Search

Keywords Tax enforcement; Tax evasion; Local taxes; Tax progressivity Highlights * I study the impact of stricter tax enforcement on local taxes set by Italian municipalities. * I take advantage of cross-municipality variation in stricter tax enforcement generated by the Ghost Buildings Program. * Stricter tax enforcement raises statutory tax progressivity on both income and property tax rates. * Larger tax collections increase public spending. Abstract In contexts with weak enforcement, the threat of tax evasion may constrain policy makers' power to set tax policies optimally. This paper studies whether stricter tax enforcement affects the tax schedule set by local governments. I take advantage of an Italian policy that generated cross-municipality variation in the scope for tackling income and property tax evasion through stricter tax enforcement. Combining an event-study design with municipality-level panel data on statutory tax rates, I show that stricter tax enforcement tips the balance in favor of higher marginal tax rates for middle and top incomes, while the poor benefit of a lower marginal tax rate. The tax hike is larger in places with higher pre-program inequality and where intrinsic tax compliance attitudes are weaker. As a result of higher tax revenue, municipalities hire more workers and raise public spending. These results suggest that tax enforcement policies have not only the power to foster tax capacity, but also to enhance the ability to pursue redistributive policies. Author Affiliation: University of Lausanne, Department of Economics and Business, Switzerland Article History: Received 22 April 2022; Revised 23 January 2023; Accepted 23 January 2023 (footnote)[white star] I would like to thank the editor, Ricardo Perez-Truglia, for his guidance and three anonymous reviewers for their helpful comments. The paper also benefited from discussions and comments from Mike Brewer, Marius Brülhart, Ben Meiselman, Andreas Mueller, Alari Paulus, Morten Ravn, Emmanuel Saez, Ugo Troiano and participants at TARC Conference (University of Exeter, April 2019), Shadow Economy Conference (University of Trento, July 2019), NTA Conference (Tampa, November 2019), University of Essex (February 2020), IIPF virtual Conference (August 2020), EEA virtual Congress (August 2020), SIEP Conference (September 2021) for providing constructive comments. Thanks also to Franco Maggio and Giovanni Reina from the Internal Revenue Agency (Agenzia delle Entrate) and Pasquale Recano from the Ministry of Interior (Ministero dell' Interno) for data assistance. All errors are mine. Byline: Enrico Rubolino [enrico.rubolino@unil.ch]

Keywords Corporate taxation; Firm mobility; Tax competition Highlights * When average firm mobility falls, local governments set higher tax rates. * We confirm this using the rapid growth of wind turbines in Germany for identification. * After immobile firm entry, municipalities increased corporate taxes by up to 24%. Abstract Capital mobility is one of the key determinants of corporate tax rates. We first show theoretically that governments will set higher tax rates on firm profits after an immobile firm has entered. We then test this prediction in a well-identified setting, using the rapid growth of wind power plants (a very immobile industry) and the large variation in local business taxes across Germany for identification. We confirm that municipalities increase corporate tax rates by up to 24% after immobile firm entry. The effect is stronger when immobile firms make up a larger share of the overall tax base. Author Affiliation: (a) KU Eichstätt-Ingolstadt, CESifo, Germany and WU Vienna, Austria (b) University of Oxford, United Kingdom and DIW, Germany * Corresponding author. Article History: Received 19 March 2019; Revised 13 April 2021; Accepted 29 September 2021 (footnote)[white star] We thank Juan Carlos Suárez Serrato (the editor), two anonymous reviewers, Johannes Becker, Steve Bond, Andreas Haufler, Ben Lockwood, Rainer Niemann (discussant), Georg Schaur, Kurt Schmidheiny (discussant), Johannes Voget (discussant) and participants at conferences by the German Economic Association and the Royal Economic Society, the MaTax conference, the summer symposium of the Oxford Centre for Business Taxation, the Norwegian-German Seminar for Public Economics, the CESifo Venice Summer Institute, and at seminars at the Universities of Bochum, Dublin, Linz, Munich, Oslo, Oxford and Tübingen for very helpful comments. Work on this paper was started when Dominika Langenmayr was visiting Oxford University Centre for Business Taxation, she is grateful for their hospitality. We gratefully acknowledge financial support from the German Research Foundation (Langenmayr: LA 3565/1--1, Simmler: SI 2050/1--1). A longer version of the paper was previously circulated under the title 'Why the Current Tax Rate Tells You Little: Competing for Mobile and Immobile Firms'. Byline: Dominika Langenmayr [dominika.langenmayr@ku.de] (a,*), Martin Simmler [martin.simmler@sbs.ox.ac.uk] (b)

