Tax Scheme Research Articles

Redistributive Unemployment Benefit and Taxation

Abstract This paper suggests a simple rule which identifies the coordination between optimal unemployment benefits paid and the tax system in the case of risk neutral workers but with moral hazard and hidden information on the worker’s type. Our model posits that, given a universal, linear income tax scheme, the optimal unemployment benefits paid does not depend on workers’ types. Standard government policy pays a positive replacement rate to unemployed workers. Optimal redistribution, taking moral hazard and adverse selection into account, instead suggests that the benefit paid should be the same for all and only depends on the underlying tax structure.

THE EXPANSION AND INTERNATIONALIZATION OF MANDATORY DISCLOSURE RULES

The Panama Papers, the Paradise Papers, and most recently the Pandora Papers have exposed the role of tax advisors, lawyers, financial institutions, and other intermediaries in enabling cross-border tax avoidance and evasion. In response, mandatory disclosure rules (MDRs), which require that intermediaries report their clients’ tax schemes, are becoming prominent tools in the international fight against tax avoidance and evasion. This Article analyzes the development of MDRs over the past four decades as a global phenomenon with three distinct phases beginning in the 1980s. The analysis reveals several trends: expansion in the types of schemes that are reportable, extension of reporting obligations to a great diversity of intermediaries, and increasing multilateralism in the effort to curb intermediary-enabled tax avoidance and evasion. This Article shows how developments in international tax policy have affected, and will likely continue to affect, the expansion and internationalization of MDRs.

Unemployment risks and intra-household insurance

To study the constrained efficient public insurance provision against unemployment risks, we build a directed search model with households where a spouse's ability to provide consumption insurance determines the risks job-seekers take on. The planner's transfers to the unemployed fall with the spouse's income because of concave preferences with limited complementarity between consumption and the spouse's labor. Due to the absence of such a transfers scheme in the laissez-faire equilibrium, too many too-low-wage jobs are created as jobless workers seek insurance in the labor market. Social welfare-maximizing policies with simple tax schemes exhibit unemployment benefits falling with spouse's income, and nearly fill up the welfare gap.

Design and selection of government policies for electric vehicles adoption: A global perspective

Regardless of increased attention in electric vehicles (EV) market expansion, the actual penetration of EVs remains low globally. Almost all major OEMs have announced investment plans to ensure that EVs constitute a major, if not complete, chunk of their product portfolios. On their part, governments worldwide (e.g., China, Poland, India, USA, etc.) have used various policy measures to facilitate EV adoption. In this paper, we study how incentives offered in terms of subsidy and differential taxation schemes could increase the market penetration of EVs. We analyze different models under uniform and differential taxation policies with and without subsidy, using a non-cooperative game-theoretic approach. Our analysis reveals that the government can follow any of the three tax-subsidy mixes that could maximize social welfare, i.e., differential taxation with and without subsidy, and identical tax with a subsidy. Surprisingly, the manufacturer's profit, the government's income, and consumer surplus for these three models are also the same and are better than the other two models depending on the consumer's green sensitivity, i.e., for higher green sensitivity, these three models can provide a win–win outcome. From an environmental perspective, levying tax on gasoline vehicles (GV) without subsidy to the manufacturer minimizes the overall environmental impact. In contrast, levying the same tax for both types of vehicles without subsidy to the manufacturer generates the maximum overall environmental impact. Furthermore, an increase in the unit environmental impact of vehicles attracts higher taxes. We portray that the increase in the cost-difference between EV and GV increases GV demand and is detrimental for EV acceptance. In addition, multifaceted insights are drawn for manufacturers and policymakers to envisage electric mobility. We extend our models and show that our main results hold under the implementation of mandate on EV manufacturers under subsidy and non-subsidy model, and inclusion of hassle cost for consumers due to lack of infrastructure in terms of charging facilities and maintenance.

Enhancing Consumer Benefit Via Special Tax Scheme for Social Enterprise

In Malaysia, social enterprises (SEs) are still in their infancy, but they are growing in popularity as more people become aware of the beneficial effects on local communities. SEs in Malaysia are business models that combine the aspects of both non-profit and commercial entities to achieve social or environmental objectives. Business organizations, such as partnerships, corporations, and limited liability partnerships, are used to operate SEs because there is no specific legal entity for SEs in Malaysia. From a Malaysian perspective, tax-exempt status is one of the main challenges encountered by Malaysian social entrepreneurs. Despite the government’s efforts to recognize SEs, the problem of taxation for SE has not been resolved because SE still must pay taxes in a manner similar to that of commercial entities. This study aims to provide tax benefits to SE in Malaysia. Although Malaysia revised its laws and accredited SEs, no tax exemption has been provided exclusively for SEs. SEs contributions are meant to improve social welfare, but SEs are not exempt from taxes, such as charitable organizations. SEs business methods and organizational structures, which are comparable to those of commercial companies, lead to the conclusion that SEs are comparable to commercial organizations. The research concludes that by introducing tax exemptions permanently for SEs in Malaysia, customers can benefit from supporting businesses that align with their values, while SEs can benefit from increased support and growth opportunities. Governments can also benefit from a stronger economy and increased social and environmental impacts, making this an attractive policy option for Malaysian society.

