Alessandro Santoro

Marginal Commodity Tax Reforms: A Survey

As noted 30 years ago by Martin Feldstein, optimal taxes may be useless for practical purposes and emphasis should instead be placed on the possibility of enhancing welfare by reforming existing tax rates. In this perspective, marginal commodity tax reforms are gaining increasing attention due to political and economic constraints on large reforms of direct (or indirect) taxation. In this paper, we summarize the main features and results of the literature on marginal commodity tax reforms pioneered by Ahmad and Stern, further developed by Yitzhaki and Thirsk and recently reinterpreted by Makdissi and Wodon. We establish new links to other fields of research, namely the literature on the use of equivalence scales and on poverty measurement. We also critically examine some issues associated with the implementation of marginal tax reforms with special reference to the calculation of welfare weights and revenue effects. Finally, we suggest directions for future research on poverty-reducing commodity tax reforms.

Taxpayer Behavior When Audit Rules Are Known: Evidence from Italy

Italy adopted in 1998 a peculiar audit scheme (Studi di Settore), for small and medium enterprises and the self-employed. This scheme is based on a particular interaction between the tax agency and taxpayers, where the agency unveils only part of the information used to develop its audit rule. The authors study this scheme by means of a simple theoretical model and they test it using a sample of 23,000 firms in manufacturing sectors in the 2005 tax year. A number of theoretically relevant relations are confirmed. In particular, reports made by taxpayers seem to be positively associated to the firm’s size. When taxpayers know that the probability to be audited decreases, they tend to report less. Other factors that are expected to influence the behavior of taxpayers have no or an ambiguous impact on reporting behavior.

Stratification And Between‐Group Inequality: A New Interpretation

Traditionally, the literature has seen stratification as linked closely to within‐group inequality. More recently, some papers have focused on measuring the impact of stratification on between‐group inequality. In this paper, we show that when two groups are involved, such an impact can be measured by a simple comparison of the two cumulative distribution functions. This approach allows an interpretation of stratification in terms of probabilities and paves the way for a neat and simple graphical illustration. We apply it to the analysis of between‐continent inequality.

Do Small Businesses Respond to a Change in Tax Audit Rules? Evidence from Italy

Tax evasion by small businesses can be tackled using different approaches. A traditional one recommends to increase the probability of an audit that is perceived by small businesses. Clearly, this entails high administrative and compliance costs. Another possibility is to reduce the room for accounting manipulation by applying more stringent accounting standards. This article uses a panel of administrative data concerning 71,000 Italian small businesses observed in tax years 2005 to 2008. The aim of this article is to evaluate the impact of a reform implemented in 2006. Until 2005, small businesses adopting more stringent accounting standards were granted a special audit regime such that the probability to be audited was particularly low. This regime was repealed in 2006. It is shown that the reform increased profits and turnover, as reported by the subset of businesses that were more likely to perceive the reform as an increase in the probability of an audit.

Stratification and Between-Group Inequality: A New Approach to Measurement

Traditionally, the literature has seen stratification as linked closely to within-group inequality. More recently, some papers have focused on measuring the impact of stratification on betweengroup inequality. In this paper, we show that when two groups are involved, such an impact can be measured by a simple comparison of the two cumulative distribution functions. This approach allows an interpretation of stratification in terms of probabilities and paves the way for a neat and simple graphical illustration. We apply it to the analysis of between-continent inequality.

The Deterrence Effect of Real-World Operational Tax Audits

We use a large administrative tax-returns panel dataset merged with tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior. Our identification strategy and the institutional setting that we consider enable us to address potential endogeneity related to non-random selection of taxpayers to be audited. We find a positive and lasting effect of audits on subsequent reported income. However, in line with theoretical predictions, taxpayers do not increase tax compliance when the tax authority does not assess a positive additional income. Our results are robust to a variety of specifications and samples.

A Note on Between-Groups Inequality with an Application to Genders

Existing methods of between-groups income inequality measurement are rather uninformative if applied to genders since they are not sensitive to discrimination. We introduce a Gini-based measure of between-genders inequality which explicitly depends upon discrimination and we apply it to measure the impact of a gender-based tax reform in Italy.