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2019/04: Behavioural responses to the (re)introduction of wealth taxes. Evidence from Spain

In the throes of economic crisis, the Spanish government decided to reintroduce the Wealth Tax, appealing to redistributive motives and its need for greater revenues. This paper studies how individuals reacted to the reintroduction of this tax by drawing on the universe of wealth tax returns submitted to the Catalan Tax Agency between 2011 and 2015. Thus, we exploit the variation in treatment exposure to analyse taxpayers’ responses, in terms not only of wealth accumulation, but also of the potential avoidance strategies adopted. Indeed, our results reflect avoidance rather than real responses. They show that while facing higher wealth taxes did not have a negative effect on taxpayers’ savings, it did encourage them to change their asset and income composition to take advantage of wealth tax exemptions (mostly business-related) and the existence of a limit on wealth tax liability. This translates into an elasticity of taxable wealth with respect to the net-of-tax rate of return of 0.64, or, put differently, a 0.1 percentage point increase in the average wealth tax rate leads to a reduction in taxable wealth of 3.24% over 4 years. Overall, these avoidance responses are quite marked in terms of tax revenues: they represent a 4-year accumulated revenue loss of 2.6 times the 2011 estimated wealth tax revenues. The existence of such responses mostly related to the design of the wealth tax has relevant policy implications not only in terms of revenues but also insofar as it undermines the tax’s redistributive role.

2019/03: Transaction-tax evasion in the housing market

We model the behaviour of a buyer trying to evade the real estate transfer tax. We identify over-appraisal as a key, easily-observable element that is inversely related with tax evasion. We conclude that the tax authority could focus auditing efforts on low-appraisal transactions. We include ‘behavioural’ components (shame and stigma) allowing to introduce buyers’ (education) and societal (social capital) characteristics that explain individual and idiosyncratic variations.

2019/02: Preventing criminal minds: early education access and adult offending behavior

In this paper we estimate the impact of a nationwide public preschool expansion that took place in Spain over the 1990s on criminal behavior later in time. We exploit variation in enrollment rates across Spanish regions and birth-cohorts, and we link education data to a unique administrative crime dataset recording offenses committed in the region of Catalonia over the period 2009-2014. We find that for the average birth cohort, Catalan municipality and year, a 1 percentage point increase in preschool exposure at age 3 yields 1.6% fewer crime actions during youth and young adulthood.

Informe IEB 2019

El Informe IEB sobre Federalismo Fiscal y Finanzas Públicas se publica cada año, desde 2009, con el objetivo de analizar cuestiones de gran relevancia y actualidad relacionadas con el federalismo fiscal y las finanzas públicas.

2019/01: Bilingual education and school choice: a case study of public secondary schools in the Spanish region of Madrid

In the academic year of 2004-2005 the Spanish region of Madrid began to implement a bilingual educational programme in public schools. Currently, 45% of the public educational system (primary and secondary) participates in the bilingual programme of the Community of Madrid (hereinafter MBP). One of the objectives sought by this programme, but not the only one, is to make the study of a foreign language accessible to students from economically less favoured families (who have greater difficulty in meeting the cost of private language tutoring). Consequently, our study aims to analyse whether, as proposed, students from disadvantaged socioeconomic backgrounds effectively participate in the MBP. To comply with this objective, we estimate a model directed at identifying which factors influence the selection of a bilingual public school by families.

Workshop on Political Economy

June 6-7, 2019