Tax Firm Research Articles

Inter‐Jurisdictional Competition for Firms*

Regions inhabited with an immobile population of disabled and able individuals compete to attract mobile firms that provide jobs. The redistributive goal of regional governments is to support the disabled, who cannot work. Able individuals may work, be involuntary unemployed because of frictions in the labor market, or choose to be voluntary unemployed. Labor force participation decisions depend on regional redistributive policies. Both the size of workforce and tax on firms affect profits and therefore, firms’ location decisions. Allowing regions to engage in tax competition may be efficient. If regions cannot tax firms, they compete by implementing inefficient redistributive policies.

Globalization and Tax Systems: Implications for Developing Countries with Particular Reference to Southeast Asia

The unfolding globalization process, centring on production and distribution networks and on financial institutions, products, and transactions, is having a profound impact on a wide range of policies and practices in both the private and the public sectors. This article analyses the implications of globalization and the resulting greater integration of the world economy on tax systems in developing countries in general, and Southeast Asian countries in particular. Issues discussed include international factor mobility and the resulting consequences for efficiency and burden of taxation; tax competition among various jurisdictions to attract foreign direct investment (FDI) and professional and technical manpower; the impact of globalization on indirect taxation, including international trade taxation; tax implications of the Internet and e-commerce; taxation of global portfolio flows (i.e. non-FDI flows); and the impact of globalization on sustainability in Southeast Asia. I. Introduction The unfolding globalization process, centring on production and distribution networks and on financial institutions, products, and transactions, is having a profound impact on a wide range of policies and practices in both the private and the public sectors. Present tax systems evolved when each country formulated its own tax policy and focused on the requirements of its domestic economy. When tax treaties, agreements and conventions among nations were negotiated, they were within the framework of national sovereignty in tax policy. The globalization process has changed this, particularly with respect to the level of taxation, mix of taxes, design of particular taxes, and the manner of their administration and compliance. Countries are being forced to exhibit much greater awareness of and sensitivity to the tax changes being undertaken by their trading partners and competitors, reducing autonomy concerning their tax policies (Lodin 2000; Owens 1998; Tanzi 1998, 2000). Tanzi (2000) uses the term fiscal termites to depict how globalization and technological changes will impact on national tax systems.1 In other words, adaptation of the tax systems to globalization is expected to be slow and subtle rather than discontinuous (Slemrod 1995). It is also possible that even as the tax administrators confront challenges in administering current taxes, new types of taxes may become feasible with the rise of new technologies and activities (Tanzi 2000).2 This article analyses the implications of globalization and the resulting greater integration of the world economy on tax systems in developing countries in general, and Southeast Asian countries in particular.3 The remainder of the article is organized as follows. Globalization has greatly increased the international mobility of goods, services, factors (particularly capital), finance, and consumers (or more precisely consumption activities). The issue of international mobility and the resulting distribution of tax burden between mobile versus immobile factors is analysed in the next section. Globalization and international factor mobility has implications for efficient taxation of firms operating in multiple tax jurisdictions. These are discussed in Section III. This is followed by an analysis of the phenomenon of tax competition among various jurisdictions to attract foreign direct investment (FDI) in Section IV; and professional and technical manpower in Section V Section VI deals with the impact of globalization on indirect taxation, including international trade taxation. Section VII briefly discusses the tax implications of the Internet and e-commerce. Taxation of global portfolio flows (i.e. non-FDI flows) is taken up in Section VIII. The final section concludes with an extended discussion of the impact of globalization on sustainability in Southeast Asia, and on ways to deal with the implications of globalization for the tax systems. …

Dual Labor Markets, Urban Unemployment, and Multicentric Cities

A two-sector model of urban employment is developed which focuses on the formation of a secondary sector in response to a primary-sector demand shock. The optimal location of this (single-firm) sector is shown to give rise to a multicentric urban spatial structure. Conditions are then established under which the new labor market equilibrium involves both a decrease in unemployment and an increase in net income for those unemployed. These results are extended to a case where all unemployment benefits are financed by local taxation of firms. Here it is shown that profit incentives may exist for the primary sector to subsidize entry of the secondary sector. (C) 1997 Academic Press.

REVENUE MAXIMISING SALES TAXES IN OLIGOPOLISTIC EQUILIBRIUM WHEN COSTS VARY BETWEEN FIRMS

ABSTRACTThis paper considers taxation of firms in oligopolistic equilibrium. It shows that sales taxes which maximise government revenues will be differential and progressive when costs vary between firms.

Unemployment Insurance, Job Queues, and Systematic Job Search: An Equilibrium Approach

The labor market effects of unemployment insurance (UI) have been viewed in several contexts by economists. On the one hand, the UI system of jobless benefits and experiencerated taxation of firms is seen as influencing firms' decisions to lay off workers [9; 10; 24; 2]. Key in such analyses is the degree to which firms' layoffs are subsidized by an imperfect experience rating-a tax system in which employers' UI taxes increase by less than their workers' benefits increase. On the other hand, many other studies of UI place primary focus on the worker (although employer concern for worker well-being plays a role even in the work on the impact of UI on firm layoff decisions). Each of these worker-based studies is concerned with one of two issues: 1) UI and compensating wage differentials [14; 24] or 2) U I and the job search process.' First, Hutchens assumes that workers face a choice in the labor market between high wage-high layoff probability firms and low wage-low layoff probability firms [14]. By reducing the cost of being laid off, UI increases one's likelihood of choosing the former kind of job. Along these lines, Topel finds evidence that UI generosity substitutes for wages and therefore lowers the compensating differential associated with a high layoff job [23]. Second, several authors have studied the effect of UI on job search. This work recognizes that UI lowers the cost of searching and therefore raises the reservation wage, expected unemployment duration and expected post-unemployment wages.2 Previous work on the impact of UI on firm layoff decisions has assumed either a layoff subsidy [9] or demand uncertainty [2] in order to generate layoffs (and therefore a U I impact on layoffs). In contrast to such work, this paper views layoffs in an equilibrium context-they occur in our model even with no layoff subsidy and/or with no demand uncertainty. Layoffs are of value to the firm in our model since they correspond to workers rejected from a of potential trainees. From the firm's point of view, a queue of applicants may be desirable in order to lower

PUBLIC INTEREST LAW FIRMS—TO FEE OR NOT TO FEE

The Internal Revenue Service, while granting that public interest law firms are Sec. 501(c)(3) organizations entitled to tax exempt status, has as yet been unwilling to permit such firms to receive fees for services rendered by them. This is an unwarranted restriction on a charitable organization where the basis of the exemption does not rest on the traditional ground of relieving poverty. The restriction should be removed and the emphasis in distinguishing exempt law firms from typical taxable firms should be put on the prohibition against inurement of earnings.

A Study of Consumer Behavior by use of Competitive Business Games

The behavior of consumers, labor, investors, and community members in a simulated society has been studied by use of competitive business games. The model for the simulation represents a closed economic system with firms in an oligopolistic industry operating by a set of anticipatory decision rules and a number of household communities whose decisions are made by players who identify themselves with the welfare of their communities. The product price and product sales each period are determined by equating the aggregate supply function of the firms and the aggregate demand function of the household communities. The wage rates and employment each period are determined by matching offers of the firms with offers of the household communities. The game results show that some regulations were required in order to maintain a satisfactory consumption level. Regulations included wage control, taxation of firms and households, dividend policy and assistance for destitute household communities. It was found that change in employment was related to anticipated change in wage rate and to household's monetary assets, and that change in product demand was related to anticipated change in product price and to past consumption.