Fiscal Policy and Optimal Taxation in Sierra Leone: Testing for Tax Smoothing Hypothesis

This paper empirically investigate whether the budget imbalances in Sierra Leone over the review period is consistent with optimal tax policy. The procedure involves testing if tax smoothing hypothesis hold for Sierra Leone. In this regard, three different empirical approaches were performed. Firstly, I examine the random walk property of the tax rate. The null hypothesis of non-stationarity of tax rate could not be rejected, which implies the tax rate follows random walk. Second, I examined whether changes in tax rate is predictable by regressing changes in tax rate by its own lagged values. The result shows that tax rate is unpredictable, as changes in tax cannot be determined by its lagged values. Finally, a VAR model was employed to examine whether tax rate can be predicted by its own lagged values together with changes in the government spending rate and the growth rate of real GDP. The results indicate that all the variables employed were found not be significant is predicating the tax rate. Overall, all the empirical estimations support the existence of tax smoothing over the sample period and that the budget inbalances over the review period is consistent with optimal tax policy.

An Analysis of Optimal Tax Revenue Sharing for Mexico

We develop an analysis that identifies the characteristics of an optimal system of shared tax collection and intergovernmental transfers. Mathematical optimization is used to find the level of taxes and intergovernmental transfers. Formulas for the optimal level of taxes and transfers to subnational governments are characterized. We suggest reforms to intergovernmental transfers to include the costs of tax inefficiency, some tax equalization transfer rules, and the marginal social benefits of local public spending. Future research could include local public spending with regional externalities, migration, and consider a dynamic model. This article proposes an original theoretical model of optimal tax coordination and transfers. The optimal level of taxes and transfers are identified. This paper proposes reforms to the participation formula for subnational governments.

Wage Discrimination and Tax Progressivity

How does wage discrimination affect tax progressivity? To address this, optimal tax progressivity is characterized in an economy where individuals have different levels of ability and some of the individuals face wage discrimination. A decrease in wage discrimination reduces optimal tax progressivity, while an increase in ability inequality raises it. When pre-tax income inequality increases, tax progressivity can decrease. Moreover, interaction effect on tax progressivity of wage discrimination and ability inequality is negative. These findings hold whether social planners or voters decide tax progressivity. The empirical analysis with panel data of Organisation for Economic Co-operation and Development economies provides evidence supportive of the theoretical findings.

What is the optimal tax treatment that motivates donor corporations to make more monetary and in-kind donations to their communities?

This aim of this study is to find out the optimal tax treatment that motivates donor corporations to make more monetary and in-kind donations to their communities with minimal damage to the interests of all the parties involved and the corporate social responsibility (CSR) idea. Economic impact, legal imbalances and the extent of closeness to or distance from the content of the idea of CSR are tax treatment methods used for corporate monetary and in-kind donations and to determine their advantages and disadvantages according to certain criteria to choose the optimal tax treatment method. According to the findings, the study adopts the method of government’s rights and corporation’s rights ‘donations as if they are loans’ by legislative bodies in all countries of the world due to the abundance of its advantages. This study has drawn up a draft law for this method, which could be used as a guide by the legislative bodies, if a decision is made to adopt this method. Keywords: Tax treatment, tax incentives, advantages, disadvantages, legal imbalances, economic impacts.

An Economic Analysis Of Sugar Sweetened Beverage Taxes - A Model With Substitutes And Complements

<p><b>Studies have shown that excess sugar intake is one of the potential causes of obesity and diabetes. As a result, taxing sugar sweetened beverages (SSBs) has been put forward as a possible solution. However, SSB taxes may not be effective, as consumers may switch to other untaxed drinks. In addition, there are gaps regarding (1) the socially optimal tax rate in New Zealand, (2) which tax base is the most favorable at its socially optimal level, and (3) whether taxing all beverages is superior to taxing only SSBs. Given these, this study addresses the socially optimal tax rate, taking into account substitutes and complements. It also explores the most efficient tax base, and whether beverage taxes are superior to SSB taxes.</b></p> <p>The study starts from constructing a utility-maximization model of the optimal corrective tax, which allows substitution and complementary effects. Since the marginal harm from SSBs is included as a component of the optimal tax formula, a contingent valuation survey is conducted to estimate people’s willingness-to-pays for health risk reductions, the results of which are further used to measure the monetary value of harm associated with internalities. Moreover, cost analyses using a Markov model and the UK Prospective Diabetes Study model are applied to estimate the harm associated with externalities. Finally, effects of taxes on social welfare are modeled, the result of which can inform the question of which tax base is the most efficient, and whether beverage taxes are superior to SSB taxes or not.</p> <p>Our estimate of the optimal tax rate suggests that the prices of SSBs in New Zealand should probably increase by 100% to 200%. A beverage tax by calories is the most favorable option, as it has a perfect relationship with the harmful ingredients. Whether taxing all beverages by price or by litres is superior to taxing only SSBs depends on the calories substitutes contain, and the magnitude of substitution effects. When there are strong substitution effects, and substitutes contain low energy, taxing only SSBs is better than taxing all beverages by price or by litres.</p>