27 results for Gemmell, Norman, Scholarly text

  • Explaining International Differences in the Prices of Tradables and Non-Tradables (with a New Zealand Perspective)

    Falvey, Rodney E; Gemmell, Norman; Chang, Cherry; Zheng, Guanyu (2014)

    Scholarly text
    Victoria University of Wellington

    The World Bank's International Comparison Program (ICP) data on national price levels for tradables and non-tradables (and goods compared to services) reveals that New Zealand has relatively high prices of both tradables and non-tradables when compared to a sample of over 40 OECD-Eurostat countries (Gemmell, 2013). The present paper seeks to explain both those observed international variations in non-tradables and tradables prices in general, and New Zealand's especially high prices in particular.

    View record details
  • Using Surveys of Business Perceptions as a Guide to Growth-Enhancing Fiscal Reforms

    Misch, Florian; Gemmell, Norman; Kneller, Richard (2014)

    Scholarly text
    Victoria University of Wellington

    This paper assesses the merits of using business perceptions of growth constraints as a guide to growth-enhancing fiscal policy reforms. Using endogenous growth models in which the government levies an income tax to provide public inputs to the production of private firms, the paper demonstrates that such perceptions of growth constraints may be misleading from a policy perspective. In particular firms can be expected to systematically overestimate the growth-enhancing effects of lower tax rates relative to public services and public capital, and underestimate the growth-enhancing effects of greater provision of public capital relative to taxation and public services. In addition, we show that firms rank different public services and different types of public capital according to the actual costs they impose on firms. It is then shown that these theoretical predictions regarding how firms rank constraints correspond closely to the observed ranking of constraints by firms in the World Bank’s Enterprise Surveys.

    View record details
  • Measuring Revenue-Maximising Elasticities of Taxable Income: Evidence for the US Income Tax

    Creedy, John; Gemmell, Norman (2014)

    Scholarly text
    Victoria University of Wellington

    A recent review of empirical estimates of the elasticity of taxable income (ETI) concluded that ‘the US marginal top rate is far from the top of the Laffer curve’ (Saez et al, 2012, p.42). This paper provides a detailed examination of the analysis underlying this conclusion, and considers whether other tax rates in the US income tax system are on the ‘right’ side of the Laffer curve. Conceptual expressions for ‘Laffer-maximum’ or revenue-maximizing ETIs, based on readily observable parameters, are presented for individuals and groups of taxpayers in a multi-rate income tax system. Applying these to the US income tax in 2005, with its complex effective marginal rate structure, demonstrates that a wide range of revenue-maximizing ETI values can be expected for individual taxpayers within and across tax brackets, and in aggregate. For many taxpayers these revenue-maximizing ETIs are well within the range of empirically estimated elasticities.

    View record details
  • Complementarity in Models of Public Finance and Endogenous Growth

    Misch, Florian; Gemmell, Norman; Kneller, Richard (2014)

    Scholarly text
    Victoria University of Wellington

    This paper considers the effects of complementarity in private production between private and public inputs on optimal fiscal policy under the objective of growth maximization. Using an endogenous growth model with public finance and CES technology, it derives two central results. First, it shows that with complementarity, growth-maximizing fiscal policy is also affected by preference parameters, the degree of complementarity and the stock-flow properties of public inputs to private production. Second, it shows that optimal public spending composition and taxation are interrelated and also depend on the efficiency of public spending under growth maximization. Both results contrast with standard findings in the literature that are typically based on the assumption of Cobb-Douglas technology, and have important lessons for policy settings.

    View record details
  • The Prices of Goods and Services in New Zealand : An International Comparison

    Gemmell, Norman (2014)

    Scholarly text
    Victoria University of Wellington

    This paper analyses the latest (2005) data available from the World Bank’s InternationalComparison Program (ICP). It assesses the extent to which the prices of goods and services in New Zealand (NZ) differ from those observed in other OECD countries, and Australia in particular. The main objective is to answer the question: “Are the prices of specific goods and services especially high or low in New Zealand by international standards?” The answer appears to be “yes”, leading naturally to the further questions of: “why, and what might the consequences be for prices and productivity in the wider New Zealand economy?” International price comparisons, even those undertaken carefully such as the ICP, are fraught with difficulties and results should be interpreted cautiously. However, a number of broad features of price level in NZ relative to other OECD countries stand out. Most prominently, goods and services associated with investment in general, and property, construction and utilities (water, gas, electricity) in particular, appear to be relatively expensive in NZ. Secondly, passenger transport (excluding private motor vehicles), and alcohol & tobacco, prices are high relative to other countries. The former involve transport industries - such as air and rail transport - that are subject to domestic and international regulation, or have some quasi-monopoly power within the NZ economy. In some cases, lack of economies of scale may also be relevant due to the limited size of the domestic NZ market. High alcohol, and especially tobacco, prices appear to be at least partly related to relatively high excise levels in NZ, though this is balanced to some extent by relatively low VAT/GST rates. Thirdly prices for key exportable products from New Zealand are relative cheap – especially beef/veal/lamb, fish, and dairy products such as butter which may reflect New Zealand’s comparative advantage in such goods. By contrast expensive tradeable products include poultry, pork and fresh milk services that are largely government provided – such as education, health and social protection, and hence are inherently difficult to measure or interpret – are also relatively inexpensive in NZ, reflecting NZ’s relatively low average wage levels within the OECD, despite higher intermediate and capital input costs. The large share of wages in total costs in these services make them important determinants of measured (non-market) prices in these activities.

