Taxation

Al Slivinski, Nathan Sussman, 20 March 2019

The problem of tax compliance is as old as the levying of taxes. Innovations in tax administration that induce high compliance rates at reasonable cost are extremely important to governments. This column demonstrates how the taille, a tax collection mechanism from medieval Paris, raised compliance by turning the social cost of tax evasion into a private one. It offers a tax collection model that is still relevant to governments today.

Peter Egger, Katharina Erhardt, Christian Keuschnigg, 25 February 2019

The effect of taxes on firm-level investments is very heterogeneous. This column shows that the impact of corporate taxation is up to 70% higher for entrepreneurial firms than for managerial ones, while dividend taxation negatively affects the investment of financially constrained firms but entails no significant impact on cash-rich firms. Policy should provide targeted tax relief to the most constrained firms, where taxes are most harmful, if other policies are unsuccessful in improving access to external funds.

Scott Baker, Lorenz Kueng, Leslie McGranahan, Brian T. Melzer, 30 January 2019

During and after the Global Crisis, economists and policymakers proposed a commitment to increase consumption taxes in the future as a way to shift consumption to the present. This column tests the impact of this unconventional fiscal policy using data on car sales. It finds that households respond dramatically to planned tax increases, but this depends on them having access to credit so they can bring forward their spending.

Rafael Ch, Jacob Shapiro, Abbey Steele, Juan F. Vargas, 29 January 2019

It is widely accepted that war between states can lead to increased fiscal capacity. Yet, there is no similarly clear, historically consistent accounting of how civil wars have affected state capacity and tax revenues. Using recent evidence from Colombia, this column shows that municipalities affected by internal conflict have tax institutions consistent with the preferences of the parties that have managed to inflict more violence in the past. Internal armed conflict can help interest groups capture municipal institutions for their own private benefit, impeding state-building.

Richard Blundell, Ian Preston, 25 January 2019

Sir James Mirrlees, co-recipient of the 1996 Nobel Memorial Prize in Economic Sciences, passed away in August 2018. This column outlines how his work has transformed economists’ understanding of their discipline – from the principles of tax design to the theory of contracts and beyond. By conceiving of policy questions in terms of information asymmetries between governments and taxpayers, Mirrlees demonstrated how to conduct convincing analysis of redistributive objectives together with incentive effects in the design of general tax systems and public policy more broadly. His ability to simplify complex problems in ways that reveal their tractable essence means that his work has yielded insights that have reverberated throughout the discipline. It has also proved highly fruitful for practical policy design.

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