of ten years (2012-2021). The study results revealed relevant insights and latest information about the connection between e-government users and the VAT compliance gap. This relationship is particularly notable as it emphasizes the potential of digitalization in uplifting tax compliance and improving VAT collection. Studying the impact of digitalization on VAT compliance, the research is intent to provide to the economist, policymakers, and students a deeper understanding of the technology’s impact on tax policies and economic outcome.

Cross‐Ownership, Green Managerial Delegation, and Emission Taxation

ABSTRACTThis paper analyzes the effects of cross‐ownership on green managerial delegation contracts in a Cournot duopoly market with emission tax policy. We show that higher cross‐ownership will always exacerbate environmental degradation and diminish societal welfare, even with green managerial delegation. Compared with sales delegation, green managerial delegation under such ownership always yields higher environmental damage and lower social welfare. Compared to concurrent regulation, noncommitted emission taxation always leads to lower environmental damage and higher social welfare, although green managerial delegation will not be chosen in the latter. Our findings have important policy implications.

Analysis of Technological Pathways and Development Suggestions for Blast Furnace Low-Carbon Ironmaking

Under the global dual-carbon background, heightened public awareness of climate change and strengthened carbon taxation policies are increasing pressure on the steel industry to transition. Given the urgent need for carbon reduction, the exploration of low-carbon pathways in a blast furnace (BF) metallurgy emerges as crucial. Evaluating both asset retention and technological maturity, the development of low-carbon technologies for BFs represents the most direct and effective technical approach. This article introduces global advancements in low-carbon metallurgical technologies for BFs, showcasing international progress encompassing hydrogen enrichment, oxygen enrichment, carbon cycling technologies, biomass utilization, and carbon capture, utilization, and storage (CCUS) technologies. Hydrogen enrichment is identified as the primary technological upgrade currently, although its carbon emission reduction potential is limited to 10% to 30%, insufficient to fundamentally address high carbon emissions from BFs. Therefore, this article innovatively proposes a comprehensive low-carbon metallurgical process concept with the substitution of carbon-neutral biomass fuels at the source stage—intensification of hydrogen enrichment in the process stage—fixation of CCUS at the end stage (SS-IP-FE). This process integrates the cleanliness of biomass, the high-efficiency of hydrogen enrichment, and the thoroughness of carbon fixation through CCUS, synergistically enhancing overall effectiveness. This integrated strategy holds promise for achieving a 50% reduction in carbon emissions from BFs in the long processes. Critical elements of these core technologies are analyzed, assessing their cost-effectiveness and emission reduction potential, underscoring comprehensive low-carbon metallurgy as a pivotal direction for future steel industry development with high technological feasibility and emission reduction efficacy. The article also proposes a series of targeted recommendations, suggesting short-term focus on technological optimization, the medium-term enhancement of technology research and application, and the long-term establishment of a comprehensive low-carbon metallurgical system.

Multiple Personal Income Taxes and Financial Well-Being of Employees in Tertiary Institutions

This study aimed to interrogate the relationship between multiple personal income taxes and public workers’ financial wellbeing. The paper therefore examined the relationships between pay as you earn, Bayelsa Health Insurance Scheme, Education Trust Funds and worker’s disposable income as proxies for objective financial wellbeing in (the public) tertiary institutions of Bayelsa State. The study adopted a quantitative design, and data were collected through the Salary Structure of teaching and non-teaching staff from Bayelsa State owned University of Africa and Niger Delta University in Nigeria. The data were analyzed by applying simple regression and correlation analysis. The findings revealed that there was a positive significant relationship between multiple personal income taxes and workers’ financial wellbeing in Bayelsa State tertiary institutions. However, at the entity level, the Bayelsa Health Insurance Scheme (BHIS) variable had a positive substantial impact on workers’ financial wellbeing; whilst, Pay as You Earn (PAYE) has a negative significant effect on workers’ financial wellbeing. Whereas Education Trust Funds (EDTF) variable had an inverse non-significant association with workers’ financial wellbeing in Bayelsa State. Therefore, we recommend a fair and equitable tax policy framework to sustain adequate pay for public servants and reduce employees’ turnover in the state.

