Tax Rebate Research Articles

The Influence of Political Orientation on the Strength and Temporal Persistence of Policy Framing Effects

The objective of this research is to analyze how political orientation moderates the influence of framing effects on policy evaluation. Drawing on the theory of motivated reasoning, three interrelated experiments assess the strength and temporal persistence of framing effects in the context of an energy conservation program. In the first experiment (N=183), the delivery mechanism of the policy is described as either a tax rebate or a subsidy. Party identification of potential beneficiaries moderates the existence and magnitude of framing effects. The second experiment (N=603) presents alternative frames of communication, which focus on either the economic or environmental benefits associated with the policy. Effects of the communication frames on policy support in comparison to a neutral text are significant, but only when the policy is consistent with respondents’ pre-existing views on economic individualism and government spending. The third experiment (N=603) investigates the temporal stability of framing effects after cognitive deliberation and finds that no change in policy support occurs over time. A key implication is that tailoring frames to the target audience increases effectiveness in policy design and communication. Considering the persistence of framing effects, early frames may have a disproportionate impact in public discourse.

Liquidity and Firms’ Response to Fiscal Stimulus

In concurrence with the recent credit crisis, the Italian government tried to stimulate R&D expenditures through tax credit. We rely on this policy to identify the firm response to an exogenous countercyclical fiscal shock. Large heterogeneity by the size of cash is observed for firms in traditional industries. The tax credit caused higher expenditures for firms with relative large cash holdings. For firms characterized by low levels of cash, the stimulus was instead mainly useful to counteract the negative effects of the credit crunch. No impact is observed among hightech firms consistent with their tendency to smooth R&D. Our findings complement those on household response to tax rebate in US and Italy, offering new evidence for evaluating fiscal stimulus programmes. JEL classification : E21, E62

The 2008 tax rebate and US household debt

ABSTRACTStarting in May 2008, the US government disbursed over $100 billion to households in the form of tax rebates. Embedded in the Economic Stimulus Act of 2008, the rollout was aimed at limiting, or possibly reversing, the negative effects of the recession that was just starting. Substantial research concentrated on capturing the impact of the stimulus on consumption behaviour. Prior research suggests that the tax rebate had a small and/or no positive effect. This raises the question: How did individuals spent their tax rebate? Using data from the Survey of Income and Program Participation 2008 panel wave 1 topical module, the data suggest that more than half of the respondents, who received the rebate, used this one-time windfall to pay off debt. Our findings indicate that this effect is more pronounced among low-income individuals, who chose to service their debt burden instead of increasing immediate consumption. The findings point to a stabilizing effect of the tax rebate programme on the financial sector, suggesting that substantial distributional asymmetries exist concerning tax rebate programmes in an economy where a large share of households are indebted.

Reported Preference vs. Revealed Preference: Evidence from the Propensity to Spend Tax Rebates

We evaluate the consistency of two methods for estimating the effect of an economic policy: i) surveying people to report the change in their behavior caused by the policy, ii) inferring this change using (reported) actual behavior and differences in treatment across people. Both methods have been widely used to measure propensities to spend. Using Federal stimulus payments disbursed quasi-randomly over time in 2008, we find greater revealed-preference estimates of spending by households reporting greater spending and the two methods produce similar estimates of average spending. But, counterfactually, reported preferences estimates are not higher for households with lower liquidity.

Ausgabenautonomie ohne Finanzautonomie: ein Geburtsfehler des deutschen Grundgesetzes

Hermann Höpker Aschoff is the founding father of the German fiscal Constitution. He gave the federal states autonomy over taxation. Therefore the German states cannot balance revenues and expenditures. They are permanently short of money and need to be bailed out by the federal government. As state tax autonomy is a politically blocked issue, the author proposes individual tax rebates.

The impact of tax rebates on export performance: China's textile exports to the USA

The paper evaluates the effectiveness of China increasing its tax rebate on textile exports to the USA. Using the difference‐in‐differences technique and employing The Harmonized System six‐digit data, it is found that the tax rebate policy boosted the growth of textile exports to the USA. Approximately 6 to 25 per cent of the growth can be attributed to this policy. The difference‐in‐differences technique appears useful in evaluating such policies and opens the door to studies measuring the impact of polices. The effectiveness of the export tax rebate policy should be a lesson for policymakers facing slumps in their exports in economic downturns and perhaps become part of the standard trade policy arsenal.

