Volume 8, Issue 1

Child-care subsidies are meant to facilitate work for mothers with small children. The paper demonstrates that the predominant current income-dependent subsidy scheme in Switzerland (which is currently also discussed in Germany) creates strong negative work incentives especially for well qualified women. The example of the city of Zurich shows that it does not pay off for mothers to work more than one to at most three days per week, as any increase in the hours worked leads to a more than proportional rise in child-care costs. For more than one child, the effective total marginal tax rate, including child-care expenditures, can well exceed 100%. This effect is primarily due to the endogenous pricing of child-care facilities implied by the scheme, and much less to progressive taxation. Pushing these mothers out of the labor market creates a loss in human capital and tax revenues.

The simplification of the tax system is a key objective of many income tax reform proposals. This paper investigates the distributional impact of tax simplification. Our empirical analysis is based on a microsimulation model for the German tax and transfer system (FiFoSiM).We model tax simplification as the abolition of a set of controversial deductions from the tax base. We combine these simplifications with a tax rate schedule adjustment to preserve revenue neutrality. The combination with a flat tax rate increases the inequality of after-tax incomes whereas the combination with a directly progressive rate schedule adjustment reduces inequality.

First it is clarified what ,,trust“ and ,,tax morale“ actually mean and how they are measured. Especially in German-speaking countries, tax morale is often mixed with tax compliance. But the first is a moral conviction while the second denotes actual behaviour, and both do not necessarily need to be congruent. Then it is shown how direct popular rights empower Swiss citizens to influence their tax burden. Finally, we discuss the impact of direct popular rights on tax morale and on tax compliance as well as the impact of the trust between citizens and tax authorities on the latter. It is shown that direct democracy leads to higher tax morale and compliance, even if tax morale is today rather low in Switzerland compared to other countries.

Empirical research on the determinants of corruption has made substantial progress over the last decade. To date, the consequences of different structures of the legal enforcement institutions have, however, only played a marginal role. This contribution deals both with the determinants of corruption within the judiciary and with the consequences of institutional structures of the judiciary for corruption at large. It is shown that both the factual independence of the judiciary as well as that of prosecution agencies are correlated with lower levels of corruption. This is also true for a third indicator that measures the degree to which judges are held accountable for their decisions („judicial accountability“).

The growing disarray of the German budgetary situation can no longer be ignored. In as much as sub-sovereign entities as Berlin, Saarland, Bremen are or will be claiming substantial subsidies in the Constitutional Court, the academic establishment begins to ponder upon the institutional design of public spending in Germany in general and the institutional challenge of fiscal emergency in the Länder (sub-sovereign entities) in particular. The proposals, however impractical as most of them are, lead to a key question: Can the management of the budget and fiscal policy in general any longer be left in the hands of politicians or do we need - not only in case of fiscal emergency - a new constitutional organ which for the whole state sets rules for public spending and is authorized to intervene in regional and national fiscal emergencies? The proposals submitted by the Academic Advisory Council of the Ministry of Finance are neither new nor original. But they have the merit to kick off - late but not too late - a fundamental debate on the institutional framework of German budget policy.