Jozef Konings, Cathy Lecocq, Bruno Merlevede, 17 October 2018

Many countries have reduced their corporate income tax rates or introduced tax deductions, exclusions, and credits to attract foreign direct investment. This column discusses the introduction of the Notional Interest Deduction in Belgium, which allows companies to deduct from their taxable income an interest that is calculated based on the company’s equity. The deduction has increased employment in Belgian affiliates of multinational enterprises by between 6% and 8%.

Ufuk Akcigit, John Grigsby, Tom Nicholas, Stefanie Stantcheva, 16 October 2018

Understanding how taxation influences innovation is of central importance to create investment incentives for R&D, yet our knowledge remains limited due to a lack of data, especially covering a long period of time. This column uses newly constructed datasets from the 20th century to examine the effects of both personal and corporate income taxation on inventors, as well as on firms that do R&D. It finds consistently negative effects of high taxes on innovation over time as well as on individual inventors and firms. 

Peter Egger, Nora Strecker, Benedikt Zoller-Rydzek, 24 September 2018

The OECD estimates that more than $100 billon is lost each year to tax avoidance by MNEs. One way that firms do this is by using their size and mobility to bargain for tax breaks. This column uses French data to identify the nature of such bargaining. It finds that the scale of the projected tax payment accounts for 41% of the tax break, and a credible threat to relocate accounts for the rest.

Annette Alstadsæter, 03 August 2018

It's routine for the rich to dodge tax by hiding it offshore. But how much of their wealth are they hiding illegally? Tim Phillips talks to Annette Alstadsæter of the Norwegian University of Life Sciences about how she and her colleagues used whistleblower data to discover the extent of tax evasion by the ultra-rich.

Andara Kamara, 06 June 2018

Policymakers use microsimulation models to gauge the impact of policies across the economy. Andara Kamara discusses the work of the IFS with the Ghanaian government, which uses such models to better understand the impact of a range of taxes on different demographic groups, particularly in the absence of historical data.

Dan Nuer, 22 May 2018

For Ghana to move beyond aid to being self-sufficient on its own tax revenues, it must first gather huge amounts of data on the tax profiles of its citizens and businesses. Dan Nuer talks about the challenges the Ghanaian government faces in doing this, and how its work with the Institute for Fiscal Studies can help address them.

Annette Alstadsæter, Niels Johannesen, Gabriel Zucman, 09 May 2018

Tax records are often used to gauge the concentration of wealth and income in a society. However, if the rich dodge taxes more than the poor, tax records will underestimate inequality. This column uses Scandinavia as an example to demonstrate how tax evasion varies with wealth: the top 0.01% richest households in Scandinavia evade about 25% of the taxes they owe by concealing assets and investment income abroad. The very rich are able to do this simply because they have access to wealth concealment services. To reduce top-end evasion, what is essential is to shrink the supply of such services.

Rasmus Wiese, Richard Jong-A-Pin, Jakob de Haan, 26 March 2018

Empirical research concludes that austerity measures that target spending are more likely to succeed than those that target taxation. This column argues that this result arises from a methodological flaw that assumes all countries have equal variability in their budget balance. Correcting for this in data from 20 OECD countries suggests that spending-based and revenue-based adjustments have been equally successful.

Sanjeev Gupta, Michael Keen, Alpa Shah, Geneviève Verdier, 07 March 2018

Digitalisation has vastly increased our ability to collect and exploit the information that governments use to implement macroeconomic policy. The column argues that the ability of governments to use the vast amounts of information held in the private sector on financial transactions are already making fiscal policy more efficient and effective. Problems of access to digital technology, cybersecurity risks, and the difficulty of organisational change in the public sector may slow the pace at which these opportunities are exploited.

Elva Bova, Tidiane Kinda, Jaejoon Woo, 07 February 2018

Understanding the distributional consequences of fiscal adjustment measures is important for equity, but also to ensure the sustainability of the measures. This column shows that fiscal adjustments increase inequality, including through unemployment. Spending-based adjustments worsen inequality more significantly than tax-based adjustments. Progressive taxation and targeted social benefits and subsidies introduced in the context of a broader decline in spending can help offset some of the distributional impact of fiscal adjustments.