Keywords Inventor mobility; Personal income taxes; Regional development Highlights * This study exploits drops in top personal net-of-tax rates across Swiss state borders. * Finds a local elasticity in immigrant inventors' location choices of 3.2. * These choices matter for the localization of new ventures and knowledge spillovers. Abstract This paper studies the relationship between local personal income tax rates and the attractiveness of municipalities as residential locations for immigrant inventors in Switzerland. Exploiting sharp differences in top income tax rates across state borders, I find an elasticity of the probability that an inventor takes residence in a border municipality with respect to the top net-of-tax rate of around 3.2. Additional evidence suggests that inventors' residential location choices are consequential for the localization of entrepreneurial activity and local knowledge spillovers. Author Affiliation: Max Planck Institute for Innovation and Competition, Germany Article History: Received 26 October 2020; Revised 19 October 2022; Accepted 16 January 2023 (footnote)[white star] I thank Benjamin F. Jones, Craig Garthwaite, Nicola Persico, David Besanko, Matthew Notowidigdo, Fabian Gaessler, Pere Arqué-Castells, Nicola Bianchi, Elena Prager, Michael Powell, Christopher Ody, Amanda Starc, Dietmar Harhoff, Raphael Parchet, Martin Wörter, Kurt Schmidheiny and Enrico Berkes. Moreover, I would like to thank the editor, two anonymous referees and seminar participants at Kellogg School of Management, the Swiss Workshop on Local Public Finance and Regional Economics, the Geography of Innovation conference, LMU Munich, EPFL Lausanne, Max-Planck Institute for Innovation and Competition, TU Munich and at the University of Wisconsin at Whitewater for their feedback. I am indebted to Raphael Parchet, Ernest Miguélez and Carsten Fink for providing me with data. I gratefully acknowledge financial support from the General Motors Research Center and the Kellogg School of Management. Byline: Rainer Widmann [rainer.widmann@ip.mpg.de]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2017.02.003 Byline: Michael Hallsworth, John A. List, Robert D. Metcalfe, Ivo Vlaev Abstract: This paper presents results from two large-scale natural field experiments that tested the effect of social norm messages on tax compliance. Using administrative data from >200,000 individuals in the United Kingdom, we show that including social norm messages in standard reminder letters increases payment rates for overdue tax. This result offers a rare example of social norm messages affecting tax compliance behavior in a real world setting. We find no evidence that loss framing is more effective than gain framing. Descriptive norms appear to be more effective than injunctive norms. Messages referring to public services or financial information also significantly increased payment rates. The field experiments accelerated the collection of tax revenue at little cost. Article History: Received 21 March 2015; Revised 30 November 2016; Accepted 8 February 2017 Article Note: (footnote) [star] We would like to thank the Editor and two referees for thoughtful comments that improved the paper considerably. We would like to thank Her Majesty's Revenue and Customs, the UK Cabinet Office's Behavioural Insights Team (now The Behavioural Insights Team), and TNS BMRB. In particular: Pedro Wrobel, Nick Down, David Halpern, Jackie Simms, Lesley Titley, Matt Cole, Dawn Reade, Simon Bradford, Mike Holgate, Bob Appleton, Gordon Smith, Graham Brammer, Mike Drewery, Michelle Harrison, and Ara Darzi. We thank David Novogordsky for his research support. We are grateful for the comments given by seminar participants at IFS-UCL, UCSD, Georgia State University, University of Wyoming, the 1st International Conference on Public Policy, the AEA/ASSA 2014 conference, and the 2014 FAU Taxation, Social Norms and Compliance conference; and those given by Hunt Allcott, James Alm, Stefano DellaVigna, Greer Gosnell, Erich Kirchler, Steven Levitt, Mark Phillips, Michael Price, Steven Sheffrin, and Richard Thaler. The views expressed are those of the authors, and cannot be attributed to H.M. Revenue and Customs, the Cabinet Office, or H.M. Government.

