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The CEO of Auto Financial Inc. has just learned of a new tax incentive, the Save Taxes by Adding and Retaining (STAR) Act, and she is considering hiring some new employees. As the current controller of Auto Financial Inc., your assignment is to read the relevant portion of STAR and to quantify the value of any tax benefits that Auto Financial, Inc. would receive if the CEO chooses to hire the five new employees. This case requires you to apply a rule of the Internal Revenue Code (IRC) to a practical business situation. As you complete the case you will become more comfortable with reading and interpreting IRC rules and applying them in business settings. You will also become more familiar with common payroll withholding categories and you will gain experience writing tax-related memoranda. [ABSTRACT FROM AUTHOR]

Numerous countries cut payroll taxes in response to COVID-19, including China, which reduced employer contributions by up to 21 percentage points. We use administrative data on more than 800,000 Chinese firms to evaluate payroll tax cuts as a business relief measure. We estimate that the tax cuts cover 31.5% of the decline in business cash flow, but labor informality causes 53% of registered firms-24% of aggregate economic activity-to receive no benefits at all. We quantify the targeting of the policy in terms of how much benefits flow to small firms less able to access external finance and to sectors worse hit by COVID-19. We find that (1) small firms and vulnerable industries are comparatively more labor intensive, which leads to desirable targeting; (2) labor informality worsens, but does not eliminate, targeting by firm size; and (3) labor informality is uncorrelated with the COVID-19 shock, and therefore does not affect targeting by sector. [ABSTRACT FROM AUTHOR]

This paper quantifies the impacts of collecting system on social insurance contribution compliance, taking advantage of a reform around 2000 in China. Using firm-level data, we find that the actual contribution rate and the probability of participation were raised by 3% and 5 percentage points respectively, after changing the collection department from social security department to local tax department. Mechanism analyses show that the effect is larger in areas where the tax collection capacity is stronger and the reform had no significant effects on SOEs.

Copyright of Polish Journal of Management Studies is the property of Czestochowa University of Technology, Faculty of Management and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

In 2006, Turkish policymakers introduced new measures to reduce informality and encourage formality, in which the primary means of combatting informality were stricter enforcement of existing labor market laws and deterrence through fines, without any appropriate adjustments in formal labour costs. In this paper we show that even without any change in enforcement and deterrence, in an economy growing with capital accumulation like in Turkey, informality gradually and naturally declines. Furthermore, we propose alternative labour market policy changes like reductions in minimum wage and payroll taxes to reduce informal employment share, and assess the relative effectiveness of these policy changes. [ABSTRACT FROM AUTHOR]

In the same vein as Blanchard and Tirole (J Eur Econ Assoc 6:45-77, 2008) First Pass, this note shows that, under the condition for equilibrium stability, the partial implementation of layoff taxes invariably increases firms’ profits as well as workers’ utilities by lowering payroll taxes. It also proves that, due to multiple equilibria, requiring stability does not raise any equilibrium existence issue per se. These insights could favor the introduction of firing taxes, which in practice would probably be a gradual process. [ABSTRACT FROM AUTHOR]

Copyright of Scientific Journal of National University of Life & Environmental Sciences of Ukraine. Series: Economy, Agrarian Management, Business is the property of National University of Life & Environmental Sciences of Ukraine and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The 2012 Colombian tax reform reduced payroll taxes and employer contributions to health insurance by 13.5 percent, while also increasing corporate income taxes and leaving untouched the benefits to workers financed through these taxes. Shifting taxation from formal employment to other business activities is a policy recipe under heated discussion in Latin America. The reform offers an ideal laboratory for studying empirically the potential distortions against formal employment associated with payroll taxes in contrast to other taxes on firms. We analyze the impact of the reform on employment and wages using monthly firm-level data on all formal employment in nonpublic firms in the country and a difference-in-differences approach that takes advantage of the fact that a few sectors were exempt from the 2012 tax reform. We find a positive average effect of 4.3 percent on employment and 2.7 percent on average firm wages, for the average firm. The employment effect is found only for micro and small firms, whereas the bulk of the employment is concentrated in medium and large firms, which show no significant effect. According to these estimates, about 145,000 new jobs were created between January and May of 2015 by virtue of the reform. These results are generally supportive of efforts to reduce payroll taxes, though our findings on employment are less robust than those on wages, and large firms do not seem to have benefitted. The apparent lack of effect for medium and large employers is also a source of concern. We speculate that it may be due to these firm's being more sensitive to the increase in corporate taxation that financed the reduction in payroll taxes, but lack of access to the relevant data prevents us from offering solid evidence regarding this hypothesis. [ABSTRACT FROM AUTHOR]

