Sovereign Debt Crises: Causes, Manifestation Processes, and Economic Consequences (OKACHI Michinao)
Abstract to be posted at a later date.(ASONUMA Tamon, HYUNGSEOK Joo, SASAHARA Akira)
The Digitalization of the Economy and Policy Responses: A Review of Changes in Taxation Rules and Economic Theory (OGAWA Hikaru)
Recent Developments and Challenges in Corporate Taxation Research: Corporate Tax Reforms of the 2010s(SUZUKI Takafumi)
Taxation and Benefits for Households: A Review of Issues and Prospects from Optimal Tax Theory (TAKAMATSU Yoshihiro)
Revisiting Traditional Theories of Taxation: Toward a Reconciliation of Competing Principles (HAYASHI Masayoshi)
| By OKACHI Michinao | (Associate Professor, Graduate School of Arts and Sciences, The University of Tokyo/ Visiting Associate Professor, Research Center for Policy Design, Tohoku University) |
In recent years, high levels of public debt have emerged as a critical issue, particularly among advanced economies. However, a consensus has yet to be reached regarding their underlying causes, the processes through which these crises manifest, and their subsequent economic consequences. This paper systematically reviews the literature on sovereign debt crises and examines future policy responses tailored to Japan's specific fiscal structure. In particular, it attempts to elaborate on the specific transmission mechanisms of monetary financing, a topic that has received limited attention in the existing literature. Furthermore, it critically examines the theoretical limitations of the mainstream academic model of sovereign default based on willingness-to-pay.
Keywords: Sovereign debt crisis, sovereign default, monetary financing
JEL Classification: H63,F34,E63
| By OGAWA Hikaru | (Professor, Graduate School of Economics and Graduate School of Public Policy, The University of Tokyo) |
With the expansion of e-commerce and digital service markets where transactions are completed entirely online, traditional taxation rules based on “physical presence” are facing challenges in securing tax revenue. In response to this environmental shift, which could be described as the “de-spatialization” of transactions, Japan amended its Consumption Tax Act in 2015 and 2025, while the United States has been revising its sales tax rules since the 2018 Wayfair ruling. Regarding corporate taxation as well, new international tax rules known as the two pillars (Pillar One and Two) of the OECD/G20 BEPS project were agreed upon in 2021 by nearly 140 countries worldwide. Against the backdrop of these policy changes, economic research analyzing taxation policies in the era of economic digitalization began to emerge around 2020. This paper reviews this growing body of research and presents the implications that can be drawn from it.
Keywords: Cross-border e-commerce, digital services, BEPS, tax competition
JEL Classification: F2,F6,H2
| By SUZUKI Takafumi | (Associate Professor, Faculty of Business, Aichi Shukutoku University) |
This paper reviews the main findings of the empirical literature on corporate tax reforms in Japan since the 2010s, covering both reforms to the core corporate tax system and targeted tax incentives. Because the effects of institutional reforms cannot be assessed solely on the basis of changes in statutory tax rates or nominal deduction and credit rates, the paper focuses on firm-level effective tax burdens and the tax benefits that firms actually realize. It organizes the existing literature around three dimensions: marginal incentives, cash flow effects, and constraints on program take-up and benefit realization. Regarding reforms of the core corporate tax system, the paper emphasizes the need to consider not only corporate tax rate cuts but also the tax base broadening and the expansion of pro forma standard taxation. It further clarifies that the effective average tax rate (EATR), effective marginal tax rate (EMTR), backward-looking effective tax rates (ETRs), and actual tax payments capture distinct dimensions of these reforms. Turning to targeted tax incentives for capital investment, research and development, and wage increases, the review shows that eligibility, actual take-up, realized tax benefits, and differences between ex ante implicit subsidy rates and ex post realized subsidy rates affect the interpretation of empirical estimates. Finally, as future research topics, it points out the need to measure firm-specific incentives using tax administrative data and conducting empirical analyses that address the endogeneity of program take-up and the incidence of tax benefits.
Keywords: Corporate tax reform, effective tax rate, special tax measures, pro forma standard taxation
JEL Classification: H25, H71, H32
| By TAKAMATSU Yoshihiro | (Professor, Faculty of Economics, Meiji Gakuin University) |
This paper introduces research trends regarding the design of taxation and benefits for households from the perspective of nonlinear optimal income tax theory and examines their policy implications. First, we review models of nonlinear optimal income taxation for individuals based on their labor supply behavior at the intensive and extensive margins and provide an overview of the results. We then introduce a model of nonlinear optimal income taxation for households and its theoretical results, clarifying that the desirable structure of taxation and benefits, as well as tax jointness (the response of an individual’s marginal tax rate to changes in the income of other household members), depends on assumptions regarding the household’s labor supply behavior, the government’s redistributive preferences, and the degree of assortative mating. Based on this theoretical framework, we examine the current state of income tax units in other countries and the use of refundable tax credits as a household-level benefit policy. As policy implications for Japan’s income tax and benefit policies, we discuss the appropriateness of the current income tax system’s spousal deduction and the design of refundable tax credits based on household income.
Keywords: Optimal income taxation, Taxation and Benefits for Households, Tax jointness, Refundable tax credits
JEL Classification: H21,H24,H53,J22
| By HAYASHI Masayoshi | (Professor, Graduate School of Economics/Faculty of Economics, The University of Tokyo) |
Japanese public finance scholarship has traditionally discussed the theory of taxation at two distinct levels: the justification of taxation and the allocation of the tax burden. At the level of justification, two classical theories have been distinguished: the benefit theory and what is commonly referred to in Japanese public finance scholarship as the obligation theory of taxation. The benefit theory, which developed under the influence of social contract theory from the seventeenth century onward, justifies taxation on the grounds that the state provides benefits to its citizens. By contrast, the obligation theory is generally regarded as rooted in the organic theory of the state that developed in nineteenth-century Germany. Because the organic theory of the state emerged partly as an intellectual movement against social contract theory, the obligation theory has often been regarded as opposed to the benefit theory. At the level of tax burden allocation, two principles have likewise been distinguished: the ability-to-pay principle and the benefit principle. The ability-to-pay principle holds that the tax burden should be allocated according to individuals' economic capacity, whereas the benefit principle requires that it should be allocated according to the benefits they receive. These principles have likewise often been regarded as conflicting with one another.
This paper revisits these two pairs of apparently opposing concepts in light of the development of economic theory. It argues that the two ideas within each pair are not necessarily incompatible. In particular, the paper shows that progressive taxation can be justified even under the benefit principle and that the benefit principle can therefore be reconciled with the ability-to-pay principle. This is because individuals with higher incomes may face higher tax rates even under the benefit principle if their maximum willingness to pay for public goods increases with income. This reasoning may appear less straightforward in the context of redistributive policies involving direct income transfers. A redistributive system, however, can be understood as a form of insurance that provides benefits when an adverse event occurs, that is, when an individual's income declines, and thereby provides economic security. Once redistribution is interpreted in this way, the insurance premium rate, and hence the tax rate, may increase with income. The paper therefore concludes that the benefit principle need not conflict with the ability-to-pay principle even in the context of redistributive taxation.
Keywords: Traditional Theories of Taxation, Benefit Theory, Obligation Theory of Taxation, Ability-to-Pay Principle, Benefit Principle
JEL Classification: H2,H20
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