Although most of the tax compliance literature focuses on tax evasion, a significant portion of the tax gap includes tax delinquencies. This column discusses new research about the enforcement of tax debts, including evidence from a field experiment in the US with nearly 35,000 tax delinquents who collectively owe half a billion dollars in taxes. In addition to financial penalties, this research studies the effectiveness of a common ‘shaming’ penalty in which the names, addresses, and other identifying information of individuals and businesses with delinquent taxes are published online.
Ricardo Perez-Truglia, Ugo Troiano, Friday, March 20, 2015
Hans Holter, Dirk Krueger, Serhiy Stepanchuk, Friday, February 20, 2015
Since the Global Crisis, debt sustainability has received increasing attention. This column argues that the maximum sustainable debt level depends negatively on the progressivity of the tax system. The authors estimate that the US is still relatively far from the peak of its Laffer curve and from its maximally sustainable debt level. However, adopting a flat tax would raise the maximum sustainable debt from 330% to more than 350% of benchmark GDP, whereas adopting Danish-style progressivity would lower it to less than 250%.
Tim Besley, Anders Jensen, Torsten Persson, Thursday, February 12, 2015
The Eurozone sovereign debt crisis has highlighted the problem of tax evasion. This column examines the effect of social norms on tax compliance using the UK poll tax as a natural experiment. Comparing councils where tax evasion spiked more during the poll-tax period to those where it spiked less, there was no systematic difference before the poll-tax period. However, once the poll tax was abolished, tax evasion remained higher in the former group, suggesting that high poll-tax non-compliance created a persistent norm of non-compliance.
Kirill Shakhnov, Saturday, January 17, 2015
The rapid growth of the US financial sector has driven policy debate on whether it is socially desirable. This column examines the trade-off between finance and entrepreneurship, and links the growth of finance to rising wealth inequality. Although financial intermediation helps allocate capital efficiently, people choosing a career in finance do not internalise the negative effect on the pool of talented entrepreneurs. This mechanism can explain the simultaneous growth of wealth inequality and finance in the US, and why more unequal countries have larger financial sectors.
Ronald B. Davies, Julien Martin, Mathieu Parenti, Farid Toubal, Monday, January 5, 2015
Allegations of tax-avoiding transfer pricing by multinational firms are common, but economic evidence is scarce. This column discusses detailed price data for intra-firm and arm’s length transactions that reveals tax-driven transfer pricing, and suggests that it may be reduced by focusing on a small number of large firms in a small number of tax havens.
Nezih Guner, Martin Lopez-Daneri, Gustavo Ventura, Sunday, October 5, 2014
Recent calls for closing fiscal deficits have been combined with proposals to shift the tax burden and increase marginal tax rates on higher earners. This column argues that revenue-maximising tax rates for high earners in the US would be substantially higher than current rates. However, increasing tax rates for high earners would not raise much additional revenue.
Ruud de Mooij, Michael Keen, Victoria Perry, Sunday, September 14, 2014
Multinational companies’ ability to pay little corporate income tax has grabbed headlines recently. This column argues that the details of international tax rules matter for macroeconomic performance – especially in low-income countries. This emphasises the importance of the G20–OECD Action Plan on Base Erosion and Profit Shifting. However, dealing properly with tax spillovers will require a deeper global debate about the international tax architecture itself.
Cait Lamberton, Jan-Emmanuel De Neve, Michael I. Norton, Friday, May 30, 2014
Non-compliance with tax costs governments billions, in part because people really don't like paying taxes. This column reports two experiments designed to see if it's possible to make people hate taxes a little less and raise tax compliance. The results indicate that if people are given the opportunity to express a preference (though not actually make the final decisions) on how their taxes are spent, they are much less likely to cheat. Simply by making the tax form more interactive, governments could increase tax compliance, while empowering citizens and improving their attitudes towards taxation.
Laurence J. Kotlikoff, Tuesday, January 14, 2014
Though taxing corporations may be a political no-brainer, it may be a big economic mistake. This column discusses recent research showing that the tax is not paid primarily by rich corporate shareholders. They can, and do, move their capital away from countries that have high corporate rates. Eliminating the US corporate tax by, for example, taxing accrued global corporate profits as personal income can produce dramatic increases in US investment, output, real wages, and saving. Modest gains accrue to early generations with very sizable gains going to young and future generations, both skilled and unskilled.
