Tax policy stance over the business cycle: evidence from Europe

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics

Progressivity in the Portuguese personal income tax system

This Work Project analyzes the evolution of the Portuguese personal income tax system’s progressivity over the period of 2005 through 2013. It presents the first computation of cardinal progressivity measures using administrative tax data for Portugal. We compute several progressivity indices and find that progressivity has had very modest variations from 2005 to 2012, whilst from 2012 to 2013 there has been a relatively stronger decrease, excluding the impact of the income tax surcharge of the years 2012 and 2013. When this latter is included, progressivity of 2012 and 2013 decreases considerably. Analyzing the effective average tax rates of the top income percentiles in the income scale, we find that these rates have increased over the period 2010–2013, suggesting that an analysis of effective tax rates is insufficient to assess progressivity in the whole tax scheme.

Reporting Income Taxes in the Banking Sector In Angola - Accounting, Tax Regulation and Financial Reporting Evidences

This research provides an insight into income taxes reporting in Angola, based on hand collected data from the annual reports of banks. Empirical studies on Angolan companies are scarce, in part due to the limited access to data. The results show that income taxes’ reporting has improved over the years 2010-2013, becoming more reliable and understandable. The Angolan Government is boosting the economic growth through tax benefits in the investment in public debt, which cause a reduction in the banks’ effective tax rate. The new income tax law will reduce the statutory tax rate from 2015 onwards and change the taxable income, resulting in shifting the focus to promoting private investment.

The Impact of income support programs on transitions to employment

The income support programs are created with the purpose of fighting both, the poverty trap and the inactivity trap. The balance between both is fragile and hard to find. Thus, the goal of this work is to contribute to solve this issue by finding how income support programs, particularly the Portuguese RSI, affect transitions to employment. This is made through duration analysis, namely using Cox and Competing Risks models. A particular feature is introduced in this work as it incorporates the possibility of Defective Risks. The estimated hazard elasticity with respect to the amount of RSI received for individuals who move to employment is -0,41. More than a half of RSI receivers stays for more than a year and the probability of never leaving to employment is 44%. The results appear to indicate that RSI has affected negatively transitions to employment.

Taxes and labor supply: Portugal, Europe, and the United States (Conference version)

I relate hours worked with taxes on consumption and labor. I propose a model and compare its predictions for Portugal, France, Spain, United Kingdom and United States. Hours per worker in Portugal decreased from 35.1 in 1986 to 32.6 in 2001. With only the parameters and the taxes for Portugal, the model predicts the hours worked in 2001 with an error of only 12 minutes from the actual hours. Across countries, most predictions differ from the data by one hour or less. The model is able to explain the trend in hours with only the changes in taxes.

Taxes and labor supply: Portugal, Europe, and the United States

I relate hours worked with taxes on consumption and labor for Portugal, France, Spain, United Kingdom and United States. From 1986 to 2001, hours per worker in Portugal decreased from 35.1 to 32.6. With the parameters for Portugal, the model predicts hours worked in 2001 with an error of only 12 minutes from the actual hours. Across countries, most predictions differ from the data by one hour or less. The model is not sensible to special assumptions on the parameters. I calculate the long run effects of taxes on consumption, hours, capital and welfare for Portugal. I extend the model to discuss implications for Social Security. I discuss the steady state and the transition from a pay-as-you-go to a fully funded system.

Search-for-yield in Portuguese fixed-income mutual funds and monetary policy

This paper studies the effects of monetary policy on mutual fund risk taking using a sample of Portuguese fixed-income mutual funds in the 2000-2012 period. Firstly I estimate time-varying measures of risk exposure (betas) for the individual funds, for the benchmark portfolio, as well as for a representative equally-weighted portfolio, through 24-month rolling regressions of a two-factor model with two systematic risk factors: interest rate risk (TERM) and default risk (DEF). Next, in the second phase, using the estimated betas, I try to understand what portion of the risk exposure is in excess of the benchmark (active risk) and how it relates to monetary policy proxies (one-month rate, Taylor residual, real rate and first principal component of a cross-section of government yields and rates). Using this methodology, I provide empirical evidence that Portuguese fixed-income mutual funds respond to accommodative monetary policy by significantly increasing exposure, in excess of their benchmarks, to default risk rate and slightly to interest risk rate as well. I also find that the increase in funds’ risk exposure to gain a boost in return (search-for-yield) is more pronounced following the 2007-2009 global financial crisis, indicating that the current historic low interest rates may incentivize excessive risk taking. My results suggest that monetary policy affects the risk appetite of non-bank financial intermediaries.

