Effects of dual networks on tax strategies: geography and transaction

This study investigates how a revenue-maximizing tax strategy of local and central governments incorporates dual networks, namely, an inter-firm transaction network and an inter-country geography network. We assume a two-stage game in which governments propose discriminatory tax levels for firms, whereas each firm has an incentive to invest in a country near the foreign branch office of its transaction partner. In our model, the centrality index of the Kronecker product of the two networks describes the interplay among the location choices and tax strategies in the equilibrium. A stronger linkage within each network generally increases demand for investment and in turn raises overall tax levels to exploit the high demand. Although more central firms in the inter-firm network are likely to be levied higher taxes because of their high demand for investment, firms in the highest tax bracket differ among countries depending on their geographical location. Finally, we show that a uniform tax in which firms are not discriminated and networks do not matter is the socially optimal tax, which incorporates all inter-country externalities. We also investigate decentralized tax strategies based on the rule of non-discriminatory (uniform) taxation and show, by comparing social welfare under discriminatory and uniform tax regimes, that restricting tax discrimination improves social welfare.

Tax Uniformity as a Requirement of Justice

Barbara Fried takes the view that uniform taxation—that is, a single rate applicable to all income levels—cannot be defended on any grounds of justice. She goes further by saying that, of all possible rate structures, it might be “the hardest one”? to ground in “a”? theory of fairness. Using the contractarian-constitutional perspective advanced by John Rawls and James Buchanan, this article argues that tax uniformity can be seen as a requirement of justice. After modelling how the political world realistically decides to distribute tax shares (self-interested parties act under a majority constraint), I show how the uniformity principle could emerge from the constitutional contract. In other words, rational individuals would choose uniformity as a procedural constraint under a “veil of uncertainty”?; that is, with limited knowledge regarding their positions under the future application of the rule. Moreover, I elucidate how the uniformity requirement integrates generalized criteria of fairness and efficiency into fiscal politics as it precludes fiscal exploitation and constrains majorities, and their most influential subgroups, to opt for policies in the direction of the Pareto frontier, and as such promotes outcomes acceptable to all participants.

Evolution of Tax Fairness: From Principle of Finansial Theory to Global Taxation Concept // Evolucija pravičnosti poreza: Od načela finansijske teorije do globalnog koncepta oporezivanja

Principle of tax fairness belongs to social-political principles of financial theory. Its application in tax systems of modern countries should ensure a uniform taxation “between the equals” and a redistribution of income and wealth “between the unequals”. The horizontal tax fairness implies that the “equals should be taxed equally”, meaning that the individuals with the same economic force (income, revenue, property) should contribute in equal way to the state for public goods and services received in return. The vertical tax fairness is ensured in a way that individuals are taxed in accordance with their economic force, meaning that the better off should pay higher taxes. Globalisation of financial and economic flows has caused a transformation of principle of tax fairness from national principle necessary for designing a fair national tax system into a global concept of fair taxation, that should ensure a fair distribution of tax burden between countries.

An economic analysis of higher education financing policies

This paper develops a model in which it is possible to evaluate alternatives of higher education financing. The alternative systems under discussion are: total fecing, graduates' taxes and uniform taxes (this can be associated to the scheme presently used in the Argentina to finance the universities). Assessment of the alternatives is performed over welfare, based on the indicators of poverty, equality, and the average levels of utility and wealth. Likewise, the functions of welfare presented by Bentham, Rawls, Atkinson, Sen and Kakwani are also considered. The most remarkable results are obtained through the simulation of an economy under two scenarios. In that way, the system of graduates' taxation is found to be better for welfare; whereas the system of uniform taxation only can be justified as it maximizes the number of students.