Michael Keen, Wednesday, October 16, 2013
Fiscal consolidation, and public concern that its pain be fairly spread, is putting tax systems under considerable pressure. This column takes stock of how they have been faring, and how they could do better.
Charles F Manski, Sunday, August 18, 2013
Economists usually think of taxation as inefficient. This column argues that the anti-tax rhetoric evident in much lay discussion of public policy draws considerable support from the prevalent negative language of professional economic discourse. Optimal income taxation doesn’t have to employ the pejorative concepts of inefficiency, deadweight loss and distortion; and this column argues that it is high time for economists to discard them and make analysis of taxation and public spending distortion-free.
Balázs Égert, Friday, May 10, 2013
France has recorded one of the lowest real per capita income growth levels in the OECD over the last 20 years or so. One of the many structural weaknesses causing this weak performance is the French tax system. This column argues that complexity, instability and non-neutrality coupled with very high effective tax rates in many areas of the French tax system put a heavy burden on the economy.
José M. González-Páramo, Ángel Melguizo, Wednesday, February 6, 2013
In spite of its policy relevance, academics and policymakers cannot agree on who bears the brunt of a tax on labour. This column uses meta-regression techniques to argue that economic institutions, the tax wedge definition, and the time horizon are crucial in determining who actually pays. Results based on 52 empirical papers suggest that in the long run, workers bear between two thirds of the tax burden in Continental and Anglo-Saxon economies, and nearly 90% in Nordic ones.
Mika Maliranta, Niku Määttänen, Vesa Vihriälä, Wednesday, December 19, 2012
Do the ‘cuddly’ Nordic countries free ride on the ‘cut-throat’ incentives for innovation in US-style economies? Don’t PCs, the internet, Google, Windows, iPhones and the Big Mac speak for themselves? This column argues that, despite a higher overall tax burden and more generous safety nets, the Nordics have generated at least as much – if not more – innovation than the US. So far, ‘cut-throat’ capitalism has not been the only road to an innovative economy.
Casey B. Mulligan, Wednesday, October 31, 2012
What has happened to marginal tax rates in the US? This column argues that marginal tax rates vary so much among different groups in the US that redistributive taxes have actually damaged and interfered with the incentives and make up of the workforce.
Harry Huizinga, Johannes Voget, Wolf Wagner, Wednesday, October 31, 2012
Capital gains taxation increases the cost of capital with potentially negative implications for growth. This column uses data from international mergers and acquisitions to show that a higher capital gains tax rate in the acquiring country reduces the international takeover price. It implies a discount of 3.4% in the acquisition prices paid by US acquiring firms, given the US capital gains tax rate of 15%.
Donato Masciandaro, Francesco Passarelli, Wednesday, January 11, 2012
Italy’s prime minister, Mario Monti, is the latest in a growing line of senior public figures to support the idea of a financial transaction tax - also known as a Tobin tax or Robin Hood tax. Rather than give a case for or against, this column looks at what the realistic options are and asks whether they will be better for Europe, or worse.
Robert H. Frank, Friday, December 23, 2011
Robert Frank of Cornell University talks to Romesh Vaitilingam about his book, ‘The Darwin Economy: Liberty, Competition and the Common Good’. He argues that Charles Darwin's understanding of competition – in which individual and group interests often diverge sharply – describes economic reality far more accurately than Adam Smith's. They discuss the implications of this view for current debates about inequality, taxation, and policies to get out of economic stagnation. The interview was recorded in London in November 2011. [Transcript available]
Leonard Burman, Marvin Phaup, Thursday, November 17, 2011
As the US tries to cut back its debt, the battle lines are already being drawn. Republicans are in favour of spending cuts; Democrats in favour of tax rises. Putting political ideology to one side, this column asks what objective economics has to say.
Harry Huizinga, Wolf Wagner, Johannes Voget, Monday, July 11, 2011
What new policies should be included in financial and regulatory reforms? This column argues that banks are under-taxed along many dimensions and analyses a proposed broad tax on financial-sector income.