Keywords Income redistribution; Measurement; Efficiency Highlights * We introduce a new survey item to measure preferences for income redistribution. * It forces respondents to consider trade-offs involved with distribution. * It keeps tax revenues constant and takes into account efficiency costs of taxation. * It measures preferred equality in different regions of the income distribution. * Results show that the new data predict subsequent behavior. Abstract This paper introduces a new survey item through which to measure people's preferences toward income redistribution. Respondents construct their preferred distribution of after-tax income by changing the tax rates of the bottom four income quintiles. Taxes for the top quintile update automatically in order to keep government revenues fixed and take into account behavioral effects on pre-tax income. Data from a large, representative sample of the Dutch population indicates that around 50--60% of the respondents construct distributions that are more equal overall than the status quo, as measured by the Gini coefficient. Indeed, only 5% of respondents opt for greater inequality, but not beyond a flat-tax. Income ratios for the bottom and top half of the distribution indicate greater support for additional redistribution among those on higher rather than lower incomes. The validity of the responses to the new item is supported by their predictive power for voting behavior in the parliamentary elections almost three years later, even when controlling for a Likert scale. Two information provision experiments illustrate the richness of the new data. Author Affiliation: (a) Tilburg University, P.O. Box 90153, 5000 LE Tilburg, the Netherlands (b) Netspar Netspar, P.O. Box 90153, 5000 LE Tilburg, the Netherlands (c) Leiden University, P.O. Box 9500, 2300 RA Leiden, the Netherlands * Corresponding author. Article History: Received 17 July 2021; Revised 21 July 2022; Accepted 21 July 2022 Byline: Jochem de Bresser [j.r.debresser@tilburguniversity.edu] (a,b,*), Marike Knoef [M.G.Knoef@law.leidenuniv.nl] (c,a,b)

Keywords Gross receipts tax; Turnover tax; Vertical integration; Natural experiment; Cannabis; Excise tax Abstract We quantify the effects of a gross receipts tax (GRT) on vertical integration for the first time. We use data from the Washington state recreational cannabis industry, which has numerous advantages including a clean natural experiment: a 25% GRT imposed on cannabis firms was subsequently replaced by an excise tax at retail. We find the short-run elasticity of vertical integration with respect to the intermediate good net-of-tax rate is -0.15 and the long-run elasticity is about twice as large. We find these incentives lead to large output losses -- production increases by 23 percent when the GRT is eliminated. Author Affiliation: (a) University of Oregon, United States (b) NBER, United States (c) IZA, Germany (d) University of Kentucky, United States * Corresponding author. Article History: Received 11 May 2022; Accepted 3 June 2022 (footnote) The authors would like to thank David Agrawal, J.S. Butler, Estelle Dauchy, Naomi Feldman, Enda Hargaden, Austin Nichols, Nathan Seegert, Monica Singhal, Jeffrey Smith, Alex Yuskavage and seminar or conference participants at University of Wisconsin-Madison, University of Kentucky, ABFM, NTA, WEAI and the Utah Tax Invitational (U-TAXI) for helpful comments. This paper previously circulated as: 'The Welfare Costs of a Gross Receipts Tax.' Byline: Benjamin Hansen [bchansen@uoregon.edu] (a,b,c), Keaton Miller [keatonm@uoregon.edu] (a), Caroline Weber [caroline.weber@uky.edu] (d,*)

Keywords Taxation; Cross-border; Innovation; Multinational corporations Highlights * Using data on R&D activity of MNEs we analze the cross-border effect of patent boxes. * We show that nexus requirements of patent boxes are crucial for cross-border effects. * Patent boxes without nexus requirement (patent havens) increase R&D activity abroad. * The positive effect is unlikely to compensate revenue losses in non-patent box countries. * Patent boxes with a nexus requirement reduce patent output abroad when R&D relocation costs are small. Abstract We analyze how a reduction of the tax rate on corporate income from intellectual property (IP) in one country, known as a patent box regime, affects corporate R&D activity in other countries. Combining data on patents and multinational corporation networks, we show that the cross-border effect of tax policy changes depends on whether co-location of the IP and the underlying R&D activity is required. Patent boxes without such a requirement increase patent output in other countries. Patent boxes with such a requirement reduce patent output abroad but only when relocation costs for R&D activity are small. Author Affiliation: (a) University of Munich, Germany (b) Norwegian School of Economics (NHH), Norway * Corresponding author at: Norwegian School of Economics (NHH), Helleveien 30, 5045 Bergen, Norway. Article History: Received 27 September 2019; Revised 12 October 2021; Accepted 12 October 2021 (footnote)[white star] The authors are grateful to the editor, Juan Carlos Suárez Serrato, three anonymous referees, David R. Agrawal, Kathleen Andries, Steven Bond, Sebastien Bradley, Michael Devereux, Evelina Gavrilova, Bronwyn Hall, Niels Johannesen, Mohammed Mardan, Jakob Miethe, Helen Miller, Nadine Riedel, Martin Ruf, Andrew Toole, Johannes Voget and Floris Zoutman as well as participants of the 2016 MaTax Annual Conference, the 2017 ZEW/MaCCI Conference, the 2017 LAGV conference, the 2017 IEB Workshop on the Economics of Taxation, the 2017 IIPF Annual Congress, the 2017 NTA Annual Conference, the 2019 Workshop on Innovation, Technological Change, and International Trade (Heilbronn), and seminars at the University of Mannheim, the Vienna University of Economics and Business, the University of Kentucky, the University of Salzburg and the Norwegian School of Economics for valuable comments and suggestions. This paper was previously circulated under the title 'Spillover from the haven: Cross-border externalities of patent box regimes within multinational firms'. Byline: Thomas Schwab (a), Maximilian Todtenhaupt [maximilian.todtenhaupt@nhh.no] (b,*)