In 2013, Colombia implemented a tax reform that reduced payroll taxes by a total of 13.5 percentage points of wages. This paper evaluates the effects of this component of the 2012 Colombian tax reform on firm's formal employment and average wages. We construct a panel of firms based on their employee's administrative records. To account for the endogeneity of the treatment, we use an instrumental variables technique that exploits the exogenous variation from the decisions of firms that are similar to each other in several dimensions, but belong to different economic sectors. Based on our preferred specification, we estimate a positive and significant increase in formal employment, as a result of the implementation of the reform, of approximately 213,000 jobs in existing pre-reform firms. In the long run, these effects will increase to more than 600,000 jobs. The effect of the reform on the average wages paid by firms was also found to be positive for some sizes of firms, but the overall effect in the short run is rather small. [ABSTRACT FROM AUTHOR]

Alternative work arrangements have grown rapidly around the world. In Latin America, these alternative work arrangements have long been part of the labor market and have continued to grow. The informal sector grew rapidly in Latin America over the past few decades comprising up to half of the working population in many countries. Some attribute the growth in alternative work arrangements and informality to regulations and taxes, while others argue that it is precisely the lack of enforcement of regulations that allows unprotected employment arrangements to flourish. We examine whether reducing taxes associated with employment stimulates formal sector employment. We exploit the fact that the tax reform introduced in Colombia in 2012 affected only certain types of workers and not others. In particular, workers earning less than ten times the minimum wage and self-employed workers with more than two employees experienced a reduction of payroll taxes of 13.5 percent between 2013 and 2014. We use the Colombian household surveys, social security records and the monthly manufacturing sample to conduct difference-in-differences analyses of the reform. We find evidence of increased formal employment for the affected groups after the reform using all three data sets. We find that the probability of formal employment and the likelihood of transitioning into registered employment increased for the affected groups after the reform. We also find that the level and share of permanent employment relative to temporary employment grew after the reform for those earnings less than ten times the minimum wage. The results are greatest for those in smaller firms and for those earnings close to the minimum wage. [ABSTRACT FROM AUTHOR]

In 2012, the Colombian Government reduced employer payroll contributions from 29.5 to 16.0 percent. Two years later, the informality rate had diminished by about 4.0 percentage points. This paper attempts to estimate how much of this reduction was due to the tax reform, isolating the impact of other macroeconomic variables. A natural approach to performing this task is to apply a difference-in-differences methodology using a household survey panel. Since the Colombian survey does not have a panel structure, we simulated one using a matching difference-in-differences methodology. According to the results, the tax reform is associated with a 4.8-percentage-point decrease in the informality of workers affected by the reform in the thirteen main metropolitan areas. This represents approximately half the reduction of the relevant informality rate during that period, affecting mostly salaried men and workers in general with low levels of education. [ABSTRACT FROM AUTHOR]

In this paper it is developed a theoretical model to study the incentives that a labor tax might induce in terms of the optimal wage setting for an export oriented firm. In particular, we analyze the interaction of a labor tax that tends to reduce the wage due the firm is induced to shift backwards the tax burden to its employees minimizing the possible increase in the payroll costs and a fall of profits. However a lower wage might not be an optimal response to the establishment of a labor tax because it increases the labor turnover and as a result the firm faces both: an outputs opportunity cost and a labors turnover cost. The firm thus optimally decides to respond to the qualification and labor taxes by increasing the after tax wage.

