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Vat Treatment Of The Financial Services: Implications For The Real Economy, Ismail Baydur, Fatih Yilmaz
Vat Treatment Of The Financial Services: Implications For The Real Economy, Ismail Baydur, Fatih Yilmaz
Research Collection School Of Economics
Financial institutions are exempt from the value-added tax (VAT) in most countries. We develop a general equilibrium model with endogenous firm entry and a banking sector to accommodate three key distortions related to exempt treatment: (i) self-supply bias in the banking sector, (ii) under-taxation of payment services, and (iii) input distortions in the business sector and tax cascading. We calibrate our model to the average of Germany, France, and the UK data. Our results show that repealing exempt treatment always increases tax revenues. However, welfare gains occur only at low VAT rates due to the hump-shaped VAT Laffer curve.
Informal Institutions And Comparative Advantage Of South-Based Mnes: Theory And Evidence, Pao-Li Chang, Yuting Chen
Informal Institutions And Comparative Advantage Of South-Based Mnes: Theory And Evidence, Pao-Li Chang, Yuting Chen
Research Collection School Of Economics
This paper builds a theory based on “informal institutions” to characterize the comparative advantage of South-based MNEs. MNEs headquartered in countries with poorer state institutions are shown to endogenously invest more in firm-specific institutional capital to compensate for the lack of state institutions, and as an optimal response, undertake FDI in countries with weaker institutions. We conduct an extensive test of the theory using worldwide firm-level greenfield FDI flows during 2009–2016, employing (among others) variations in the interaction of prevalence of informal institutions at home and state institutional qualities of host countries, as well as heterogeneity across sectors and firms …