The Norwegian state collects almost half of the national income in taxes. The design of the tax system therefore matters tremendously for the utilization and distribution of economic resources.
Although there exists no consensus of what constitutes a good or optimal tax system, three dimensions are commonly used to evaluate tax reforms; (i) government revenue, (ii) economic efficiency, and (iii) the distribution of disposable income and welfare across households. Another key aspect of the tax system is tax administration, enforcement and compliance, features that have a direct bearing on the revenue, efficiency and distributional effects of imposed taxes.
The economic analysis of taxation is difficult and interesting because agents adjust behavior when a tax is introduced or changed. Providing knowledge about how different tax bases respond to changes in the tax structure and tax rates will be the main objective for NFS. To obtain this knowledge we will combine tax theory and cutting-edge empirical analysis of economic decisions made by firms and individuals. With this combination it is possible identify the parameters that determine how taxation affects government revenue, efficiency and the distribution of economic welfare.
By combining advances in theory, empirical methods, excellent researchers, and new data sources, NFS will push both the research frontier and the practical implementation of tax policies. We take a holistic, systems approach, and aim to deliver research for a comprehensive evaluation of the Norwegian tax system.
Our research covers all the topics requested in the call. We will conduct novel research based on field experiments to study how different tax enforcement strategies can improve overall tax compliance and we will use advanced Machine Learning techniques to identify heterogenous responses and optimal enforcement policies. We will combine theory, advanced empirical methods and novel data to identify or bound the parameters that capture how individuals and firms adjust their behavior to tax policy changes. Finally we will study the interplay between taxation on the one hand and more comprehensive measures of income and wealth inequality on the other. We will combine theory and empirics to estimate how tax reforms affect economic efficiency as well as the distribution of income across different type of workers and between workers and capital owners. These studies will be based on empirical measures of (taxable) income and wealth that are better aligned with theoretical concepts than those currently in use.
The center will constitute a unique platform for long-term collaboration between national and international leading researchers on tax systems. The center consists of leading national and international partners and we envision fruitful exchanges across the partners. This collaboration will also generate high quality teaching of public economics at the department and several PhD students as well as a Postdoc will be hired as part of the center. Finally, close collaboration with analysts at the NTA will ensure knowledge transfers from academics to practitioners and vice versa.