Analysis of mental health service financial models with a particular emphasis of Ireland

ABSTRACT: Financing is a critical factor in ensuring the optimal development and delivery of a mental health system. The primary method of financing worldwide is tax-based. However many low income countries depend on out-of-pocket payments. There is a report on Irish Health Care funding but none that deals exclusively with mental health care. This paper analyses the various financial models that exist globally with respect to financing the mental health sector, examines the impact of various models on service users, especially in terms of relative ‘financial burden’ and provides a more detailed examination of the current mental health funding situation in Ireland After extensive internet and hardcopy research on the above topics, the findings were analysed and a number of recommendations were reached. Mental health service should be free at the point of delivery to achieve universal coverage. Government tax-based funding or mandatory social insurance with government top-ups, as required, appears the optimal option, although there is no one funding system applicable everywhere. Out-of-pocket funding can create a crippling financial burden for service users. It is important to employ improved revenue collection systems, eliminate waste, provide equitable resource distribution, ring fence mental health funding and cap the number of visits, where necessary. Political, economic, social and cultural factors play a role in funding decisions and this can be clearly seen in the context of the current economic recession in Ireland. Only 33% of the Irish population has access to free public health care and the number health insurance policy holders has dramatically declined, resulting in increased out-of-pocket payments. This approach risks negatively impacting on the social determinants of health, increasing health inequalities and negatively affecting economic productivity. It is therefore important the Irish government examines other options to provide funding for mental health services.

What is the best accounting policy for gains and losses in pensions?

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Cape Verde’s foreign policy: an economic perspective

The virtuous cycle between development success and foreign policy in Cape Verde reflects a positive interaction between globalization and governance. Development success under globalization entails positive market perceptions regarding the orientation and predictability of policies as well as the accompanying institutional arrangements, thereby making foreign policy salient beyond the comparator group, or “aspirational”. Even if there is no universally applicable development model, an aspirational foreign policy can be built on positive rankings with respect to comparator groups. In Macedo and Pereira (2010), macrolevel policy and institutional combinations underpinning trade diversification and income convergence in West and Southern Africa are used to establish development success for Cape Verde and Mozambique respectively. Here, the narrative of long-term development helps identify the following drivers: moving towards a market economy; opening up to regional and global trade; increasing economic and political freedom; pursuing macroeconomic stability and financial reputation; ensuring policy continuity (especially in trade and industrial sectors) and focusing on human development (especially poverty reduction and education). Looking at GDP per capita and indicators of financial reputation and good governance of sub-regional peers is not sufficient to conclude that Cape Verde’s convergence will be sustained. Nevertheless, the positive interaction between trade and financial globalization, on the one hand, and democracy and good governance, on the other, have positive implications for the effectiveness of foreign policy across the region as well as in the Portuguese-speaking community.

Innovation and environmental policy: Clean vs. dirty technical change

We study a two sector endogenous growth model with environmental quality with two goods and two factors of production, one clean and one dirty. Technological change creates clean or dirty innovations. We compare the laissez-faire equilibrium and the social optimum and study first- and second-best policies. Optimal policy encourages research toward clean technologies. In a second-best world, we claim that a portfolio that includes a tax on the polluting good combined with optimal innovation subsidy policies is less costly than increasing the price of the polluting good alone. Moreover, a discriminating innovation subsidy policy is preferable to a non-discriminating one.

Catastrophic health care expenditures in Portugal between 2000-2010: Assessing impoverishment, determinants and policy implications

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics

The role of income inequality on fiscal multipliers

A Work Project, presented as part of the requirements for the Award of a Masters Double Degree in Economics from the Nova School of Business and Economics and University of Maastricht

Empirical evidence on the difference between the effective and the statutory tax rates for listed groups in Germany

The difference between the statutory and effective tax rate for listed groups is a complex variable influenced by a variety of factors. This paper aims to analyze whether this difference exists for listed groups in the German market and tests which factors have an impact on it. Thus the sample consists of 130 corporations listed in the three major German stock indices. The findings suggest that the companies that pay less than the statutory rate clearly outweigh the ones that pay more, and that the income earned from associated companies has a significant impact on this difference.