Factors attracting private sector investments in public–private partnerships in developing countries

PurposeThe increasing demand for public infrastructure has caused a rise in the global adoption of the public–private partnership (PPP) concept. However, over the past years, most of the developing countries have failed to attract more private investments as realised in the developed countries. This paper aims to investigate the critical factors that attract private investments in the PPP markets of developing countries.Design/methodology/approachAn empirical questionnaire survey was conducted with targeted international PPP experts from the academic and industrial sectors. The inter-rater agreement analysis, mean score ranking and Mann–Whitney U test were used to analyse the survey responses.FindingsResults indicate that the three most critical factors are political support and acceptability for PPPs, government positive attitude towards private sector investments and political stability. On the other hand, factors including government guarantees, competent PPP unit and tax rebate on imported equipment are of low importance. The Mann–Whitney U test reveals that experts from the academic and industrial sectors view the importance of three factors differently: adequate public sector experience in PPP, government providing guarantees and government providing tax rebate on imported equipment.Originality/valueThe research outputs contribute to the existing but limited knowledge on PPP practices in developing countries by providing empirical evidence and cross-cultural perceptions on the conditions that are critical to the expansion of PPP markets in developing countries. It is therefore expected that governments and policymakers seeking to adopt the PPP concept would take into consideration the results and implications to enhance PPP growth.

Patent Boxes and the Relocation of Intellectual Property

Firms can make use of the discretionary aspect of the location of patent ownership to avoid taxation and maximise their profits. This paper investigates patent transfers with regard to patent box regimes, and study how firms' incentives to relocate patents vary with the heterogeneity of the features of such regimes. Using a comprehensive dataset on international patent transfers, I find that patent box countries significantly attract more patent relocations, and that incoming flows increase in the tax rebate. The fiscal incentives are stronger in countries with a high R&D level, suggesting multiple dimensions in firms' decisions of patent relocation. This is all the more true for more valuable patents. I distinguish between intra-group relocation and patent trade. The results indicate that policy makers could tweak the designs of patent box regimes and the stringency of the rules governing patent transfers to deter relocation driven solely by fiscal optimization motives. Finally, I propose a novel instrument to address the potential endogeneity of R&D expenditures.

Monetary versus fiscal policy in India: an SVAR analysis

ABSTRACTConventionally, the policymakers relied on three policy alternatives to manage business cycles – debt-financed government spending, debt-financed tax rebate and interest rate. While the first two are fiscal policy instruments, the latter is a monetary policy instrument. This paper aims to capture interactions among Indian monetary and fiscal policy actions, and the impact of such policy actions on select macroeconomic variables for the period 1990Q1–2011Q4. The policy actions are identified using the sign restrictions approach combined with magnitude restrictions in a Structural Vector Autoregression framework, and interpreted using impulse responses and variance decomposition. The results show that Indian monetary policy responds to tax rebate shocks and spending shocks differently. In the case of a tax rebate shock, Indian monetary policy responds by reducing interest rates thereby accommodating fiscal expansion. On the opposite, monetary policy seems not to accommodate expenditure shocks. Interestingly, the monetary policy shock is accompanied by a fiscal expansion that threatens the credibility of the central bank actions, thus indicating fiscal policy dominance. A comparison of the efficacy of the policies suggests that the interest rate is more effective in stimulating output. Out of the two fiscal policy instruments analysed, the tax rebate seems to be the better option for stimulating output considering the output-debt trade-off.

Regional effects of export tax rebate on exporting firms: Evidence from China

AbstractThis paper extends a model from 2003 to separate the direct and indirect impact of an export tax rebate on the intensive margin of firm‐level export sales at the subnational level. The direct impact of the rebate is associated with a reduction of an exporting firm's variable costs, while the indirect impact manifests itself through higher regional wages as a result of increased demand for local labor. First, the empirical results imply that a 1 percent rise in the export tax rebate rate increases the export sales among continuing exporters by 0.2 percent through the direct channel. Second, through the indirect channel, a 1 percent difference in the regional rebate causes a 0.02 percent difference in exporters' sales growth. Both effects are statistically significant, and are consistent with the model's predictions.

Market Efficiency, Heterogeneous Trade Costs and Export‐Only Firms

AbstractThis paper provides a two‐country general equilibrium model under monopolistic competition, in which we incorporate heterogeneous fixed export costs, a non‐zero export tax rebate rate and efficiency asymmetry to explain the existence of export‐only firms. We focus on the impact of efficiency differences on social welfare and the evolution of export‐only activities from autarky to trade. We show that exposure to trade brings a country of larger size and with higher efficiency more welfare gains, including higher industry productivity and greater variety of products. We also find that firms that face lower fixed export costs enjoy greater export tax rebates and firms that are located in more efficient countries have a greater chance of becoming export‐only firms. Further internationalization promotes the prosperity of export‐only activities.

