Using a VAT for Deficit Reduction

Examines implications of imposing a value-added tax, compared with increasing individual income tax rates (including capital gains tax), such as the distribution of the tax burden on households, distortions on economic decisions, and government costs

Implications of Different Bases for a VAT

Analyzes options for a value-added tax: a low rate on a broad base to meet deficit reduction targets; a high rate on a narrow base that excludes items disproportionately consumed by lower-income households; or a broad base with a targeted rebate

Using a VAT to Reform the Income Tax

Analyzes a proposal to simplify the tax system and improve economic incentives by adopting a value-added tax, removing most current taxpayers from income tax rolls, reforming the corporate income tax, and lowering the top individual and corporate rates

Corporate Tax Policy and the Right to Know: Improving State Tax Policymaking by Enhancing the Legislative and Public Access

This report examines the need for disclosure of state corporate income tax data in order to facilitate more thoughtful tax policymaking as well as accountability and openness in government. While disclosure of federal income tax data has been resolved by the SEC’s required disclosures of public corporations, the only states that have laws mandating disclosure of information relating to their state’s income tax are Arkansas, West Virginia, and Massachusetts. Firm-specific disclosure of corporate tax information at the state level is necessary for informed tax policy, essential to public understanding of corporate tax reform issues, and will complement SEC mandated disclosures. Because of the large sums of money involved in corporate taxation, disclosure is necessary to analyze how the costs of government are distributed and which companies and industries bear the burden of the tax within each state. Public understanding is essential in order to affect economic reform in a democratic setting regardless of whether the policy is founded on sound theoretical reasoning and the public must know which corporations are receiving incentives in order to judge whether the benefits justify the foregone revenue. Firm-specific data, in particular, is necessary in order to get the benefits of disclosure. Compared with aggregate data, firm-specific information will allow tax policy judgements to be made that could not be made in the abstract, and will also facilitate inter and intra-industry comparisons. Arguments against disclosure at the state level that firm-specific disclosure might reveal proprietary information, violate a corporation’s right to privacy, discourage filing of accurate tax returns, or even undercut a state’s business climate all fall short of rebutting the benefits that come from disclosure and are largely unremarkable arguments when viewed in comparison with the type of disclosure mandated by the SEC

Implications of the New Regulatory Order for Retirement System Risk Management

Responding to the worst financial crisis since the Great Depression, the US Congress in 2010 passed the Dodd–Frank Wall Street Reform and Consumer Protection Act, thereby altering the playbook for how banks and other financial institutions must manage their risks and report their activities. The European Insurance and Occupational Pensions Authority (EIOPA) has similarly been working diligently to overhaul the regulatory environment for insurers and pension managers, as well as the more traditional financial sector players such as banks. The implosion of the financial sector also prompted calls for change to the accounting system from many seeking to better understand how assets and liabilities are reported. While initially banks were seen by many as the most important focus for regulatory reform in the wake of the 2008–09 financial meltdown, other institutions are now attracting policymakers’ purview and reform efforts. The new rules are having both direct and spillover effects on retirement systems around the world, including pensions and insurers. The first half of this volume undertakes an assessment of how global responses to the financial crisis are potentially altering how insurers, pension plan sponsors, and policymakers will manage risk in the decades to come. The second half evaluates developments in retirement saving and retirement products, to determine which and how these might help meet shortfalls in retirement provision

Differential Taxation and Firms' Financial Leverage: Evidence from the Introduction of a Flat Tax on Interest Income

Tax competition for the mobile factor capital has led to a trend in many countries to levy lower taxes on interest income, often introducing differential taxation between interest and business income. In this study, we analyze the effect of such differential taxation on the debt ratio of firms. We exploit a 2009 tax reform in Germany as a quasi-experiment, which introduced a flat final withholding tax and opened a gap of 18 percentage points between the tax rate on income from unincorporated businesses and the new lower tax rate on interest income. We apply a regression adjusted semi-parametric difference-in-difference matching strategy based on firm level panel data. In addition, we implement a more structural approach with a tax rate differential, taking into account its endogeneity by using instrumental variables. The results indicate that firms increase their leverage when the tax rate on interest income decreases, albeit to a small degree.Income taxation, capital taxation, financial structure, leverage, matching

The Role of XBRL on EMAS Reporting: An Analysis of Organisational Values Compatibility

This paper proposes a measurement method for assessing the extent to which the XBRL digital standard eXtensible Business Reporting Language can assist firms in implementing their reporting when applying EMAS The EU Eco-Management and Audit Scheme. A specific survey based on the work of (Bunker et al., 2007), which uses Value Compatibility, was carried out at the most important firms in Southern Spain. Different sectors were involved in the study: public hospital, copper manufacturing facilities, petrochemical plant and pulp and renewable energy production. The results reveal some concordances between EMAS using XBRL as a reporting technology, and the cultural, organisational and technical working environment of the analysed firms, specifically those related to the Structural Dimension. By contrast, some discordance is highlighted related to the Practical Dimension. The paper proposes for the first time the application of the global financial standard XBRL for a non financial purpose like the widely accepted EMAS, to actual potential uses in real scenarios. The empirical research combined heavy industry with services, privately owned firms with public entities, private and public sector, in the analysis of this technology. The paper represents a necessary landmark for a subsequent longitudinal study.JEL Codes - D8; M14; M15; M41; M4

Incorporating Financial Statement Information to Improve Forecasts of Corporate Taxable Income

We contribute to the research on the information content of earnings as it applies to the forecasting of economic activity across reporting models. We examine whether publicly available financial statement information is incrementally useful in forecasting confidentially reported taxable income. More precise firm-level taxable income forecasts can improve policymakers’ modeling of the tax system and their ability to analyze the effect of proposed changes in corporate tax law. When aggregated, improved micro-forecasts can also yield more accurate macro-forecasts of corporate taxable income, a significant component of the federal budget. We find that financial statement information improves firm-level estimates of future taxable income by providing more timely information. We also document the usefulness of the deferred tax valuation allowance in improving taxable income estimates for loss firms. Our evidence suggests public financial statement information complements proprietary data to improve estimates of future taxable income for budgetary and policy use

The future of taxation in changing labour markets

This paper provides a first assessment of the fiscal and distributional consequences of the ongoing structural changes in the labour markets of EU member states, mostly driven by technological progress and ageing. The Cedefop 2020 Skills forecast (including the effects of COVID-19), population projections and the forecast on pension expenditures depict a scenario of an ageing population, an inverted U-shaped unemployment trend and potentially polarising labour markets in the EU till 2030, the latter mostly driven by a surge in high-skill occupations. We make use of the microsimulation model EUROMOD and reweighting techniques to analyse the fiscal and distributional impacts of these trends under a no-policy-change assumption. The results suggest that the macro trends will increase pressure on government budgets, however, we also show that the current tax-benefit systems have the capacity to counterbalance the increases in income inequality and poverty risks triggered by the expected future labour markets developments

Labor Market Uncertainty and Pension System Performance

The financial market crisis has prompted policymakers to devote substantial attention to ways in which capital market risks shape pension performance, but few analysts have asked how shocks to human capital shape retirement wellbeing. Yet human capital risks due to fluctuations in labor earnings, employment volatility, and survival, can have a profound influence on pension accumulations and payouts. This paper reviews existing studies and offers a framework to think about how human capital risk can influence pension outcomes. We conclude with thoughts on how future analysts can better assess sensitivity of pension plan outcomes to a labor income uncertainty