The Japanese fiscal system and public deficits

Historical development and the role of consumption and income taxes

Japan has been mudded in a long-lasting recession since the 1990s.

During Japan's recession period of 1990's and 2000’s (called the "Lost Decades"), accompanied by a deflation (decrease of price level). Subsequent fiscal management brought huge outstanding debts. In this lecture, we talk that history matters for Japan’s adoption of tax policies and fiscal adjustment.

"Taxing Multinationals: The Scope for Enforcement Cooperation"

(co-written with Jean Hindriks)

Abstract : We present a tax-competition model with two policy instruments: the corporate tax rate and the tightness of tax enforcement (i.e., controls on profit shifting by multinational enterprises).
Tougher enforcement increases the cost of profit shifting, and thus mitigates tax competition.

In a framework of noncooperative tax choices, we compare the equilibria of the noncooperative and cooperative enforcement choices. After showing that enforcement cooperation may not benefit the low-tax country, we indicate two drivers that promote enforcement cooperation.

The first driver of cooperation is complementarity (imperfect substitutability) of countries’ enforcement efforts, taking into account that dispersed enforcement efforts among the involved countries are less effective. We show that cooperation is more likely with greater enforcement complementarity.

The second driver of cooperation is tax leadership, which reduces the extent of disagreement on tax enforcement.