The Role of the North-China Herald in the Anti-Tax Activities of British Businessmen in Shanghai, 1850-1854

Leveraging historical records from the North-China Herald alongside British Parliamentary archives and correspondence from key stakeholders, this article delves into the publication’s influence during the period of the “Shanghai Insurgents (1853-1855, i.e., from Qing Heen-Fung 3rd to 5th year).” Specifically, it investigates the North-China Herald’s involvement in the advocacy efforts of British merchants in Shanghai against taxation policies amid the backdrop of the conflict. Analysis reveals a notable shift: preceding the “Shanghai Insurgents,” British merchants voiced dissent against Qing government tax policies through the North-China Herald; post-war, the newspaper actively championed the grievances of British traders in Shanghai, amplifying their concerns through extensive coverage and commentary. Ultimately, the establishment of the “Office of Inspector of Chinese Customs” marked a significant triumph for the anti-tax activities led by British businessmen in Shanghai, with the North-China Herald in shaping public opinion and influencing policy outcomes.

Gendered Taxation: IMF Tax Advice and the Unintended Disempowerment of Women

Case research points to the gendered effects of the value added tax (VAT), which may particularly disadvantage women by crowding out their economic participation. A key driver of VAT introductions has been the International Monetary Fund (IMF). To counterbalance of-payments woes, IMF advice for cash-stripped countries has frequently focused on shifting toward broad-based consumption taxes while lowering trade taxes and corporate income taxes. We expect this tax policy advice – while ostensibly gender-blind – to contribute in practice to a deterioration in women’s socioeconomic well-being. To test this hypothesis, we construct a panel dataset for 147 countries from 1980 to 2016 and estimate the effect of IMF programs on women’s economic participation, education and health. Accounting for selection effects, we find that women’s life chances deteriorate relative to men’s if a country undergoes an IMF program with tax conditionality. We corroborate these findings to demonstrate the mechanism underlying these effects by showing a negative effect of IMF-induced de jure VAT adoption on women’s life chances. We provide complementary individual-level evidence from the World Values Surveys based on 98 countries from 1981 to 2019. We show that during an IMF program with tax conditionality, women are significantly less satisfied with home life and report more material hardships. Our results provide evidence of the potential for unintended consequences of IMF revenue prescriptions for women, supporting calls for increased attention to gender-responsive budgeting.

The Quiet Evolution in International Tax: Domestic Law and Double Taxation

This article describes the respective roles of international tax law (predominantly tax treaties) and domestic tax law and their relationship with each other. This is a complex and interdependent relationship, with treaties, as special law, generally overriding domestic law. The article discusses the founding principle of tax treaties preventing double taxation, reflecting the original purpose of tax treaties. Subsequent developments over time have vigorously established the second principle of treaties: that the purpose of tax conventions is also to prevent tax avoidance and evasion. Such an increasingly important principle heralds the rise of anti-avoidance rules, prevention of abuse and the preservation of domestic taxing rights. The thesis in this article is that domestic law has prevailed against the more specialized law of treaties and at an increasing rate. This evolution has occurred in situations where the special law of treaties is “watered down” by the principle that treaties should not be allowed to be abused or in situations where they facilitate tax avoidance. What are the implications of this trend on the development of international tax policy? The article reflects on the respective roles of international and domestic law and guides us to suggestions on how to preserve important international tax principles in good faith and limit expedient domestic tax law changes when they are not driven by taxpayers’ abusive actions.

Cross Ownership Under Strategic Tax Policy

Abstract We provide a new reason for the consumer surplus and welfare raising cross ownership. We show that cross ownership reduces the tax rate, and increases consumer surplus and welfare under Cournot and Bertrand competition when the marginal social cost/benefit of public funds is less than unity. We further show that Cournot competition creates higher consumer surplus and welfare compared to Bertrand competition if the marginal social cost/benefit of public funds is less than unity, thus providing a new reason for the Cournot-Bertrand welfare reversal.

Tax System Optimization: A Comparative Analysis Between Personal Income Tax and Corporate Income Tax in Indonesia

This study adopts a qualitative approach to analyze the comparison between Personal Income Tax (PPh) and Corporate Income Tax (PPh Corporate) in Indonesia. Through literature studies and observations, this study explores the tariff structure, tax relief, and tax compliance level of the two tax systems. The economic implications of the implementation of Income Tax and Corporate Income Tax on economic growth, investment, and income distribution were also discussed. The findings show that tax reform, as stated in the Law on Harmonization of Tax Regulations (UU HPP), has a significant impact in improving the effectiveness and fairness of the tax system. The results of this study provide in-depth insights into the importance of appropriate tax policies to support inclusive and sustainable economic growth in Indonesia.