The Next Pandemic

The Next Pandemic

Public health lessons from the French 2012 soda tax and insights on the modifications enacted in 2018

In 2016, the World Health Organization officially recommended sugar-sweetened beverage (SSB) taxation as a strategy to reduce purchases, stimulate product reformulation and generate revenues for health-related programmes. Four years before, France had been one of the first countries to tax SSBs. However, the design of this tax was not considered optimal: its rate was flat, low, identical for SSBs and artificially-sweetened drinks containing no added sugars, and its initial public health justification was set aside in favour of budgetary concerns. In 2018, a new taxation scheme was enacted. Integrated in the Social Security Finance Bill, the tax on SSBs is now linearly indexed to the quantity of added sugars in the drink. In this article, we summarize the lessons learnt from the 2012 soda tax and offer insights on the potential public health benefits of the new tax enacted in 2018. A multidimensional framework aimed at gathering evidence about SSB taxation for public health drove our rational so that we address: (1) the soda tax policy-change process; (2) its impact on price and purchases; (3) the consumer receptiveness to the tax and; (4) its legal framework. We also discuss the potential application of the tax to other foods/nutrients.

The Widening Gap Under the Internal Revenue Code: The Need for Renewed Progressivity

“I have never viewed taxation as a means of rewarding one class of taxpayers or punishing another. If such a point of view ever controls our public policy, the traditions of freedom, justice and equality of opportunity, which are the distinguishing characteristics of our American civilization, will have disappeared and in their place we shall have class legislation with all its attendant evils.” Andrew Mellon (1924)The words written by Andrew Mellon more than 75 years ago represent an idealistic view of the tax system. Despite the ideas expressed by Mr. Mellon, it is difficult to devise a tax scheme that conforms to his standards. Our present scheme of taxation is intended to promote vertical equity, which means that the higher income taxpayer should pay a higher level of taxes based on an abilityto-pay concept. In theory, this objective is met by the progressive tax structure imposed under the Code. Arguably, a progressive tax system is inconsistent with the principles expressed by Mellon because of the purported penalty levied against high-income taxpayers in the form of inflated tax rates and the reward bestowed on low-income taxpayers in the form of lower tax rates. In reality, a progressive tax system does not reward or punish one class of taxpayers over another, but it is necessary to ensure that taxpayers do not pay more tax dollars to finance the government than they can afford. A progressive tax scheme is also necessary to enable every taxpayer to retain sufficient income to live above the poverty threshold. To the extent that a taxpayer lives below the poverty threshold, that taxpayer should not be required to pay income taxes. The current tax scheme is only partially successful in preventing taxpayers’ after-tax income from falling below the poverty threshold.

Exploring the efficacy of traditional and alternative funding mechanisms to provide transportation revenue during the COVID-19 pandemic

Steep reduction in motor vehicle travel during the COVID-19 pandemic has plummeted the fuel sales affecting the revenue streams of state Departments of Transportation (DOTs) across the US. The objective of this study is to investigate the effectiveness of a number of user-based and general revenue generation mechanisms in reducing the transportation revenue shortfall or providing more stable revenue during a pandemic. State policies and pilot programs as well as public perception studies are reviewed to develop reasonable scenarios of tax and fee schemes, and price elasticity estimates are used to account for the effect of higher travel cost on demand for travel. We specifically focus on the adverse impacts of the COVID-19 pandemic on the transportation revenue in North Carolina (NC) using data from January to October 2020. The results indicate that monthly transportation revenue in NC could not have been sustained by increasing the state motor fuels tax up to 50% or motor vehicle fees up to 100%. On the other hand, increasing the highway use tax (state vehicle sales tax) from 3% to 8% would have eliminated the monthly shortfall in the state transportation revenue. Replacing the state fuels tax by mileage-based user fees could not bridge the gap between the monthly collected and projected state transportation revenue, even for high per-mile charges for passenger vehicles and trucks. Promising results are found for instituting an additional 0.75% state sales tax dedicated to general transportation use which could have provided adequate funding to eliminate the monthly shortfall in transportation revenue in NC during the COVID-19 pandemic. Dependence on state sale and use tax for transportation revenue is preferred and would lead to a lower shortfall compared to the motor fuels tax in a pandemic.

