Online shopping can redistribute local tax revenue from urban to rural America

What is the effect of e-commerce on the geographic distribution of local sales tax revenues? Using COVID-19 as a shock to online shopping and hand-collected high-frequency data on local sales tax revenue, we document an important shift in the state and local public finance landscape. As e-commerce increases, a destination basis for remote sales taxes results in higher growth in local sales tax collections in smaller, generally more rural jurisdictions. This increase comes at the expense of larger urban retail centers, which previously enjoyed an origin basis for sales tax collections. As households replace in-person commerce with online shopping, sales taxes no longer accrue to urban centers with large concentrations of retail establishments and instead expand the tax base of smaller jurisdictions. State-level reforms that enforce sales tax compliance generally mitigate the revenue falls in larger jurisdictions and amplify the increases in smaller jurisdictions. © 2023 Elsevier B.V.

EVIDENCE FROM DYNAMIC SYMMETRIC AND ASYMMETRIC CAUSALITY TESTS ON THE RELATIONSHIP BETWEEN TAX REVENUES AND PUBLIC EXPENDITURES IN G7 COUNTRIES

In this study, it is aimed to determine the symmetric and asymmetric causal relations between tax revenues and public expenditures in G7 countries. Annual data for the years 1990 through 2021 were used to determine the relationships between the variables. The Hacker and Hatemi-J (2012) bootstrap symmetric causality test, the Hatemi-J (2012) bootstrap asymmetric causality test, and the Hatemi-J (2021) dynamic bootstrap symmetric and asymmetric causality tests were used. The symmetric and asymmetric causality tests revealed few causal linkages between the variables, however the dynamic symmetric and asymmetric causality tests revealed more causal relationships. According to our research, it is essential to use dynamic analysis methods that can generate unique outcomes for sub-periods rather than analysis methods that generate a single result for the entire period in dynamic domains like public expenditure and national tax policies. In reality, it has been noted that throughout the Quantitative Easing period introduced following the 2008 Global Financial Crisis in the USA and during the COVID 19 process, public spending have expanded independently of budget revenues. Similar circumstances occurred in France during the EU debt crisis (2013– 2017), in Italy during the Great Recession of 2007–2009, and during COVID 19. When the global economic environment was favorable between 2017 and 2019, Germany, United Kingdom, and Italy organized their public expenditures in accordance with tax revenues, functioning within the framework of the Tax-Spend Hypothesis. As a result, for the effectiveness of fiscal policy, nations may use various fiscal policy techniques during various economic conjuncture times. © 2022, Symmetrion. All rights reserved.

Evaluating the Impact of COVID-19 on Transportation Infrastructure Funding in the United States

The coronavirus disease 2019 (COVID-19) pandemic has caused a reduction in business and routine activity and resulted in less motor fuel consumption. Thus, the gas tax revenue is reduced, which is the major funding resource supporting the rehabilitation and maintenance of transportation infrastructure systems. The focus of this study is to evaluate the impact of the COVID-19 pandemic on transportation infrastructure funds in the United States through analyzing the motor fuel consumption data. Machine learning models were developed by integrating COVID-19 scenarios, fuel consumptions, and demographic data. The best model achieves an R2-score of more than 95% and captures the fluctuations of fuel consumption during the pandemic. Using the developed model, we project future motor gas consumption for each state. For some states, the gas tax revenues are going to be 10%-15% lower than the pre-pandemic level for at least one or two years. © 2022 International Conference on Transportation and Development

Direct Digital Services Taxes in Africa and the Canons of Taxation

The unprecedented expansion of the digital economy has increased the intricacy of mobilising tax revenues from both domestic and international transactions. Tax evasion and avoidance are perpetuated by the invisible nature of digital transactions. To minimise the untapped revenues, countries all over the world are mapping policy strategies on how to collect revenue from this sector. African countries are not an exception. They have constructed digital tax policies to levy both direct and indirect taxes on digital transactions. This paper focuses on direct digital service taxes (DSTs). Direct digital service taxes have been an issue of debate among governments, policy makers, academics, tax bodies, and development organisations. Disagreements coalesce around their structure, their adherence to the canons of taxation, opportunities, and challenges as well as consequences of implementing them. Through a literature review, this paper assesses the legislative structure and administration of digital service taxes in relation to the canons of taxation. The findings of the review were conflicting. While certain aspects, motives, and possible outcomes of the taxes upheld the principles of taxation, some of these were conflicting with the principles. This could possibly be linked to variations in the economic, political, and social contexts in African countries and between developed and developing countries. The study recommends that while digital service taxes are an irrefutable necessity to tap tax revenues from the digital economy, African countries should ensure that equity, neutrality, economy, and efficiency among other principles are considered and balanced with the fundamental roles of tax policy.