Residential income tax compliance in Nepal: An empirical analysis

Tax compliance is the determining factor in tax report submission, enhancing tax awareness. A low level of tax compliance (TC) directly affects the government revenue and low inflow of information regarding taxpayers. This study uses descriptive and explanatory research approaches to identify determinants of residential rental income tax compliances (TC) among property owners in Kathmandu Metropolitan City, Nepal. A total of 1,129 structured questionnaires were distributed among the households of Kathmandu Valley for the cross-sectional and primary data, and only 500 (44.29 percent) useful responses were received from the respondents as the population was unknown. The response rate exceeds the estimated sample size of 384. The findings revealed a significant positive impact of tax rate on tax compliances (r = 0.329**, P<0.05). Fines and penalty (FP) and tax compliance (TC) found a positive and significant association depicting (r =.398**, P<0.05). Similarly, there was a positive and significant relationship (r = .612**, P<0.05) between attitudes and perception (AP) and tax compliance (TC). Moreover, a positive and significant association was found (r =.410**, P<0.05) between tax knowledge (TK) and tax compliance (TC). Furthermore, tax policy (TP) was positively and significantly associated (r = .440**, P<0.05) with tax compliance (TC). This study enhances taxpayers’ knowledge and helps to execute the policies to increase the efficiency and transparency of the tax system in Nepal. Acknowledgment The authors would like to express their gratitude to Prof. Dr. Achyut Gnawali and Mr. Prem Bahadur Budhathoki, Associate Professor, and Dr. Gangaram Bishowakarma, Assistant Professor of Tribhuvan University, Kathmandu, Nepal, for extending warm support towards the research work through the academic inputs.

Supply Chain Optimization Decisions for Environmentally Conscious Products with Preservation Investment and Carbon Tax Policy

Supply Chain Optimization Decisions for Environmentally Conscious Products with Preservation Investment and Carbon Tax Policy

Unevenly Unequal Responsiveness: Public Opinion and Redistributive Policy Shifts in Western Europe Since 2008

Recent studies puzzle over why it is that democratically elected governments have not responded to rising inequality by engaging in more redistribution. While some scholars argue that low- and middle-income citizens have not responded to rising inequality in the way we would expect, others argue that policymakers are not responsive to the demands of these citizens. We argue that both solutions to the “lack-of-redistribution puzzle” leave something to be desired and that variation across policy domains sheds new light on the issues at stake in this debate. Based on an original 2019 survey replicating questions asked by the European Social Survey in 2008, we show that support for progressive income taxation and more egalitarian unemployment insurance has increased in most West European countries since 2008. Tax policy has moved in the same direction as public opinion, but unemployment policy has not. We conclude that public opinion should be conceived as a constraint on policymakers motivated by political-economy considerations rather than a driver of policy developments.

Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

This paper concerns Saez and Stantcheva’s (2016) generalized social marginal welfare weights, which aggregate losses and gains due to tax policies while incorporating nonutilitarian ethical considerations. The approach evaluates local tax changes without a global social objective. I show that local tax policy comparisons implicitly entail global comparisons. Moreover, whenever welfare weights do not have a utilitarian structure, these implied global comparisons are inconsistent. I argue that broader ethical values cannot in general be represented simply by modifying the weights placed on benefits to different people, and a more thoroughgoing modification of the utilitarian approach is required. (JEL D60, D63, D71, H21, H23, I31)

Cap-and-trade under a dual-channel setting in the presence of information asymmetry

Cap-and-trade, a widely used carbon regulation policy, encourages firms to adopt carbon abatement technologies to reduce emissions. Traditional supply-chain literature on this policy assumes symmetrical information, overlooking the fact that carbon abatement efforts and costs are often private and vary significantly across geographies, industries, and pollutants. In this paper we explore a dual-channel setting involving a manufacturer and a retailer, where the manufacturer, subject to cap-and-trade regulations, has undisclosed information about its carbon abatement costs. Our findings reveal that high abatement costs can paradoxically benefit the manufacturer, the environment, consumers, and overall social welfare. Our result also cautions that a higher carbon trading price (e.g., due to more ambitious emission reduction targets) can disincentivize the manufacturer from investing in carbon abatement. Moreover, a higher production cost, while resulting in lower market output, can increase pollution generation. We contribute the following to the practitioner debate about the impact of carbon policies: for an industry with a large market size, our findings lend support to governments to implement a cap-and-trade policy, because the manufacturer, customers and social welfare can be better off under a cap-and-trade policy than under a tax policy or no carbon policy. Additionally, we suggest that in such industries, governments need not enforce information transparency within the supply chain.