Tiebout sorting with progressive income taxation and a fiscal equalization scheme

This paper develops a model of Tiebout sorting with decentrally determined progressive income taxation and a built-in fiscal equalization scheme that redistributes money from richer to poorer regions. Both aspects are central to policy makers: the progressivity for equity reasons and the fiscal equalization to prevent an underprovision of the publicly provided good and to limit the degree of segregation of households according to income. The model is calibrated to the metropolitan area of Zurich (Switzerland), and policy evaluations reveal that a progressive tax scheme as the basis for decentrally determined tax rates causes strong segregating forces that can only to some extent be compensated by the fiscal equalization scheme.

Defending Paine's Agrarian Justice and the "Ground-Rent"

Thomas Paine’s Agrarian Justice deserves more attention than it has received, for in it Paine provides a foundational case for a broad social welfare program that is absent in his better-known Rights of Man. In this paper, I explain Paine’s case in Agrarian Justice, and consider the objection that the main revenue source Paine proposes – the “ground-rent” – is insufficient to fund the social welfare program he proposes because in the production of value the contribution attributable to natural resources is insignificant. I argue that the ground-rent justifies levying a tax not just on the value of the natural resources used in the production of value, but on a portion of the value of the labor applied to those resources, and therefore can be a significant revenue source. Similar considerations apply to resource-based taxation schemes suggested by others, including Henry George, Thomas Pogge, and some modern “left-libertarians”.
 
 

Commission

This overview highlights the Commission’s (i) plan to respond to rising energy prices; (ii) approval of technical support for tax reforms in the Member States; (iii) initiative to waive VAT to support defence and security capabilities within the European Union; (iv) scrutiny of Hellenic Post’s VAT exemption under State aid rules; and (v) approval of French tax scheme to attract investment to Saint-Martin.

Specific vs. ad valorem taxation and social welfare in mixed duopoly with foreign ownership

In this paper, we set up a mixed duopoly competition model between state-owned and private firms in order to compare specific and ad valorem taxes. Assuming that the total output under specific and ad valorem taxation remains unchanged, we find that if the public firm is completely privatised, the output of the private firm under the two tax schemes will be the same. If the public firm is not completely privatised, the output of the the private firm under specific taxation will be greater than that under ad valorem taxation. If the private firm is a pure local one, the social benefits will be the same under the two tax schemes. However, if the private firm is a joint venture that involves domestic and foreign entities, social welfare under ad valorem taxation will be greater than that under specific taxation.

Multi-objective optimization of environmental tax for mitigating air pollution and greenhouse gas

Government macro-control through various policies is an important way to mitigate air pollution and greenhouse gases. Therefore, environmental tax is used worldwide as an important measure. However, few studies have considered the interaction between carbon and environmental protection taxes. Additionally, different sectors differ in their energy structure, pollution emission intensity, and economic status, and previous studies rarely proposed differentiated environmental tax rates based at the sectoral level. A model framework combining the computable general equilibrium (CGE) model and Bayesian optimization (BO) algorithm is proposed to maximize GDP, meet environmental planning objectives, and explore the optimal environmental taxation scheme to realize the multi-objective optimization of the economy and environment. Meanwhile, this study compares the different impact mechanisms of environmental protection tax and carbon tax. It discusses the impacts of differentiated environmental tax rates in different sectors on the environment and economy. For example, the results show that the coordinated implementation of environmental protection and carbon tax policies and the sectoral differentiated environmental tax rates in China could better balance economic development and environmental governance. Additionally, the optimal taxation scheme could mitigate air pollution and greenhouse gases, promote economic growth, and realize sustainable economic and environmental development. Furthermore, the optimized taxation scheme positively affects the energy and industrial structures.