    View record details
  • Does the Composition of Government Expenditure Matter for Long-run GDP Levels?

    Gemmell, Norman; Kneller, Richard; Sanz, Ismael (2014)

    Scholarly text
    Victoria University of Wellington

    We examine the long-run GDP impacts of changes in total government expenditure and in the shares of different spending categories for a sample of OECD countries since the 1970s, taking account of methods of financing expenditure changes and possible endogenous relationships. We provide more systematic empirical evidence than available hitherto for OECD countries. Our results provide strong evidence that reallocating total spending towards infrastructure and education would be positive for long-run income levels. Increasing the share of social welfare spending (and away from all others pro-rata) may be associated with, at most, modestly lower long-run GDP levels.

    View record details
  • Pensions, Savings and Housing: A Life-cycle Framework with Policy Simulations

    Creedy, John; Gemmell, Norman; Scobie, Grant (2015)

    Scholarly text
    Victoria University of Wellington

    The objective of the paper is to explore the saving and consumption responses of a representative household to a range of policy interventions such as changes in taxes and pension settings. To achieve this, it develops a two-period life-cycle model. The representative household maximises lifetime utility through its choice of optimal levels of consumption, housing and saving. A key feature of the approach is modelling the consumption of housing services as a separate good in retirement along with the implications for saving. Importantly, the model incorporates a government budget constraint involving a pay-as-you-go universal pension. In addition, the model allows for a compulsory private retirement savings scheme. Particular attention in the simulations is given to the potential impact on household saving rates of a range of policy changes. Typically the effect on saving rates is modest. In most instances, it would take very substantial changes in existing policy settings to induce significant increases in household saving rates.

    View record details
  • E-Commerce and its effect upon the Retail Industry and Government Revenue

    Steel, Will; Daglish, Toby; Marriott, Lisa; Gemmell, Norman; Howell, Bronwyn (2013)

    Scholarly text
    Victoria University of Wellington

    This paper was written by William Steel, Toby Daglish, Lisa Marriott, Norman Gemmell, Howell, Bronwyn and presented at a seminar on 20 March 2013, info here

    View record details
  • A Proposed Pathway towards future reform of New Zealand’s de minimis threshold

    Steel, Will; Daglish, Toby; Marriott, Lisa; Gemmell, Norman; Howell, Bronwyn (2013)

    Scholarly text
    Victoria University of Wellington

    Imports into New Zealand are tax free if the duty and GST payable is less than $60. This has resulted in an effective value threshold of between $226 and $399, significantly higher than many of our trading partners. We examine other nations' thresholds and border practices with a view to whether NZ should lower its de minimis threshold. We further examine other options, strongly recommending changing to a minimum customs value definition. However, we do not support collection of duties/GST through financial intermediaries, instead proposing the establishment of a multilateral system. Finally, we outline shortcomings in Customs’ cost - benefit analysis and accordingly present three alternative methodologies for future assessment of the de minimis threshold.

    View record details
  • Taxation and the User Cost of Capital : An Introduction

    Creedy, John; Gemmell, Norman (2015)

    Scholarly text
    Victoria University of Wellington

    The aim of this paper is to provide an introduction to the concept of user cost and its determinants. Particular attention is given to the influence of taxation. The concept of user cost relates to the rental, the rate of return to capital, that arises in a profit maximising situation in which further investment in capital produces no additional profit. This paper sets out in some detail the range of assumptions involved in obtaining alternative expressions for the user cost. The user cost refers to a before-tax capital rental, the rate of return that ensures that the (after-tax) cost of capital is equal to the post-tax returns over its life. Hence, associated with the user cost measure is an effective marginal tax rate. This can differ substantially from the statutory marginal rate applicable to the investor. A related effective average tax rate is also defined.