The Impact of Fiscal Policy Instruments on Economic Wellness: Evidence From Malaysian Per Capita Income

This study examines the strength of the impact of fiscal policy tools on economic wellbeing as measured by per capita income in Malaysia from 1996 to 2020. The impact of fiscal policy instruments on economic wellness, represented by real income per capita, is measured using the autoregressive distributed lags model. The speed of adjustment from short-run disequilibrium to long-run equilibrium is also measured to assess the strength of the fiscal instruments' impact on per capita income. Empirical results exhibit the existence of co-integration relationships between per capita income, tax revenue, and government spending. The findings provide strong support for the presence of a long-run positive impact on government spending and a long-run negative impact of tax revenue on per capita income. The coefficient of ECTt-1 indicates that deviations from a short-run disequilibrium to a long-run equilibrium from the current to the future period are corrected with a speed of 76% (equivalent to a duration of 1.5-2 years to return to equilibrium). The practical and policy implication of the results is fiscal instruments play a significant role, mainly in alleviating the economic impact of the COVID-19 pandemic in the long run.

Estimating the Employment and Fiscal Consequences of Thermal Coal Phase-Out in China

China hosts over half of global coal-fired power generation capacity and has the world’s largest coal reserves. Its 2060 carbon neutrality goal will require coal-fired electricity generation to shrink dramatically, with or without carbon capture and storage technology. Two macroeconomic areas in which the socioeconomic impact of this decline is felt are losses in jobs and tax revenues supported by thermal coal mining, transport and power generation. At the national level, under a ‘baseline’ (B) scenario consistent with China’s carbon neutrality goal, labour productivity growth in coal mining implies that significant job losses will occur nationally in the medium term, even if all coal plants continue operating as planned. Jobs supported by the coal power industry would decline from an estimated 2.7 million in 2021, to 1.44 million in 2035 and 94,000 in 2050, with jobs losses from mining alone expected to exceed 1.1 million by 2035. Tax revenues from thermal coal would total approximately CNY 300 billion annually from 2021–2030, peaking in 2023 at CNY 340 billion. This is significantly less than estimated subsidies of at least CNY 480 billion, suggesting coal is likely a net fiscal drain on China’s public finances, even without accounting for the costs of local pollution and the social cost of carbon. As coal plant retirements accelerate, from 2034 onwards, fiscal revenues begin to fall more rapidly, with rates of decline rising from 1% in the 2020s to over 10% a year by the 2040s. More aggressive climate policy and technology scenarios bring job and tax losses forward in time, while a No Transition policy, in which all currently planned coal plants are built, delays but does not ultimately prevent these losses. At the provincial level, China’s major coal-producing provinces will likely face challenges in managing the localised effects of expected job losses and finding productive alternative uses for this labour. Governments of coal-producing provinces like Inner Mongolia, with an industry highly dependent on exports to other provinces, are more exposed than others to declining tax revenues from coal, and more insulated from job losses, given their high current degree of labour efficiency. Although their provincial revenues are likely to remain stable until the early 2030s under the B scenario, the possibility of increasing policy stringency underlines the need for revenue and skill base diversification. At the firm level, China’s ‘Big Five’ state-owned power companies were responsible for over 40% of both jobs and tax revenues in 2021. The number of jobs supported by the activities of each of the largest ten firms, with one exception, will decline by 71–84% by the early 2040s, with the tax contribution of each declining by 43–69% in the same period.

The determinants and cyclicality of fiscal policy: Empirical evidence from East Africa

As part of the regional integration process, East African Community (EAC) member countries agreed upon macroeconomic convergence criteria that include, among others, harmonizing and restricting the level of fiscal deficits. However, achieving these targets has been faced with heightened vulnerabilities, including those related to the global financial crisis, the COVID-19 pandemic, and domestic policy slippages. Consequently, high fiscal deficits are fast leading to accumulation of debt. This paper investigates the macroeconomic determinants and cyclicality of fiscal policy in a panel of five EAC countries for the period 1980–2020. Using a combination of linear and nonlinear panel ARDL methods, long-run results show that the fiscal deficit is positively associated with current account balance, real per capita GDP, and interest rate;and negatively associated with the GDP deflator, grants, and debt service. Disaggregating fiscal balances into their revenue and expenditure components shows that government spending is procyclical, while tax effort is countercyclical. Specifically, both government expenditures and tax-to-GDP ratios are positively associated with real per capita GDP regardless of whether this relationship is observed during growth accelerations or decelerations. The size and statistical significance of short-run asymmetric effects of real per capita GDP on fiscal policy vary between countries.