We show that wage setting in the Colombian manufacturing industry is not fundamentally driven by labour productivity in contrast to the standard theoretical prediction. On the contrary, internal institutional arrangements - payroll taxation, the minimum wage or the price wedge between manufacturing and consumption prices - together with a higher exposure to international trade - connected to the increasing globalization of the Colombian economy - appear as the crucial drivers. These findings lead us to question the political strategy followed to attain cost competitiveness in a context of growing exposure to international trade. Implementation of a true wage bargaining system is suggested as a critical policy target to prevent the disruptive economic consequences of the current wage-setting mechanism and help rebalance the trade deficit. [ABSTRACT FROM AUTHOR]

This study uses a computable general equilibrium model to analyze the ef fects of eliminating Colombia's parafiscal taxes, which finance social programs. In the model, these are substituted by alternative financing sources: VAT, indirect taxes or taxes on capital. The results show that elimination of parafiscal taxes produces a one percentage point decrease in the unemployment rate, as long as these are not substituted by other taxes. However, when other taxes are substituted for parafiscal taxes, there may not be any ef fect on the unemployment rate. This implies that eliminating parafiscal taxes does not produce the ef fects expected by a partial equilibrium analysis, that is, a significant reduction in the unemployment rate. [ABSTRACT FROM AUTHOR]

Copyright of Ecos de Economía is the property of Universidad EAFIT and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Both wages and labor force participation have been declining for young, less-educated men since the mid-1970s. The purpose of this article is to examine how key income-security policy areas—including unemployment insurance, payroll taxes and the Earned Income Tax Credit, and child support enforcement—affect these men. The article concludes with policy recommendations to improve the impact of work-based subsidies on poverty among low-income men. Subsidized jobs in transitional job programs could play a critical role in helping these men to access these subsidies. [ABSTRACT FROM PUBLISHER]

A key obstacle to reducing payroll taxes in many industrialized and transition countries is the direct revenue loss to the government that it implies. This paper studies a simple and practical labor tax reform of reducing a payroll tax and increasing a progressive wage tax that keeps the marginal tax wedge unchanged. Such a strategy increases employment, reduces the equilibrium unemployment rate, and increases public revenue as long as workers do not have all the bargaining power in wage negotiations. Moreover, welfare rises if workers’ bargaining power is sufficiently large to exceed a critical value determined by the second-best Hosios condition. [ABSTRACT FROM AUTHOR]

A growing literature examines the responsiveness of taxable income to changes in federal income tax rates. The literature has found evidence of small but consistent taxable income elasticities to changes in federal tax rates. This article extends the analysis to examine the responsiveness of taxable income and labor income measures to changes in payroll tax rates. Using data to exploit the change in payroll taxes from 1979 to 1981, this article finds that taxpayers respond in the same way to changes in payroll taxes and individual income taxes. [ABSTRACT FROM AUTHOR]

As the architect of the new world's tallest building, Taipei 101, the Taiwanese architect C.Y. Lee has played an important role in building designs that present a Chinese cultural identity to the world. This paper analyzes C.Y. Lee's reinterpretation of traditional Chinese architecture in office buildings and skyscrapers. Lee developed his own view of modern Chinese architecture, producing "rules "for creating modern Chinese office buildings and skyscrapers. [ABSTRACT FROM AUTHOR]

This paper investigates and quantifies the role of payroll taxes in the decision to be self-employed. It examines the effects of introducing into the labour market a payroll tax which taxes employers, but which exempts the self-employed. It exploits two changes in the tax legislation to confirm that it is changes in legislation and not other sector specific trends that are driving the results. Our findings suggest that payroll taxes do indeed influence the decision to be self-employed, with the probability of self-employment increasing as taxes on employees increase and vice versa. Furthermore, there appear to be declines in the return to self-employment caused by the tax, possibly due to inefficient allocation of labour towards self-employment. [ABSTRACT FROM AUTHOR]

Reviews evidence about the economic attributes of payroll taxes in the finance of social security in Canada. Potential effects on employment; Nature of benefit-tax linkages.