    View record details
  • Government Size, Fiscal Policy and the Level and Growth of Output: A Review of Recent Evidence

    Gemmell, Norman; Au, Joey (2012)

    Scholarly text
    Victoria University of Wellington

    Theoretical developments, improved methodologies and more extensive data have helped generate a dramatic increase in the literature testing for the impact of government size and fiscal policy on economic growth in recent years. We review a range of the more recent evidence and examine (1) the consistency or robustness of the results; (2) how these results differ from the earlier literature and (3) their usefulness as a guide to policy reform in practice. We find that the last decade has produced more robust evidence and more plausible orders of magnitude on the impact of fiscal policy on growth. However, the value of this evidence remains limited as a basis for quantifying macroeconomic responses to fiscal policy reform in practice.

    View record details
  • Measuring Revenue Responses to Tax Rate Changes in Multi-Rate Income Tax Systems: Behavioural and Structural Factors

    Creedy, John; Gemmell, Norman (2012)

    Scholarly text
    Victoria University of Wellington

    This paper shows how income changes in response to changes in marginal income tax rates (MTRs) translate into tax revenue changes for the familiar multi-step income tax function used in many countries. Previous literature has focused on the relatively straightforward case of a proportional income tax or the top MTR only. The paper examines revenue responses at both the individual and aggregate levels, and it is shown that for individual MTRs within a multi-rate regime, simple expressions for tax revenue responsiveness can be derived that nevertheless capture the various behavioural and structural responses to income tax reforms involving changes to multiple rates and thresholds. Illustrations are provided using changes to the New Zealand income tax structure in the 2010 Budget. This reduced all marginal tax rates while leaving income thresholds unchanged.

    View record details
  • Revenue-Maximising Elasticities of Taxable Income in Multi-Rate Income Tax Structures

    Creedy, John; Gemmell, Norman (2012)

    Scholarly text
    Victoria University of Wellington

    The empirical literature on the elasticity of taxable income (ETI) sometimes questions whether estimated values are consistent with being on the revenueincreasing section of the Laffer curve, usually in the context of a single rate tax system or for top marginal rates. This paper develops conceptual expressions for this ‘Laffer-maximum’ or revenue-maximising ETI for the multi-rate income tax systems commonly used in practice. Using the New Zealand income tax system in 2010 to illustrate its properties, the paper demonstrates that a wide range of revenue-maximising ETI values can be expected across individual taxpayers, across tax brackets and in aggregate.

    View record details
  • The Tax Gap: A Methodological Review

    Gemmell, Norman; Hasseldine, John (2012)

    Scholarly text
    Victoria University of Wellington

    The global economic crisis has highlighted the continuing problem of tax evasion. For tax agencies to respond, an important antecedent necessitates knowing the extent of the problem. This study is the first to comprehensively review recent research on the tax gap. Our primary contributions are two-fold. First we argue that the tax gap, as conventionally defined, is conceptually flawed because it fails to capture behavioral responses by taxpayers adequately. Our second contribution is to review methods for measuring the tax gap and compare empirical estimates. We suggest that many of the most trenchant criticisms of conventional tax gap measurement (and the ‘hidden economy’ measures that underlie them) leave only microdatabased measures of tax non-compliance as likely to deliver more reliable tax gap estimates. Even here, however, further work is required, on both conceptual and empirical aspects, before tax gaps suitable for policy analysis (e.g. implications for enforcement policy) are likely to be delivered.

    View record details
  • A Proposed Pathway Towards Future Reform of New Zealand’s De Minimis Threshold

    Steel, William; Daglish, Toby; Marriott, Lisa; Gemmell, Norman; Howell, Bronwyn (2013)

    Scholarly text
    Victoria University of Wellington

    Imports into New Zealand are tax-free if the duty and GST payable is less than $60. This has resulted in an effective value threshold of between $226 and $399, significantly higher than many of our trading partners. We examine other nations’ thresholds and border practices with a view to whether NZ should lower its de minimis threshold. We further examine other options, strongly recommending changing to a minimum customs value definition. However, we do not support collection of duties/GST through financial intermediaries, instead proposing the establishment of a multilateral system. Finally, we outline shortcomings in Customs’ cost-benefit analysis and accordingly present three alternative methodologies for future assessment of the de minimis threshold.

    View record details
  • The Distribution of Income and Fiscal Incidence by Age and Gender: Some Evidence from New Zealand

    Aziz, Omar; Gemmell, Norman; Laws, Athene (2013)

    Scholarly text
    Victoria University of Wellington

    This paper examines the age and gender dimensions of income distribution and fiscal incidence in New Zealand using Household Expenditure Survey (HES) data for 2010 and a non-behavioural micro-simulation model. Since many fiscal policies are likely to have quite different incidences across age groups and genders, and with population ageing changing the age and gender composition of the voting population in many countries, age/gender dimensions of fiscal incidence become increasingly relevant. While this single ‘age distribution snapshot’ cannot fully capture lifecycle incidences, it avoids the complex and uncertain assumptions implicit in the latter and is an important component of lifetime redistribution calculations. We explore alternative methods of intra-family allocation of resources including ‘unequal share’ assumptions based on recent research into how families allocate their spending. Our evidence, which in general is not highly sensitive to sharing assumptions, suggests a strong ‘life cycle’ aspect to fiscal incidence whereby net tax liabilities are low, and generally negative, at younger and older ages but positive during much of the ‘working age’ period. Women, on average, are found to have a systematically and persistently lower net fiscal liability than men, most pronounced at older ages when greater female longevity exercises a strong influence. Nevertheless, considerable heterogeneity of fiscal incidence for both men and women is observed with the distributions of various fiscal incidence measures showing substantial overlap.

