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This paper investigates who is most affected by informal competition and how regulation and enforcement affect the extent and nature of this competition. Using newly-collected enterprise data for 6,466 manufacturing formal firms across 14 countries in Latin America, the authors show that formal firms affected by head-to-head competition with informal firms largely resemble them. They are small credit constrained, underutilize their productive capacity, serve smaller customers, and are in markets with low entry costs. In countries where the government is effective and business regulations onerous, formal firms in industries characterized by low costs to entry feel the sting of informal competition more than in other business environments. Finally, the analysis finds that in an economy with relatively onerous tax regulations and a government that poorly enforces its tax code, the percentage of firms adversely affected by informal competition will be reduced from 38.8 to 37.7 percent when the government increases enforcement to cover all firms.

Compliance costs --- Cost savings --- Economic development --- Economic growth --- Environment --- Environmental Economics and Policies --- Environments --- Fixed costs --- Metals --- Microfinance --- National Income --- Productivity growth --- Tax rates

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Income inequality in Latin America ranks among the highest in the world. It can be traced back to the unequal distribution of assets (especially land and education) in the region. But the extent to which asset inequality translates into income inequality depends on the redistributive capacity of the state. This paper documents the performance of Latin American fiscal systems from the perspective of income redistribution using newly-available information on the incidence of taxes and transfers across the region. The findings indicate that: (i) the differences in income inequality before taxes and transfers between Latin America and Western Europe are much more modest than those after taxes and transfers; (ii) the key reason is that, in contrast with industrial countries, in most Latin American countries the fiscal system is of little help in reducing income inequality; and (iii) in countries where fiscal redistribution is significant, it is achieved mostly through transfers rather than taxes. These facts stress the need for fiscal reforms across the region to further the goal of social equity. However, different countries need to place different relative emphasis on raising tax collection, restructuring the tax system, and improving the targeting of expenditures.

Debt Markets --- Economic Theory and Research --- Effective tax rates --- Emerging Markets --- Finance and Financial Sector Development --- Indirect taxation --- Macroeconomics and Economic Growth --- Poverty Impact Evaluation --- Poverty Reduction --- Private Sector Development --- Tax --- Tax collection --- Tax incidence --- Tax rate --- Tax rates --- Tax revenue --- Tax revenues --- Tax system --- Taxation and Subsidies

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This paper extends the effective average tax rate (EATR) developed in Devereux and Griffith (2003) by relaxing the assumption of a one-period perturbation in the capital stock. Instead it allows a permanent investment. While this may appear a small change, it has important implications. First, it allows the EATR to be calculated in the presence of tax holidays, which are an important part of tax systems, especially in developing countries. Second, it reveals an interesting feature of the original EATR: despite the assumption of a one-period investment, the original measure is informative about long-term investments, thanks to the assumption of pooled depreciation. Without this assumption-which is justifiable in a few countries only- the EATR based on one-period perturbation in the capital stock would be less useful for analyzing medium and long-term investments.

Investments --- Taxation --- Tax rates --- Tax tables --- Investing --- Investment management --- Portfolio --- Finance --- Disinvestment --- Loans --- Saving and investment --- Speculation --- Econometric models. --- Rates and tables. --- Investments: General --- Taxation, Subsidies, and Revenue: General --- Investment --- Capital --- Intangible Capital --- Capacity --- Public finance & taxation --- Macroeconomics --- Depreciation --- Effective tax rate --- Tax holidays --- Average effective tax rate --- Marginal effective tax rate --- Tax administration and procedure --- Tax incentives --- Canada

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This study examines the roles of revenue recycling schemes for the selection of alternative tax instruments (i.e., carbon-, sulphur-, energy- and output-tax) to reduce CO2 emissions to a specified level in Thailand. A static, single period, multi-sectoral computable general equilibrium (CGE) model of the Thai economy has been developed for this purpose. This study finds that the selection of a tax instrument to reduce CO2 emissions would be significantly influenced by the scheme to recycle the tax revenue to the economy. If the tax revenue is recycled to finance cuts in the existing labour or indirect tax rates, carbon tax would be more efficient than the sulphur-, energy- and output-taxes to reduce CO2 emissions. On the other hand, if the tax revenue is recycled to households through a lump-sum transfer, sulphur and carbon taxes would be more efficient than energy and output taxes. The ranking between the sulphur and carbon taxes under the lump sum transfer scheme depends on substitution possibility of fossil fuels. Sulphur tax is found superior over carbon tax at the higher substitution possibility between fossil fuels; the reverse is found true at the lower substitution possibility. In all schemes of revenue recycling considered, the output tax is found to be the most costly (i.e., in welfare terms) despite the fact that it generates two to three times higher revenue than the other tax instruments.

Carbon Tax --- Carbon Taxes --- Debt Markets --- Energy --- Energy Production and Transportation --- Energy Tax --- Environment --- Environment and Energy Efficiency --- Environmental Tax --- Environmental Taxes --- Finance and Financial Sector Development --- Income Tax --- Levies --- Levy --- Macroeconomics and Economic Growth --- Tax Rates --- Tax Revenue --- Taxation and Subsidies --- Transport --- Transport Economics, Policy and Planning

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The last two decades have witnessed a sharp increase in foreign direct investment (FDI) flows and increased competition among developing countries to attract FDI, resulting in higher investment incentives offered by host governments and removal of restrictions on operations of foreign firms in their countries. Fiscal competition between governments can take the form of business tax rebates, productivity-enhancing public infrastructure or investment incentives such as tax holidays, accelerated depreciation allowances or loss carry-forward for income tax purposes. It can take place between governments of different countries or between local governments within the same country. This paper surveys the recent theoretical and empirical economic literature on decentralization which attempts to answer three questions. First, does theoretical literature on fiscal competition and "bidding races" contribute to a better understanding of such phenomenon in developing countries? Second, are FDI inflows in developing countries sensitive to fiscal incentives and is there empirical evidence of strategic behavior from the part of developing countries in order to attract FDI? Third, what evidence is there about fiscal competition among local governments in developing countries?

Central governments --- Debt Markets --- Decentralization --- Differentials --- Districts --- Emerging Markets --- Finance and Financial Sector Development --- Fiscal federalism --- Local governments --- Macroeconomics and Economic Growth --- Private Sector Development --- Provinces --- Public consumption --- Public expenditures --- Public finance --- Public Sector Development --- Public Sector Economics --- Subnational Economic Development --- Tax --- Tax autonomy --- Tax competition --- Tax concessions --- Tax incentives --- Tax policies --- Tax purposes --- Tax rate --- Tax rates --- Taxation --- Taxation & Subsidies