Report of the Action Group on Access to Third Level Education

In line with a commitment under the Programme for Prosperity and Fairness the Minister for Education and Science, Dr Michael Woods, established the Action Group on Access to Third Level Education, in September 2000, to advise the Minister on the development of a co-ordinated framework to promote access by mature and disadvantaged students and students with disabilities to third level education.

Topics in public finance: social security and taxation

Summary The field of public finance focuses on the spending and taxing activities of governments and their influence on the allocation of resources and distribution of income. This work covers in three parts different topics related to public finance which are currently widely discussed in media and politics. The first two parts deal with issues on social security, which is in general one of the biggest spending shares of governments. The third part looks at the main income source of governments by analyzing the perceived value of tax competition. Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that the wealth effect also plays an important role in the retirement decision for middle and high income earners. An actuarially fair, but mandatory funded system with a relatively high replacement rate may thus contribute to a low labor market participation rate of elderly workers. We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier men, and to a smaller extent women, tend to leave the workforce. The fact that early retirement has become much more prevalent in the last 15 years is a further indicator of the importance of a wealth effect, as the maturing of the Swiss mandatory funded pension system over that period has led to an increase in the effective replacement rates for middle and high income earners. Part two covers the theoretical side of social security. Theories analyzing optimal social security benefits provide important qualitative results, by mainly using one general type of an economy. Economies are however very diverse concerning numerous aspects, one of the most important being the wealth level. This can lead to significant quantitative benefit differences that imply differences in replacement rates and levels of labor supply. We focus on several aspects related to this fact. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of the model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy, and if the introduction of disability insurance into a social security system is preferable for all economies. Second, the screening mechanism of disability insurance and the threshold level at which people are defined as disabled can differ. For economies with different wealth levels, we determine for different thresholds the screening level that maximizes social welfare. Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization.2 Inter-jurisdictional tax competition can generate at least two potential benefits or costs: On a public level, tax competition may result in a lower or higher efficiency in the production of public services. But there is also a more private benefit in the form of an option for individuals to move to a community with a lower tax rate in the future. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton, Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.

The Rise of The Swiss Tax Haven in the Interwar Period: An International Comparison

The history of tax havens is still little known for the decades before World War II. Up to now the studies that have focused on the 1920s and 30s have presented either a very general perspective on the development of tax havens or a narrow national point of view. Based on unpublished historical archives of four countries, this paper offers therefore a new comparative look on international tax competition during this period in order to answer the following question: was the Swiss case - already considered as a quintessential tax haven at the time - specific in comparison to other banking centres? This research has two results. On the one hand, the 1920s and 30s appear as something of a golden age of opportunity for avoiding taxation through the relocation of assets. Actually, most of the financial centres granted consistent tax benefits for imported capital, while the extremely limited degree of international cooperation and the usual guarantee of banking secrecy in European countries prevented the taxation of exported assets. On the other hand, within this general balance sheet, the fiscal strategies of a tax haven like Switzerland differed from those of a great financial power like Great Britain. Whereas the Swiss administration readily placed itself at the service of the bankers, the British policy was more balanced between the contradictory interests of the Board of Inland Revenue, the Treasury and the English business circles.

Eager for fairness or revenge: psychological altruism in economics

To understand the human capacity for psychological altruism, one requires a proper understanding of how people actually think and feel. This paper addresses the possible relevance of recent findings in experimental economics and neuroeconomics to the philosophical controversy over altruism and egoism. After briefly sketching and contextualizing the controversy, we survey and discuss the results of various studies on behaviourally altruistic helping and punishing behaviour, which provide stimulating clues for the debate over psychological altruism. On closer analysis, these studies prove less relevant than originally expected because the data obtained admit competing interpretations such as people seeking fairness versus people seeking revenge. However, this mitigated conclusion does not preclude the possibility of more fruitful research in the area in the future. Throughout our analysis, we provide hints for the direction of future research on the question.

Do agglomeration economies reduce the sensitivity of firm location to tax differentials?