Climate impacts of fossil fuels in todays electricity systems

Oil, coal, and gas account for approximately 80% of global primary energy, but only a portion of total airborne CO2eq (approx. 35% at GWP20 to 65% at GWP100), even though they account for 95% of total measured CO2 emissions. The benefits of these energy sources, as well as their related costs, are not all incorporated in current energy policy discussions. Global greenhouse gas policies must include documented changes in measured airborne CO2eq to avoid spending large amounts of public funds on ineffective or sub-optimal policies. The authors examined airborne CO2, which is less than half of emitted CO2, as well as reported CH4 emissions and the global warming potential of CH4 as published by the IPCC for coal and natural gas. The surprising conclusion is that surfaced-mined coal appears 'better for the climate' than the average natural gas, and all coal appears beneficial over LNG. Therefore, current CO2-only reduction policies and CO2 taxes are leading to unintended consequences and the switch from coal to natural gas, especially LNG, will not have the desired impact of reducing predicted future global warming; in fact, quite the contrary. A large portion of anthropogenic global warming is attributed by the IPCC and IEA to CH4, but it must be noted that CH4 emissions from natural sources and from agriculture account for approximately 40% and 25% of annual global CH4 emissions respectively. Energy accounts for about 20% of documented CH4 emissions. CO2 contributes only approximately 35% of annual airborne anthropogenic GHG emissions after accounting for CH4, over a 20-year horizon. At a 100-year horizon, the contribution of CO2 increases to approximately 60%. Energy policies that do not consider all GHG emissions along the entire value chain will lead to undesired economic and environmental distortions. All carbon taxation and CO2 pricing schemes are incorrect and need to be revised. At IPCC's GWP20 an approximately 2%1 higher loss of CH4 across the value chain prior to combustion of natural gas versus coal will lead to 'climate parity' of coal with natural gas. According to public data, natural gas value chains have high CH4 and undocumented CO2 losses. On a global average, using only IEA-documented CH4 data, natural gas emits approximately 15% more CO2eq than surface-mined coal, over a 20-year horizon. This difference will increase as the use of shale gas and LNG expands. Investors should support all energy systems in a manner that avoids an energy crisis, including intermittent renewable energy systems where they make sense. If CO2 emissions need to be reduced, one of the most effective ways would be to install ultra-supercritical power plants with CCUS technology. However, the undisputed benefits of increased CO2 concentrations in the atmosphere because of its promotion of photosynthesis and plant growth effects (fertilization) need to be considered in energy policy decisions as well. The authors suggest that future research and development should concentrate on reducing net emissions from fossil fuel power plants and providing cost-effective and reliable new conventional power generation capacity, utilizing clean coal and clean natural gas technology.

Analysis of Air Transport Stake Holders Perceptions and Motivations about Long Term Innovations Towards Sustainable Aviation Energy Paradigms

Aviation sustainability and GHG emissions reduction are academic and social trending topics. Air transport intensive energy use together with its constant pre-pandemic growth and the difficulties to evolve towards non-carbon-based energy paradigms, conform an environmentally “worrying frame”. Emissions reduction initiatives comprise aircraft technology and operation improvements, tax schemes, compensation and trading, efficient infrastructures, and sustainable aviation fuels. All of them have been subject of extensive academic analysis. Aspects that have been almost neglected in this analysis are the personal motivation and commitment from air transport stakeholders to pursue longer term technology developments towards sustainable energy paradigms. This paper explores those aspects by using a novel methodology where experts were interviewed prior to the COVID-19 pandemic (2017-2018) and during the pandemic (summer 2021), aiming at exploring the evolution of their beliefs regarding aviation sustainability, focusing in the expectations regarding aviation energy paradigm changes. Additionally, a survey was run among professionals of the aviation and energy sectors performing a quantitative analysis, triangulated with the interviews’ results. Aviation professionals keep relying on air traffic recovery and growth despite the COVID crisis. They are also conscious of the difficulties of the sector to enact the application of emissions reduction technologies and policies. However, there is not consensus in the strategies with the highest potential, although some tendencies have been identified: whilst enthusiasm about aircraft electrification has cooled down, a higher degree of reliance is put in new engine architectures. Fiscal measures are either poorly valued or not well understood. Aviation should leverage the consensus on new engine architectures to achieve tangible emissions contention in the mid-term, increase efforts to improve and explain emissions trading and compensation schemes, keep developing new technologies to unveil their real potential, and manage social expectations realistically, stressing its social and economic sustainability dimensions.

