Tax Uniformity: A Commitment Device for Restraining Opportunistic Behavior

Abstract

We show that uniform and differentiated tax systems diverge in their propensity to generate distortionary opportunistic behavior. First, when firms choose investment before the government can commit to its taxes, the tax scheme creates strategic incentives for firms to distort their investment. Second, a system of differentiated taxes has a greater propensity to foster strategic distortions in investment than a uniform tax regime. While the paper makes these points in a set‐up in which polluting firms face an emission tax and invest in abatement, the main message is shown to hold for a wide class of tax policy games.

Quo Vadis Kepatuhan Pajak?

“…Oleh karena itu, penting menghadir kan peran komitmen dalam hubungan an tara wajib pajak dan pemerintah untuk menciptakan kinerja kepatuhan pajak ting gi yang hasilnya dapat dirasakan melalui keberpihakan kebijakan publik terhadap kese jahteraan masyarakat pada umumnya. Pentingnya membangun komitmen dalam hubungan antara wajib pajak dan peme rintah ditegaskan oleh Dewit & Leahy (2015) dan Mascagni (2018) seberapa kuat komitmen wajib pajak untuk berkontribusi demi kepentingan bersama. Komitmen dalam ensiklopedia Indone sia diartikan sebagai perjanjian atau keteri katan atau kontrak untuk melakukan sesu atu.…”

Environmental Concerns, Environmental Policy and Green Investment

“…However, Isik [ 2 ] showed that uncertainty about government policies significantly impacts the green investment decision of economic agents. Dewit and Leahy [ 3 ] argued that many environmental policies, including emission taxes in the real world, typically have commitment power in the short run, but fail to extend that power to the longer run. Based on these arguments and examples in Chinese context mentioned above, we assume the firm as the leader to set his strategic decision of green technology investment level first, and the regulator as the follower to set the tax (or subsidy) level in response to it.…”

“…However, many other studies have modeled the regulator’s profit function based on specific issues the study concerned. For example, Dewit and Leahy [ 3 ] assumed the regulator’s profit consisited of the firm’s profits, the environmental damages, and emission taxes in the study of how the tax system would create distortionary opportunistic behaviour. Arguedas et al [ 22 ] presented a Stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime.…”

“…Some Chinese scholars [ 1 ] have argued that the regulator should adopt a dynamic tax/subsidy system. However, this results in the failure of the policy to extend its commitment power to the long run and might cause the economic agents to behave opportunistically [ 2 , 3 ]. As an instance, before 2018, the Chinese government regulated the business green behavior by levying pollutant discharge fee, which is without a national uniform standard and is completely determined by local regulators being in charge of the office only temporarily.…”

“…Thus, if the environmental policy fails to exert a long-run commitment power on regulating the economic agents’ behavior, it may be more reasonable to think of the firm as the leader in the game, since the investment in green technology is usually a strategic decision. Dewit and Leahy [ 3 ] proposed a game model, in which the firm is the leader to make its decision to affect the regulator’s policy. They focused on investigating the propensity of two tax systems (i.e., uniform and differentiated tax systems) to create distortionary opportunistic behavior.…”