    View record details
  • Taxpayers' Behavioural Responses and Measures of Tax Compliance 'Gaps': A Critique

    Gemmell, Norman; Hasseldine, John (2013)

    Scholarly text
    Victoria University of Wellington

    The work of Feldstein (1995, 1999) has stimulated substantial conceptual and empirical advances in economists’ approaches to analysing taxpayers’ behavioural responses to changes in tax rates. Meanwhile, a largely independent literature proposing and applying alternative measures of tax compliance has also developed in recent years, which has sought to provide tax agencies with tools to identify the extent of tax non-compliance as a first step to designing policies to improve compliance. In this context, measures of ‘tax gaps’ – the difference between actual tax collected and the potential tax collection under full compliance with the tax code – have become the primary measures of tax non-compliance via (legal) avoidance and/or (illegal) evasion. In this paper we argue that the tax gap as conventionally defined is conceptually flawed because it fails to capture behavioural responses by taxpayers. We show that, in the presence of such behavioural responses, tax gap measures both for indirect taxes (such as the ‘VAT-gap’) and direct (income) taxes exaggerate the degree of noncompliance. Further, where these conventional tax gap measures motivate reforms designed to increase the tax compliance rate, they will likely have a tax base reducing effect and hence generate a smaller increase in realised tax revenues than would be anticipated from the tax gap estimate.

    View record details
  • Estimating Firm-Level Effective Tax Rates and the User Cost of Capital in New Zealand

    Fabling, Richard; Gemmell, Norman; Kneller, Richard; Sanderson, Lynda (2013)

    Scholarly text
    Victoria University of Wellington

    Effective marginal tax rates can be very different from the statutory rate and vary across firms, reflecting such factors as the extent and nature of taxable deductions (losses, depreciation), asset and ownership structures, and debt/equity financing. We estimate firm-specific EMTRs and related user cost of capital (UCC) measures allowing for shareholder-level taxation using data for 2000-2010 from the Longitudinal Business Database. Examining distributions of various UCC measures we find substantial firm-level heterogeneity; systematic changes as a result of tax reforms between 2004 and 2011; and systematic differences between foreignowned and domestically-owned firms. Choices among alternative UCC measures make a difference to interpretations.

    View record details
  • Can Automatic Tax Increases Pay for the Public Spending Effects of Population Ageing in New Zealand?

    Creedy, John; Gemmell, Norman (2013)

    Scholarly text
    Victoria University of Wellington

    This paper examines the extent to which projected aggregate tax revenue changes, association with population ageing over the next 50 years, can be expected to finance expected increases in social welfare expenditures. Projections from two separate models, dealing with social expenditures and income tax and GST revenue, are used. The results suggest that the modest projected required increase in the overall average tax rate over the next 50 years can be achieved automatically by adjusting income tax thresholds using an index of prices rather than wages. Based on evidence about the New Zealand tax system over the last 50 years, comparisons of average and marginal tax rates suggest that such an increase may be feasible and affordable. The paper discusses the range of considerations involved in deciding if this automatic increase in the aggregate average tax rate, via real fiscal drag of personal income taxes, is desirable compared with alternative fiscal policy changes.

    View record details
  • Regression Estimates of the Elasticity of Taxable Income and the Choice of Instrument

    Carey, Simon; Creedy, John; Gemmell, Norman; Teng, Josh (2012)

    Scholarly text
    Victoria University of Wellington

    This paper examines estimation of the elasticity of taxable income using instrumental variable regression methods. It is argued that the ‘standard instrument’ for the net-of-tax rate − the rate that would be applicable post-reform but with unchanged income levels − is unsatisfactory in contexts where there are substantial exogenous changes in taxable income. Two alternative tax rate instruments are proposed, using estimates of the dynamics of taxable income for a panel of taxpayers over a period that involves no tax changes. The parameters derived from this procedure are then used to construct hypothetical (or counterfactual) post-reform incomes that would be expected in the absence of reform. The first method is based on the tax rate each individual would face if income were equal to ‘expected income’, conditional on income in two periods before the tax change. The second alternative uses the form of the conditional distribution of income for each taxpayer to obtain an instrument based on the ‘expected tax rate’. The methods are applied to the tax change in New Zealand in 2001.

    View record details