Low corporate taxes can help attract new firms. This is the main mechanism underpinning the standard 'race-to-the-bottom'view of tax competition. A recent theoretical literature has qualified this view by formalizing the argument that agglomeration forces can reduce firms' sensitivity to tax differentials across locations. We test this proposition using data on firm startups across Swiss municipalities. We find that, on average, high corporate income taxes do deter new firms, but that this relationship is significantly weaker in the most spatially concentrated sectors. Location choices of firms in sectors with an agglomeration intensity at the twentieth percentile of the sample distribution are estimated to be twice as responsive to a given difference in local corporate tax burdens as firms in sectors with an agglomeration intensity at the eightieth percentile. Hence, our analysis confirms the theoretical prediction: agglomeration economies can neutralize the impact of tax differentials on firms' location choices.

Is altruism important for understanding the long-run effects of social security?

This paper quantifies the effects of social security on capital accumulation and wealth distribution in a life cycle framework with altruistic individuals. The main findings of this paper are that the current U.S. social security system has a significant impact on capital accumulation and wealth distribution. I find that social security crowds out 8\% of the capital stock of an economy without social security. This effect is driven by the distortions of labor supply due to the taxation of labor income rather than by the intergenerational redistribution of income imposed by the social security system. In contrast to previous analysis of social security, I found that social security does not affect the savings rate of the economy. Another interesting finding is that even though the current U.S. social security system is progressive in its benefits, it may lead to a more disperse distribution of wealth.

Female labour supply in Spain: The importance of behavioural assumptions and unobserved heterogeneity specification

We estimate four models of female labour supply using a Spanish sampleof married women from 1994, taking into account the complete form of theindividual s budget set. The models differ in the hypotheses relating tothe presence of optimisation errors and/or the way non-workers contributeto the likelihood function. According to the results, the effects of wagesand non-labour income on the labour supply of Spanish married women dependon the specification used. The model which has both preference andoptimisation errors and allows for both voluntarily and involuntarilyunemployed females desiring to participate seems to better fit the evidencefor Spanish married women.

Optimal taxation without state-contingent debt

To recover a version of Barro's (1979) `random walk'tax smoothing outcome, we modify Lucas and Stokey's (1983) economyto permit only risk--free debt. This imparts near unit root like behaviorto government debt, independently of the government expenditureprocess, a realistic outcome in the spirit of Barro's. We showhow the risk--free--debt--only economy confronts the Ramsey plannerwith additional constraints on equilibrium allocations thattake the form of a sequence of measurability conditions.We solve the Ramsey problem by formulating it in terms of a Lagrangian,and applying a Parameterized Expectations Algorithm tothe associated first--order conditions. The first--order conditions andnumerical impulse response functions partially affirmBarro's random walk outcome. Though the behaviors oftax rates, government surpluses, and government debts differ, allocationsare very close for computed Ramsey policies across incomplete and completemarkets economies.

Income taxation in a frictional labor market

A new model of wage dispersion is used to examine welfare aspects of income taxation. The model retains the dynamics of wage posting modelswhile exogenizing search e¤ort, therefore allowing more insight into policy issues. The results highlight effects that standard analyses do not take into account. The optimal income tax should depend on an incidenceeffect between workers and firms. This incidence effect arises from firmstrying to lower wages as much as possible. An employment tax proves, incertain cases, to be the best method to encourage labor force participation.

The choice of titling system in land

This paper analyzes the choice of the socially optimal titling systemassuming rational individual choices about recording, assurance andregistration decisions. It focuses on the enforcement of propertyrights on land under private titling and the two existing publictitling systems, recording and registration. When the reduction in theexpected costs of eviction compensates the higher cost of initialregistration, it is more efficient to introduce a registration systemrather than a recording system. The development of private "titleassurance" improves the standing of recording as compared toregistration. This improvement depends, however, on the efficiency ofthe assurance technology and, also, on corrective taxation that isneeded to align individual optimization, which disregards the transferelement in eviction, with social objectives.

