June 16, 2012
Tax Panel at Today's ISNIE Annual Conference at USC
Today is the final day of the 16th Annual International Society for New Institutional Economics Conference at USC, with this tax panel:
- Mark Phillips (USC) (Chair)
- Luca Andriani (University of London), Tax Morale and Pro-Social Behaviour: Evidence from a Palestinian Survey: The Palestinian context is missing in the tax morale literature. Hence, in this paper we consider public spirit and associational activity two major expressions of pro-social behaviour and we estimate their impact on Palestinians’ tax morale (intrinsic motivation to pay taxes). The empirical analysis uses a unique dataset based on a survey conducted by the Palestine Economic Policy Research Institute in 2007 in West Bank and Gaza Strip. By using a bivariate probit model, we find that tax morale increases with public spirit but it is lower among Palestinians involved in associational activities. Predicted conditional probabilities indicate that public spirit has more impact when the respondent has low confidence in the institutions and in the rule of law. Finally, more public spirit is required for a self-employee in order to deal with tax compliance than for a worker in the public sector, unless the worker in the public sector has lower confidence in the institutions and in the rule of law than the self-employee worker.
- Arthur J. Cockfield (Queen’s University), The Limits of the International Tax Regime as a Commitment Projector: The paper examines how transaction cost approaches (as developed by North and Williamson) can inform international tax law and policy discussions. The international tax regime evolved institutions and institutional arrangements to address transaction costs such as the risk that two countries might doubly tax the same cross-border business profits. It mainly sought to reduce this risk by serving as a ‘commitment projector’ that enables governments to make credible political promises to taxpayers, other members of the public and other governments that they will not overtax these cross-border profits. As a result of these political commitments, taxpayers do not need to incur transaction costs they would otherwise have to sustain to identify and protect their global tax liabilities. In other areas, however, the international tax regime does not facilitate credible commitments. First, the international tax regime does not promote credible political promises to effectively address the growing policy concern of undertaxation whereby, as a result of tax planning, cross-border profits are frequently never taxed by countries with high tax rates. Second, because the international tax regime is not constituted by any binding supranational institutions, governments are afforded opportunities for unilateralism (such as the 2010 U.S. proposal to create a global tax reporting system via the Foreign Account Tax Compliance Act) that subverts credible commitments and raises transaction costs for economic participants.
- Leo Martinez (UC-Hastings), The Incoherence of U.S. Tax Policy: The Environment as Case Study: The Internal Revenue Code is vast, complicated, and at times internally inconsistent. Nowhere is this inconsistency more apparent than the Code’s application to the environment. A survey of contemporary literature and public opinion show an increased awareness of and a recent focus on tax policy tooled for environmental protection. Indeed, though many Code provisions are explicitly environmentally flavored or can be easily seen to have an environmental component, there are many Code provisions that are at apparent odds with a sensible and cohesive environmental policy. The reality is that the Code is a complex stew of sound and unsound public policy, special interests, and situational pressures. This results in a Code that rewards the use of hybrid and electronic plug-in vehicles and encourages commuters to use public transportation and bicycles, while simultaneously promoting the use of motor vehicles with internal combustion engines, rewarding oil exploration and depletion of natural resources, and indirectly promoting urban sprawl. Against this landscape there exist structural and institutional barriers that impede reform. The paper uses just one aspect of the Code – the Code’s uneasy existence with environmental concerns – as the vehicle to evaluate the prospects for reform. This focus on a single area is undertaken with two underlying observations. First, the Code is necessarily complex. A focus on a single area is manageable and serves as a useful case study. Second, the issues we all face as a result of a degraded environment provides the possibility that attention will be paid. The paper will move from the general to the specific, first highlighting the strengths and the weaknesses of the Code, and second, highlighting structural problems that affect tax policy. The aim will be to guide legislators and policymakers toward a sane tax policy.
- Thomas Stratmann (George Mason), Wireless Taxes and Fees: A Tragedy of the Anticommons: Combined federal, state, and local taxes on wireless services are about twice as high as the average retail sales tax. While the normative justification for above-average taxation of wireless service is weak, there is a compelling public-choice explanation: The mobile service tax base appears to suffer from a tragedy of the anticommons. That is, multiple parties have the power to block or partially block access to a resource, resulting in underutilization of the resource. In our context, numerous overlapping tax authorities seek to obtain revenues through wireless-service taxation and this may lead to overexploitation of the tax base. The anticommons problem has two dimensions. First, the mobile-service tax base funds numerous distinct projects at each level of government. Second, the base is taxed by numerous overlapping levels of government. We use state-level data from three years to examine the possible economic, demographic, and political factors that might explain the variation in these rates. We find that wireless tax rates increase with the number of overlapping tax bases.
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