Colin Mayer, 24 January 2018

Following the 2008 financial crisis, investments recovered quicker in the US than in Europe. Colin Mayer discusses how taxation and regulation have exacerbated companies' long-term debt problem. This video was recorded at the RELTIF book launch held in London in January 2018.

Raul Sanchez de la Sierra, 19 December 2017

We have theories of why states form, but until now no systematic data on the process. This column uses a new dataset on 650 locations in the Democratic Republic of the Congo to explain why armed actors may create the functions of a state. When a village's output was valuable but could not easily be taxed, armed actors developed sophisticated fiscal and legal administrations to extract revenue. Household welfare improved only when these stationary bandits had ties to the population.

Robert Duval-Hernández, Lei Fang, Liwa Rachel Ngai, 23 October 2017

Economists have tended to focus on the role of taxation in accounting for the wide variation in average hours worked across OECD countries. This column argues that the differences are driven by women, particularly women without a college degree. As taxation rises, women are more likely than men to reduce the hours they work. Social subsidies for family care reduce the price of substitutable market services, resulting in women working more.

Matthew Weinzierl, 03 September 2017

Under a welfarist approach, tax policy is judged on its implications for the well-being of those in the society to which it applies. An implicit vulnerability of this approach is that judgements are based on necessarily incomplete cost and benefit calculations. This column investigates people’s preferences for welfarist and non-welfarist approaches by exploring responses to envy. A narrow majority of respondents reject a redistribution of resources that raises overall welfare by assuaging envy. These respondents seem to be using non-welfarist principles to encode concerns about indirect policy consequences.

Don Fullerton, Nirupama Rao, 03 May 2017

In the 2012 US presidential election, Mitt Romney famously asserted that 47% of the population were long-term dependents of the government – ‘takers’, not ‘givers’ to the system. This column examines this claim using long-spanning household-level data. Even though many households find themselves not paying tax or receiving public benefits in at least some years, only a small fraction consistently pay no tax or consistently receive public transfers.

Rachel Griffith, Martin O'Connell, Kate Smith, 21 March 2017

Governments have long used taxation to correct for the socially costly overconsumption of alcohol, but as the external cost of overconsumption varies across drinkers, a single tax rate is not optimal. This column argues that variation in preferences for different products and in price responsiveness across heavy and light drinkers provides scope to improve welfare by varying tax rates across alcohol products. The proposed framework is well suited to addressing other sources of external costs, such as obesity.

Pierre Cahuc, Olivier Charlot, Franck Malherbet, Hélène Benghalem, Emeline Limon, 05 January 2017

Temporary job contracts account for a substantial proportion of the workforce in countries such as France and Spain, but they can result in high job turnover and instability. This column assesses the impact of government policies that impose taxes on temporary contracts to induce employers to lengthen job durations. Such policies a negative impact on the labour market, reducing the mean duration of jobs and decreasing job creation. The introduction of open-ended contracts with no termination cost for separations occurring at short tenure may be more effective.

Elisa Gamberoni, Katerina Gradeva, Sebastian Weber, 03 December 2016

Employment subsidies have been widely used in OECD countries to counteract the recent job crisis, but their effectiveness is difficult to assess. This column summarises the findings of a recent study analysing a 2012 Spanish employment subsidy given to firms with fewer than 50 employees that make use of a new type of permanent contract. Consistent with other country studies, it fails to find robust evidence for increased employment growth due to the subsidy scheme.

Marco Buti, Helene Bohn-Jespersen, 25 November 2016

The actions taken in 2008-09 by the G20 avoided an outright depression during the financial crisis, but questions remain over its ability to evolve from a short-term crisis response forum to effectively addressing more long-term challenges. This column argues that to ‘win the peace', G20 members as well as G20 Presidencies have to redesign international economic policy coordination, and ensure that the focus is kept on a limited number of deliverables to which all G20 members can agree.

Kai Konrad, Tim Stolper, 22 November 2016

The reasons why a country would comply with international standards of transparency in the face of sizeable returns in the tax haven business are unclear. This column highlights fundamental coordination problems in the fight against offshore secrecy regimes and their implications for optimal policies, and explores whether the fight will be successful or not.

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