The principle of VAT neutrality: content and relationship with tax legislation

The subject. The principle of VAT neutrality is actual for Russia as VAT is one of the taxes levied in Russia. The principle of VAT neutrality has been upheld by the Russian Supreme Court. Therefore, the subject of the research is the definition of this principle as well as the problems of its relationship with the Russian tax law.Purpose of the study. The article considers the principle of value added tax neutrality as an independent principle of tax law, analyzes its content and regulatory role as independent means of legal regulation. Dealing with foreign doctrine regarding to the referred principle, the article shows the problems of its implementation in Russia and includes suggestions re its harmonization with the Russian tax legislation.Methodology. The author uses the formally legal interpretation of the legal provisions, comparative analysis of Russian and European literature as regards the nature and neutrality principle of VAT as well as the systemic analysis.The main results. The author has formulated the definition of the principle of VAT neutrality and determined the elements of the referred principle. Each element of the principle has been described. The author divided the content of the referred principle on property, legal, economic and competitive elements. However, all these elements should be considered systemically as VAT is supposed to be neutral for businesses in terms of each sphere of their business activity. The author concluded that VAT is the tax on consumption and the burden of this tax should be transferred on final consumers. Taxable persons are only public agents to collect VAT after taxable transactions with final consumers. Therefore, there should be no obstacles as regards the right to deduct input VAT as well as any rules distinguishing the tax burden for similar taxable transactions. Also, due to the deduction mechanism the burden of VAT in the same price of goods (services, work) should be equal and does not depend on the quantity of transactions to be previous to the sale to any final consumer. As regards the Russian tax legislation, the author identified the rules infringing the principle of VAT neutrality. Thus, the author has concluded that the Russian tax rules establishing strict documentary requirements to the right to deduct input VAT and limiting this right for foreign businesses contradict the principle of VAT neutrality. Also, the rules of the Russian Tax Code which stipulate the exemptions for the transactions between taxable persons and the different tax rates for the similar transactions as well as exclude the persons of the special tax schemes from VAT regime are not in line with referred principle.Conclusions. According to the results of the study, the author has formulated the suggestions regarding to the amendments to the tax legislation in order to correct the revealed mismatches between the provisions of the chapter 21 of the Russian Tax Code and the principle of VAT neutrality. It is proposed to reduce the requirements to the right to deduct as well as exclude the current limitation of this right for foreign businesses, the different tax rates for the similar transactions and the exemptions for the transactions between taxable persons. In addition, the author has suggested to entitle the persons of the special tax schemes to refuse their excluding from VAT regime.

Influence of tax dodging on tax justice in developing countries: some theory and evidence from Sub-Saharan Africa

PurposeThe mobilising domestic resources, in particular, taxation, is key to unlocking the resources required for public investment in infrastructure, growth and sustainable finance. This study aims to share the perception that the tax arrangements of states and the transnational corporations (TNCs) of developed states have a critical effect on the development prospects of the less powerful states in developing countries.Design/methodology/approachThis paper locates the role of TNCs tax practice within the broader dynamics of globalisation and the pursuit of profits, to argue that the drive of TNCs for higher profits can enrich our understanding of why some TNCs engage in tax dodging. This paper used publicly available evidence to shed light on the role played by TNCs in tax dodging practices in developing countries.FindingsThe evidence shows that tax havens and offshore financial centres, shaped by globalisation, are major structures facilitating the sophisticated tax schemes of highly mobile TNCs. This paper further shows that the corrosive effect of low-tax jurisdictions (“tax havens”) continues to represent a major obstacle to a regulation of global economic relations, which is required for maintaining sustainable social and economic development of poorer states.Research limitations/implicationsThis paper used publicly available evidence to illuminate the role played by TNCs in tax dodging practices in Sub-Saharan Africa.Practical implicationsThis paper, therefore, advocates a radical reform that could minimise the attendant problems created by the activities of TNCs and the enabling structures that facilitate these practices.Social implicationsTax dodging has played a major role in causing serious damage to the economic and social landscape in developing countries. This in turn, has undermined social welfare and also investment in the public services, thereby eroding the quality of life and producing a decline in average life expectancy.Originality/valueThis paper is a general review of literature and evidence on contemporary developmental issues.

Parliament

This overview highlights the Parliament’s (i) resolution on the impact of national tax schemes on the EU economy, (ii) recommendation on Mutual Recognition of Tax-Exempt Organizations, and (iii) call for action to reduce the EU VAT gap.

Evaluation of the Russian trade levy under the constitutionality test articulated by US case law

Protecting the constitution from violations continues to be a major challenge worldwide. The main concern is to cure constitutional noncompliance and to afford taxpayers an adequate opportunity to challenge tax’s constitutionality. This article gives an overview of the US standards for determining when a state tax is valid under the Constitution. After discussing applicability of the US standards to the Russian taxes the author evaluates the Russian trade levy under the four-prong test developed by the US Supreme Court and raises constitutional challenges to the Russian income tax scheme. The trade levy as a part of this scheme results in unconstitutional discriminatory treatment of regional residents and non-residents. Such an uncommon analysis permits to find tax discrimination and economic Balkanisation not only in Russia, but also in other Federations throughout the world. These issues are of great importance in the field of comparative tax law. In response to the problem of discrimination, the author provides solutions based on the applicable Russian law principles and global practice of avoiding multiple taxation.