International accounting harmonisation - A comparison of Spain, Sweden and Austria

Despite attempts to secure harmonisation of accounting practice,significant variations in accounting rules and practice continueto arise in European countries, variations which give rise tocompliance costs for multinational companies.Firstly, this paper considers the relevance of internationalaccounting harmonisation for European business. It then proceedsto examine accounting regulation in three countries: Spain, Swedenand Austria, highlighting the key regulatory issues of the 'trueand fair' view requirement and the link between taxation andaccounting. The three countries are selected because of theinteresting contrasts which they provide; these contrasts areexamined in detail in the paper.The work is based upon a series of interviews carried out withleading accounting practitioners in the three countries during1996-97.The paper concludes that there are significant obstacles toaccounting harmonisation in Europe and that there is potentialfor continuing diversity of national accounting practice.

The size and distribution of donations: Effects of numbers of potential recipients

Whereas much literature exists on choice overload, little is known about effects of numbers of alternatives in donation decisions. How do these affect both the size and distribution of donations? We hypothesize that donations are affected by the reputation of recipients and increase with their number, albeit at a decreasing rate. Allocations to recipients reflect different concepts of fairness equity and equality. Both may be employed but, since they differ in cognitive and emotional costs, numbers of recipients are important. Using a cognitive (emotional) argument, distributions become more uniform (skewed) as numbers increase. In a survey, respondents indicated how they would donate lottery winnings of 50 Euros. Results indicated that more was donated to NGO s that respondents knew better. Second, total donations increased with the number of recipients albeit at a decreasing rate. Third, distributions of donations became more skewed as numbers increased. We comment on theoretical and practical implications.

Summary of Real Estate Assessment, 2009

The most important aspect of property taxation is the concept that all property should be valued for tax purposes on a uniform basis so that the actual property tax burden can be distributed equitably among individual property owners. One of the most widely used and accepted methods of determining relative levels and uniformity of assessments is the assessment/sales ratio study. Such a study, in its most fundamental analysis, is the comparison of the assessed value of an individual property to its sale price. For example, a property assessed at $12,000 which sold for $26,000 would have an assessment/sales ratio of 46% ($12,000 ÷ $26,000). The purpose of this study is to provide assessment/sales ratio information that may be utilized by property tax administrators, local assessing officials, and interested taxpayers in examining the relative levels and uniformity of assessments throughout the State of Iowa. After further refinement, the study is one factor considered by the Director of Revenue in the biennial equalization of assessments.

Summary of Real Estate Assessment, 2008

The most important aspect of property taxation is the concept that all property should be valued for tax purposes on a uniform basis so that the actual property tax burden can be distributed equitably among individual property owners. One of the most widely used and accepted methods of determining relative levels and uniformity of assessments is the assessment/sales ratio study. Such a study, in its most fundamental analysis, is the comparison of the assessed value of an individual property to its sale price. For example, a property assessed at $12,000 which sold for $26,000 would have an assessment/sales ratio of 46% ($12,000 ÷ $26,000). The purpose of this study is to provide assessment/sales ratio information that may be utilized by property tax administrators, local assessing officials, and interested taxpayers in examining the relative levels and uniformity of assessments throughout the State of Iowa. After further refinement, the study is one factor considered by the Director of Revenue in the biennial equalization of assessments.

The dynamic adjustment of local government budgets : Does Spain behave differently?

[spa] El objetivo de este trabajo es analizar si los municipios españoles se ajustan en presencia de un shock presupuestario y (si es así) qué elementos del presupuesto son los que realizan el ajuste. La metodología utilizada para contestar estas preguntas es un mecanismo de corrección del error, VECM, que estimamos con un panel de datos de los municipios españoles durante el período 1988-2006. Nuestros resultados confirman que, en primer lugar, los municipios se ajustan en presencia de un shock fiscal (es decir, el déficit es estacionario en el largo plazo). En segundo lugar, obtenemos que cuando el shock afecta a los ingresos el ajuste lo soporta principalmente el municipio reduciendo el gasto, las transferencias tienen un papel muy reducido en este proceso de ajuste. Por el contrario, cuando el shock afecta al gasto, el ajuste es compartido en términos similares entre el municipio – incrementado los impuestos – y los gobiernos de niveles superiores – incrementando las transferencias. Estos resultados sugieren que la viabilidad de las finanzas pública locales es factible con diferentes entornos institucionales.