Keywords Cash transfer programs; Labor supply; Registered employment; Efficiency costs Abstract The disincentive effects of social assistance programs on registered (or formal) employment are a first-order policy concern in developing and middle-income countries. We study the impact of a conditional cash transfer (CCT) program in Uruguay on the employment of adult members in beneficiary households in a context of high informality. Our research design relies on the sharp discontinuity introduced by program eligibility rules around a poverty score threshold combined with longitudinal administrative data. We find reductions of about 6 percentage points (a 13% drop) in formal labor force participation among all beneficiaries and of 8.7 percentage points (a 19% drop) for single mothers. The implied elasticity of participation in the formal sector with respect to the net-of-tax rate is about 0.78 for the full sample and about 1.3 for single mothers. The reduction in labor supply is stronger among individuals who have a medium propensity to be formally employed, with a smaller reduction in the case of infra-marginal individuals. We also present suggestive evidence that the reduction in formal employment increases inactivity and informal work in equal proportions. Finally, despite pervasive informality in the context of the Family Allowance assistance program (AFAM), the program's marginal value of public funds of 0.61 implies an efficiency cost within the range of cash transfer programs targeted to families in the United States. Author Affiliation: (a) Instituto de Economía (IECON), Departamento de Economía, Universidad de La República, G. Ramirez 1926, Montevideo, Uruguay (b) IZA Institute of Labor Economics, Bonn (c) CEDLAS (Centro de Estudios Económicos, Laborales y Sociales) -- Universidad Nacional de La Plata, Facultad de Ciencias Económicas, Calle 6 n. 777, La Plata, Provincia de Buenos Aires, Argentina (d) School of Economics, University of Nottingham, Nottingham NG7 2RD, United Kingdom (e) CONICET (Comisión Nacional de Investigaciones Científicas y Tecnológicas), Argentina * Corresponding author at: CEDLAS -- Universidad Nacional de La Plata, Facultad de Ciencias Económicas, Calle 6 n. 777, La Plata, Provincia de Buenos Aires, Argentina. Article History: Received 18 July 2018; Revised 18 September 2020; Accepted 27 September 2020 (footnote)[white star] We would like to thank Leonardo Gasparini, Marco Manacorda and Andrea Vigorito for their valuable input at different stages of this project. We are also grateful to Mariano Bosch, David Card, Emily Conover, Paul Gertler, Corrado Giulietti, Hilary Hoynes, Clément Imbert, Hugo Jales, Carlos Lamarche, Stefan Staubli, Darío Tortarolo, Gonzalo Vázquez Baré, Andrea Weber and Josef Zweimüller for comments on earlier drafts and presentations, as well as seminar participants at the 9th IZA/World Bank Conference on Employment and Development, the European Association of Labour Economists 26th Annual Conference, ORT University seminar (Uruguay), IECON seminar, the IZA/CEPR 17th European Summer Symposium in Labour Economics, the 2015 Northeast Universities Development Consortium (NEUDC) Conference, and the SEU Annual Conference. Two anonymous referees made valuable contributions. G. Cruces would like to thank the generosity of CEGA at U.C. Berkeley, where part of this work was carried out during his visit in January 2015. Matías Giaccobasso provided excellent research assistance. A previous version of this paper circulated under the title 'Work Incentives and Welfare Programs. Evidence on Real and Reporting Effects in Uruguay.' Byline: M. Bergolo [mbergolo@iecon.ccee.edu.uy] (a,b), G. Cruces [gcruces@cedlas.org] (c,d,e,*)

