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Article
Publication date: 3 April 2018

Konstantinos J. Liapis and Evangelos D. Politis

The purpose of this paper is to study the effect of income and property taxes on property assets through the application of fair value accounting and deferred income tax standards.

Abstract

Purpose

The purpose of this paper is to study the effect of income and property taxes on property assets through the application of fair value accounting and deferred income tax standards.

Design/methodology/approach

This approach is based on the whole life costing model that accounts for the initial expenses, operation and maintenance costs, future revenues, and residual value.

Findings

Formulating a step-by-step accounting procedure based on fair valuation and temporary differences in taxation, this paper shows the existence of the Laffer curve and thus elucidates the economic effect of the taxes and fully discloses the asset’s fair value. The optimal taxation rate is lower when a property tax and an income tax are both present, as the the marginal gain from both taxes is constantly decreasing, due to the changes in the fair value of the asset, and even has a negative effect in the case of the income tax.

Practical implications

Accounting techniques, which combine market-based assumptions, financial valuation techniques based on discounted fair value models, and standard International Financial Reporting Standards disclosures, prove to be an unbiased proxy for the optimal taxation rate.

Originality/value

This study demonstrates a practical tool for policy makers who are trying to define macroeconomic policies on property taxation. Moreover, this approach can be used as an evaluation model for individual investors who wish to measure the future prospects from a property investment under taxation uncertainties.

Details

Journal of Property Investment & Finance, vol. 36 no. 3
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 9 November 2015

Darong Dai

The purpose of this paper is to study the problem of optimal Ramsey taxation in a finite-planning-horizon, representative-agent endogenous growth model including…

Abstract

Purpose

The purpose of this paper is to study the problem of optimal Ramsey taxation in a finite-planning-horizon, representative-agent endogenous growth model including government expenditures as a productive input in capital formation and also with hidden actions.

Design/methodology/approach

Technically, Malliavin calculus and forward integrals are naturally introduced into the macroeconomic theory when economic agents are faced with different information structures arising from a non-Markovian environment.

Findings

The major result shows that the well-known Judd-Chamley Theorem holds almost surely if the depreciation rate is strictly positive, otherwise Judd-Chamley Theorem only holds for a knife-edge case or on a Lebesgue measure-zero set when the physical capital is completely sustainable.

Originality/value

The author believes that the approach developed as well as the major result established is new and relevant.

Details

Journal of Economic Studies, vol. 42 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

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Book part
Publication date: 1 January 2014

Rolf Aaberge and Ugo Colombino

Abstract

Details

Handbook of Microsimulation Modelling
Type: Book
ISBN: 978-1-78350-570-8

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Book part
Publication date: 6 August 2018

Eliav Danziger and Leif Danziger

This chapter analyzes the effects of introducing a graduated minimum wage in a model with optimal income taxation in which a government seeks to maximize social welfare…

Abstract

This chapter analyzes the effects of introducing a graduated minimum wage in a model with optimal income taxation in which a government seeks to maximize social welfare. It shows that the optimal graduated minimum wage increases social welfare by increasing the low-productivity workers’ consumption and bringing it closer to the first-best. The chapter also describes how the graduated minimum wage in a social welfare optimum depends on important economy characteristics such as the government’s revenue needs, the social welfare weight of low-productivity workers, and the numbers and productivities of the different types of workers.

Details

Transitions through the Labor Market
Type: Book
ISBN: 978-1-78756-462-6

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Article
Publication date: 20 February 2009

Balbir S. Sihag

The purpose of this paper is to present Kautilya's principles of taxation during the fourth century BCE.

Abstract

Purpose

The purpose of this paper is to present Kautilya's principles of taxation during the fourth century BCE.

Design/methodology/approach

Modern tools of economic analysis are used to present Kautilya's principles on income taxation.

Findings

Kautilya implicitly suggests a linear income tax. He emphasizes fairness, stability of tax structure, fiscal federalism, avoidance of heavy taxation, ensuring of tax compliance and subsidies to encourage capital formation.

Research limitations/implications

According to Kautilya, some linkage between the ability to pay (i.e. provision of a safety net to the poor, old and the sick) and the benefit principle may be better than the current approaches, which treat the ability to pay and the expenditure side of the taxation separately.

Practical implication

Ensuring tax compliance and avoidance of heavy taxation are the most important ingredients of a sound fiscal policy.

Originality/value

The paper presents the very first growth‐oriented fiscal policy along with a provision of a safety net.

Details

Humanomics, vol. 25 no. 1
Type: Research Article
ISSN: 0828-8666

Keywords

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Article
Publication date: 1 April 1979

Jonathan Eaton and Harvey S. Rosen

The growth of tax rates on earned income has focused attention upon the impact of such taxes on work effort. The effect of taxes on hours of work has been the subject of…

Abstract

The growth of tax rates on earned income has focused attention upon the impact of such taxes on work effort. The effect of taxes on hours of work has been the subject of both careful theoretical and econometric study. The basic lesson of the theoretical literature is that the impact of taxation on hours of work is logically indeterminate because of the familiar conflict between income and substitution effects. Therefore, an enormous amount of econometric research has been done on this subject. Although there is a disconcertingly high variance in estimates of labour supply elasticities, it would probably be fair to say that the consensus is that the response in hours of work to changes in the net wage is very small for prime age male earners. This finding has been interpreted by some as evidence that taxes have little influence on work effort.