Emerging Adaptation of Local Clusters in China in a Shifting Global Economy: Evidence from the Furniture Cluster in Houjie Town, Dongguan

AbstractAt the aftermath of the 2008 financial crisis, a dramatic restructuring of global value chains (GVCs) was witnessed along with the transformation of industrial clusters in developing countries such as China. However, little research has been conducted on exploring the interaction between the evolution of GVCs and local clusters in the dynamic global‐local interaction. By attempting to forge links between GVC restructuring and the adaptation of local clusters from the perspective of evolutionary economic geography, this paper explores the emerging adaptation of the furniture cluster in Houjie town, Dongguan, China in the crisis and post‐crisis recovery. The study is conducted on the basis of on‐site field investigations, particularly in‐depth firm‐level interviews during the period April 2012 to January 2014. Taking the furniture industry as a case, it examines the positive and negative effects of weak and strong lock‐ins of the prevailing export‐oriented cluster, reflected by the negative impact of export tax rebate policies and the positive effect of the International Famous Furniture Fair on furniture firms' attempt to tap into China's domestic market. The paper urges more empirical analysis to better understand the dynamic interaction between the global shift of production and markets, as well as the adaptation of local clusters in a shifting global economy.

Government Subsidy for Remanufacturing or Carbon Tax Rebate: Which Is Better for Firms and a Low-Carbon Economy

The government as a policy maker wishing to promote remanufacturing and proper disposal of hazardous old products which are harmful to environment has taken many actions, ranging from carbon regulation and financial incentives such as trade-in subsidy. However, carbon tax can result in loss of profit for firms to some degree, so the government has to give other subsidy to balance the profits and carbon emission. Thus, this article investigates two subsidy mechanisms: remanufacturing subsidy or tax rebate. The optimal pricing and production decision under these policies are examined. Our results show that carbon tax has a great impact on pricing strategies. Trade-in subsidy can encourage customers to replace their existing products with new and remanufactured products. Both remanufacture subsidy and tax rebate are beneficial to manufacturer and can further promote remanufacturing development.

Economic feasibility of solar photovoltaic rooftop systems in a complex setting: A Swedish case study

An economic feasibility study of solar photovoltaic rooftop (PV) systems in Swedish multifamily buildings was carried out to examine the effects of current market conditions, incentive programmes, and building-specific parameters. Economic analyses were conducted for 108 electricity supply points for scenarios including (1) a tax rebate, (2) an investment subsidy, and (3) both tax rebate and subsidy. First, PV systems were sized and oriented to give the highest net present values, considering actual fuse sizes and hourly demands matched to simulated PV generation. This resulted in shares of profitable systems as follows: 33% with a tax rebate, 51% with a subsidy, and 93% with both. It was shown that the tax rebate programme promotes relatively large systems compared to the subsidy, although with a much higher risk. Thereafter, the influences of main fuse size and existing roofs were investigated. Most of the roofs were large enough to fit the previously sized PV systems. However, taking into account the slopes and directions of available rooftops considerably reduced the number of profitable systems. Finally, the study showed that in addition to support measures and other economic conditions, the PV system feasibility was highly sensitive to roof characteristics, electricity demand and fuse size.

Export Tax Rebates and Resource Misallocation: Evidence from a Large Developing Country

The export tax rebate (ETR) policy is one of the most frequently used policy instruments by Chinese policy makers. This paper therefore provides a vital analysis of its allocation effects. To motivate our empirical analysis for the allocation effects of the ETR policy, we first add a tax rebate to the Melitz and Ottaviano (2008) model and examine the impact of this policy on firms' markup size and resource allocation between eligible and non-eligible firms for the rebates. We use customs transactions, tax administration, and firm-level data to measure the effect of variation in export tax rebates, taking advantage of the large policy change in 2004. A difference-indifference approach allows us to compare the production and pricing decisions of eligible versus non-eligible firms and the distributional implications. We find that an increase in tax rebates shifts production to eligible firms and that tax rebates increase allocative efficiency.