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2016.04.002 Byline: Thomas A. Gresik Abstract: This paper analyzes the effect on firm behavior and national tax revenues of allowing multinational firms to choose to be taxed under separate accounting rules or an apportionment formula. Separate accounting always generates more profitable output and conditional labor demand distortions from tax differentials while either method can generate a more profitable income-shifting distortion. Both low-cost and high-cost firms can prefer separate accounting while medium-cost firms prefer formula apportionment. With symmetric countries, a firm's preferred method generates greater tax revenues in the country with the lower tax rate. With asymmetric countries, a firm's preferred method need no longer generate greater tax revenues in the lower-tax-rate country due to the fact that countries and firms now value tax base distortions differently. With this misalignment of preferences, some firms can choose the preferred method of both countries at fixed tax rates. Article History: Received 4 December 2013; Revised 10 April 2016; Accepted 11 April 2016 Article Note: (footnote) [star] I thank Andreas Haufler, Kai Konrad, Wolfgang Schon, Dirk Schindler, participants of the 2013 Skatteforum (Tax Forum) in Norway, the research seminar at the Max Planck Institute for Tax Law and Public Finance in Munich, Germany, and the 8th Norwegian-German Seminar on Public Economics at CESifo, and three anonymous reviewers for all their comments.

Keywords Multinational enterprises; Cross-border expansion; Target choice; Corporation income tax; Mixed logit Abstract We use firm-level data to investigate the impact of taxes on the international location of targets in M&A, allowing for domestic acquisitions and heterogeneous responses by companies. The statutory tax rate in the target country is found to have a negative impact on the probability of an acquisition in that country. In addition, the estimated size of the effect is found to depend on whether (i) acquirer is a domestic or a multinational enterprise; (ii) the acquisition is domestic or cross-border; and (iii) the acquirer's country has a worldwide or territorial tax system. Author Affiliation: (a) Department of Economics, University of Warwick, Coventry CV4 7AL, UK (b) Oxford University Centre for Business Taxation, Said Business School, Oxford OX1 1HP, UK (c) IZA, Germany (d) Oslo Fiscal Studies, Oslo, Norway (e) ETH Zurich, MTEC, Zurich 8092, Switzerland * Corresponding author. Article History: Received 14 February 2017; Revised 24 May 2019; Accepted 31 May 2019 (footnote)[white star] This paper was previously circulated under the title, 'How do taxes affect cross-border acquisitions?'. Financial support from the ETPF and the Economic and Social Research Council (ESRC) (grant number RES-060-25-0033) is gratefully acknowledged. We thank Giorgia Maffini, Simon Loretz and Socrates Mokkas for providing the BvD and tax data. We thank the Editor, two anonymous referees, and Steve Bond, Luis Candelaria, Valentina Corradi, Clemens Fuest, Bill Greene, Simon Loretz, Peter Neary, David Ulph, members of the European Tax Policy Forum, and seminar participants in Oxford, Bayreuth, the 2011 Public Economics UK workshop, the IIPF Congress in Michigan, and the UNC 2012 Tax Symposium for helpful comments. We remain responsible for any errors. Byline: Wiji Arulampalam [wiji.arulampalam@warwick.ac.uk] (a,b,c,d), Michael P. Devereux [michael.devereux@sbs.ox.ac.uk] (b,*), Federica Liberini [liberini@kof.ethz.ch] (e)

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpubeco.2015.02.002 Byline: Andreas Haufler, Christoph Lulfesmann Abstract: The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the effects of introducing a two tier structure of capital taxation, where the asymmetric member states of a union choose a common, federal tax rate in the first stage, and then non-cooperatively set local tax rates in the second stage. We show that this mechanism effectively reduces competition for mobile capital between the members of the union. Moreover, it distributes the gains across the heterogeneous states in a way that yields a strict Pareto improvement over a one tier system of purely local tax choices. We also discuss the effects of diverging capital endowments within the union and capital flows to third countries. Article History: Received 20 December 2012; Revised 14 October 2014; Accepted 10 February 2015 Article Note: (footnote) [star] We thank an anonymous referee and the editor, David Wildasin, for their insightful comments and suggestions. This paper was presented at conferences and seminars in Berkeley, Dresden (IIPF Conference), Gottingen (German Economic Association), Oxford and Vancouver (CEA meetings). We thank seminar participants, in particular David Agrawal, Alan Auerbach, John Burbidge, Thiess Buttner, Nadja Dwenger, Jim Hines and Dominika Langenmayr for helpful comments. The research was started when the first author visited Simon Fraser University. He wishes to thank the Department of Economics for its hospitality. Financial support by SSHRC is gratefully acknowledged.