Details

Management Research News, vol. 2 no. 4
Type: Research Article
ISSN: 0140-9174

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Article
Publication date: 4 November 2014

Kenneth Backlund, Tomas Sjögren and Jesper Stage

This paper aims to present a theoretical underpinning for the fact that empirical studies have found an inverted-U curve relationship between emigration and per capita…

Abstract

Purpose

This paper aims to present a theoretical underpinning for the fact that empirical studies have found an inverted-U curve relationship between emigration and per capita income, based on credit restrictions. The implications for tax policy are also analyzed.

Design/methodology/approach

Using an intertemporal general equilibrium model, the authors characterize how the presence of an “inverted U-curve” relationship between emigration and per capita income will influence the optimal tax and expenditure policy in a country where agents have the option to move abroad.

Findings

Among the results it is shown that if age-dependent taxes are available, the presence of an inverted-U curve provides an incentive to tax young labor harder, but old labor less hard, than otherwise.

Originality/value

This migration model fits the empirical facts of migration better than most of the migration models previously used in the optimal taxation literature.

Details

Indian Growth and Development Review, vol. 7 no. 2
Type: Research Article
ISSN: 1753-8254

Keywords

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Book part
Publication date: 10 November 2006

Amedeo Spadaro

In this paper, I support the usefulness of using microsimulation models for the normative analysis of real redistribution system. Drawing from three recent works…

Abstract

In this paper, I support the usefulness of using microsimulation models for the normative analysis of real redistribution system. Drawing from three recent works (Bourguignon & Spadaro, 2000, 2005; Oliver & Spadaro, 2004), I propose an application consisting in analyzing how social preferences on inequality have changed since the introduction of the 1999 reforms to the Spanish personal income tax (PIT). The starting point is the observed distribution of a population's gross and disposable incomes and the observed marginal tax rates as computed in standard microsimulation models. I show that, using a set of simplifying assumptions, it is possible to identify the social welfare function that would make the observed marginal tax rate schedule optimal. I apply this methodology to the 1998 and 1999 Spanish PIT, using the Eurostat (ECHP) dataset on the income and socio-demographic characteristics of Spanish households.

Details

Micro-Simulation in Action
Type: Book
ISBN: 978-1-84950-442-3

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Article
Publication date: 14 May 2020

Anita Rath

The purpose of this paper is to find out the factors contributing to major shifts in the growth of tax revenue through the estimation of structural breaks and analysis of…

Abstract

Purpose

The purpose of this paper is to find out the factors contributing to major shifts in the growth of tax revenue through the estimation of structural breaks and analysis of major tax regimes. Recent contributions to optimal tax theory and empirical literature on the Laffer curve effect, based on elasticity of taxable income, challenge the settled understanding on the rate-revenue relationship. In this backdrop, the objective of the paper is to find out the relative significance of changes in tax rate, tax base and administrative reforms in affecting the growth of tax revenue in India. The paper considers tax data spanning a period of six and half decades for five major components of direct and indirect taxes (corporation, personal income, customs, excise and service) of the central government of India.

Design/methodology/approach

Unknown break point(s) – single and multiple – in the tax structure are identified by using the Quandt-Andrews and Bai-Perron econometric tests. These tests were conducted for two models of growth of taxes (tax revenue and tax-NDP ratio) estimated using semi-log functions. A simulation exercise was conducted to find out the robustness of the results by varying the trimming parameter and number of breaks. An analytical framework is used to understand the factors associated with these breaks.

Findings

There is more than one break identified for every tax component as per the results of Bai–Perron test. The simulation exercise suggests that estimated breakpoints are mostly robust. Economic growth, structural changes in the economy, simplification and rationalization of tax structure, tax competition, policies such as liberalization have contributed to the changing tax regimes. Results of this study suggest that high tax rates have not been, in particular, detrimental to achieving growth in revenue and factors other than changes in tax rates have been more prominent in bringing about the shifts.

Originality/value

This is, perhaps, the first paper exploring the multiple structural breaks in the fiscal variables in India. It offers an understanding of the changing regimes of central government taxes and the underlying factors for the same.

Details

Indian Growth and Development Review, vol. 14 no. 1
Type: Research Article
ISSN: 1753-8254

Keywords

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Book part
Publication date: 6 July 2007

Udo Ebert and Georg

There is a consensus in the general public that income taxes should be everywhere progressive. Starting from the basic properties normally required, we examine the…

Abstract

There is a consensus in the general public that income taxes should be everywhere progressive. Starting from the basic properties normally required, we examine the possibilities of designing everywhere progressive income tax schedules. An axiomatic analysis investigates the (in)consistency of these requirements with further restrictions on the degree of progression. It turns out that everywhere progressive tax schedules have to be maximally progressive or almost proportional in some income range.

Details

Equity
Type: Book
ISBN: 978-0-7623-1450-8

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