Verlag:
ZEW, Centre for European Economic Research, Mannheim
We study the effect of inflowing remittances - a major source of capital for many countries - on tax-revenues and tax-policy. Instrumenting remittances with changes in the oil-price interacted with a country's distance to oil-producing countries, we...
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
Signatur:
DS 15 (2016,22)
Fernleihe:
keine Fernleihe
We study the effect of inflowing remittances - a major source of capital for many countries - on tax-revenues and tax-policy. Instrumenting remittances with changes in the oil-price interacted with a country's distance to oil-producing countries, we find that remittances have a large positive effect on VAT revenues but no effect on income-tax revenues. This suggests that remittances often escape the income tax but can be taxed via consumption. We further show that tax policy is responsive to shocks in incoming remittances: remittances make the adoption of VAT-systems more likely, and they lead to lower VAT-rates and higher income-tax rates.