Household Spending Out of a Tax Rebate: Italian ''80 Tax Bonus'

We estimate the consumption response of Italian households to the “€80 tax bonus” introduced in 2014, using the panel component on the Survey of Household Income and Wealth. We find that households that received the tax rebate increased their monthly consumption of food and means of transportation by about €20 and €30, respectively, about 50-60 per cent of the total bonus. There was a larger increase for households with low liquid wealth or low income. Our estimates are quite robust to different model specifications and are broadly in line with the evidence available from similar tax rebates in other countries but, due to the small sample size, are not always statistically significant. To understand the mechanism behind our results we then simulate an overlapping generations model of household consumption: the marginal propensity to consume generated by the structural model is in line with our empirical estimates. JEL Classification: D12, E21

Local-central Intergovernmental Fiscal Relations of China

For a large country like China, handling of intergovernmental fiscal relations must create compatible incentives to central and local governments. China initially created a fiscal management system characterized by tax sharing in 1994, basically meeting the needs of its socialist market economic system. Yet further improvements must be made to the assignment of administrative authority and expenditure responsibilities, revenue allocation and the fiscal transfer payment system. This paper is based on the author’s previous research and the recent situation of adjustment in China’s intergovernmental fiscal relations. The paper examines the problems of local-central fiscal relations: insufficient alignment between fiscal revenues and administrative authority; uncertainty of sharing the revenue from income tax and value-added tax; imperfect tax rebate and transfer payment system. Concludes that uncertainties of local fiscal resources inevitably affected the behavior of local governments. The paper describes the land sales revenues of local government as the example how the interplay intergovernmental fiscal relations with other systems threatens socio-economic sustain-ability of China. The following measures in tax reforming are suggested: increasing the share of local governments in VAT distribution; reducing the property tax rates; canceling tax rebates; endowing local governments with certain taxing authority, including legislation and tax rate adjustment. In handling intergovernmental fiscal relations, great attention must be paid to the system’s stability to give play to its function of incentives and restraints. Highlights China must create a hierarchical fiscal management system in line with its modern fiscal system and further standardize the division between administrative authority and expenditure responsibilities China should formalize a fiscal transfer payment system, and develop a hierarchical fiscal management system encompassing the sharing of tax, rents and profits For citation Yang Zhiyong. Local-central Intergovernmental Fiscal Relations of China. Journal of Tax Reform, 2017, vol. 3, no. 2, pp. 92–102. DOI: 10.15826/jtr.2017.3.2.033 Article info Received April 10, 2017; accepted July 31, 2017

Household Spending Out of a Tax Rebate: Italian '€80 Tax Bonus'

Household Spending Out of a Tax Rebate: Italian '€80 Tax Bonus'

ТІНЬОВА ЕКОНОМІКА ТА ОФШОРИЗАЦІЯ ЕКОНОМІЧНОЇ ДІЯЛЬНОСТІ

The shadow economy, without a doubt, is one of the leading areas of research in the context of mastering the levers of state regulation of the national economy. In interpreting the shadow economy, the researcher takes into account the resource aspect of its existence, but rather its adaptability and impact on institutional isomorphisms. The article identifies the lack of a unified approach to the interpretation of the economic definition of "shadow economy", which is primarily determined by the complexity and multifaceted nature of this economic concept. Due to the scale of the shadow economy (according to the integrated indicator of the shadow economy in Ukraine, its volume is 30% of gross domestic product), as well as the hidden nature of its functioning as a separate environment of the national economy, the method still has a significant impact on her assessment. In the structure of the shadow economy in modern economic relations is defined and offshore activities as a special type of hidden economy that avoids paying taxes, or is carried out for tax optimization, the formation of industrial competitive advantages and global production chains. For the state, there is pressure on financial security, which is caused by the reduction and erosion of the tax base, the formation of a system of tax rebates, obtaining illegal or illegal benefits, compensation, benefits or subsidies. The importance of this issue is due to the scale of this economic phenomenon, because according to expert estimates in offshore zones and the gray economy revolves about a third of world gross domestic product, and economic losses are quite significant, so the United States loses about $ 450 billion annually. , and Ukraine about 6 billion dollars. The actual combination of such complex processes is of scientific interest.

Housing and the Tax System: How Large Are the Distortions in the Euro Area?

This paper presents new evidence on the impact of the preferential treatment of owner-occupied housing in Europe. We find that tax benefits to homeowners reduce the user cost of housing capital by almost 40 percent compared to the efficient level under neutral taxation. On average, the tax subsidy translates into an excess consumption of housing services equivalent to 7.8 percent of the value of owner-occupied housing, or about 30 percent of financial asset holdings in household portfolios. The bulk of the subsidies stems from under-taxation of the return to home equity, while the average contribution of the tax rebate for mortgage interest payments is driven down by relatively low loanto-value ratios in the data. However, at the margin, the tax–induced incentive to use mortgage debt to finance the purchase of the main residence is sizable.