Worldwide experience in sales taxation: Lessons for North America

Worldwide fiscal experience over the past twenty-five years indicates steady expansion in the political and academic constituency for expenditure taxation, including indirect taxes on consumption. Retail levies have emerged as the preferred method of indirect taxation of consumption, as older, pre-retail sales taxes have proven unsuited to modern economic structures. Increasingly, reform of sales taxation has involved a shift to one particular form of tax, the European Community type of value-added tax (VAT). This consumption tax option is again a topic of policy debate in North America, particularly in Canada where a VAT was under active consideration in 1985.This paper sifts through worldwide experience with broad-based sales taxes to identify lessons for tax policy in North America both in the short and longer-run. It indicates that the reputation of such taxes as regressive instruments may have been much exaggerated, and that in any case methods are available, particularly in Canada, for resolving equity issues in sales taxation. The VAT is shown to have marginal economic and administrative advantages over single-stage federal retail taxes in both Canada and the US. However, these advantages are not nearly so significant as in European countries where the VAT was adopted there. Further, sensible debate over the merits and limitations of the VAT in North America will call for much closer scrutiny of the problems unique to this form of tax. Finally, three political issues that were not significant in Europe will likely have an important bearing on any future choices of sales tax instruments, both in the U.S. and in Canada.     

Goods and services tax,cascading, and revenue performance: Analyzing Indian commodity taxation market

Indian economy has finally introduced an improvised value‐added tax commonly known as goods and services tax (GST) with an explicit focus to target cascading. Cascading is by far the most serious issue of a tax structure as it leads to many other challenges like opaqueness, complexity, evasion besides deadweight losses. GST is a fiscal policy reform aimed at integrating and harmonizing the Indian tax structure and hence reduce the incidence of cascading. This study is an attempt to empirically analyze the possible impacts of GST on the cascading and hence revenue collection in the Indian economy. The study has employed a simple but representative simultaneous equation model representing the commodity taxation using time series data from 1990 to 2017. This study finds that reduced cascading under GST will enhance the revenue efficiency of the Indian commodity tax structure. The findings are corroborated by the post‐GST revenue performance of Indian states and the central government.     

On the equity effects of taxing imputed rent: Evidence from Australia

Abstract

Taxation of net imputed rent from owner‐occupied housing (and mortgage interest deductibility) has been advocated in Australia on grounds of both efficiency and equity. The current tax system (no taxation or deductibility) favors owner‐occupied housing over business investments, and in the owner‐occupied sector it favors high‐income, low‐debt households over others. Nevertheless, imputed rent taxation has been criticized on the empirical grounds that its direct burden would fall more heavily on low‐income households than high‐income households.

Using micro‐level data from the 1986 Income Distribution Survey, we show that the burden does not fall more heavily on low‐income households when net imputed rent is included in owners’ incomes and when life cycle effects are controlled for. Moreover, for married couples aged 25 to 54, the taxation of imputed rental income would be not only progressive, but more progressive than the taxation of other household income.     

Public Attitudes towards Taxation: Sweden 1981–1997

Claims have been raised from different perspectives that the welfare state suffers from eroding public support. From an examination of public attitudes towards taxation in Sweden by utilising survey data spanning the period 1981–1997, it is concluded that no long-term trend of increased tax discontent can be distinguished. There are, however, some indications that discontent with taxation has increased during the most recent years. Social conflicts over the preferred distribution and levels of taxes vary in intensity over time, but are foremost structured by class, income, and, to a lesser extent, sector of employment. It is argued that the observed attitude patterns can to some extent be understood as responses to changes in tax and welfare policy.     

How Governments Respond to Business Demands for Tax Cuts: A Study of Corporate and Inheritance Tax Reforms in Austria and Sweden

How responsive are democratic governments to business demands for tax cuts? We research this question in comparative case studies of cuts in corporate taxes and inheritance taxes in Austria and Sweden. We find that governments, regardless of partisan composition, are responsive to business demands, but that fiscal and electoral goals attenuate responsiveness. In both countries, the limited revenues generated by inheritance taxation and greater alignment of business demands with middle‐class voter interests resulted in governments heading business demands for an abolition of this tax. Goal conflict were larger for corporate tax cuts. In both countries, governments tried to minimize these goal conflict by adopting compensatory policy measures, specifically measures to broaden the tax base and simultaneous tax cuts for low‐income groups. The findings suggest that the policy output of business‐friendly tax cuts reflect a balancing of conflicting goals, rather than outright business dominance.     

Funding the Welfare State: Globalization and the Taxation of Business in Advanced Market Economies

Theorists assert that international capital mobility creates substantial pressure for all democratically elected governments to decrease tax burdens on business. I explicate and critique the general version of this theory and offer an alternative view. Empirically, I explore whether or not the globalization of capital markets has resulted in decreases in business social security, payroll, and profit taxes. I also investigate whether or not capital mobility has intensified government responsiveness to domestic investment and profitability. Evidence suggests that business tax burdens have not been reduced in the face of rises in capital mobility nor is tax responsiveness to profitability and domestic investment intensified by more open capital markets. To the contrary, analyses indicate that business taxation has become subject to new 'market conforming' policy rules that developed in tandem with liberalization of markets. These new policy orientations reduce the economic management roles of business taxation while leaving the revenue-generating roles intact. In conclusion, I discuss the implications of the findings for questions concerning the structural power of internationally mobile capital, redistributive policies, and the autonomy of democratically elected governments in a global economy.     

TAXATION AND THE ECONOMY: A BUSINESS VIEW ON SOME IMPORTANT ISSUES

Australia is facing major economic problems. The overseas debt is uncomfortably high and we, like other countries, are having to face up to problems associated with the ageing of our population.
To overcome these problems we need to save through superannuation and otherwise. Furthermore, we need to encourage further development of overseas operations by Australian companies and remove existing constraints.
Taxation plays an important role. A consumption tax/income tax trade-off warrants thorough investigation. The benefits appear significant.
We should avoid unnecessary restrictions on business activities as complexities lead to inefficiencies. We should seek to clarify and hopefully simplify the taxation code; a major review of the Income Tax Assessment Act would seem in order.     

Property tax in Indonesia: measuring and explaining administrative (under‐) performance

One of the arguments made by some Indonesian government officials in defence of continued central control over the property tax is that it has performed well under their authority and that its decentralisation would inevitably result in weaker operations and outcomes. The property tax has indeed grown remarkably well over the past 15 years. This growth, however, has been from a very low base, has been dominated by increased revenues from the mining sector and has been driven by a small number of sub‐national governments. Recently, only around 40% of local sector property tax potential has been realised under central control, given the existing tax rate and base. Property valuations are the most problematic aspect of administration but tax coverage and collections are also sub‐standard. While there may, in fact, be insufficient local government capacity to manage the property tax, even to current levels of performance, this problem could be solved by transferring the relevant central staff to local governments, as has been carried out in other newly decentralised sectors. But even before tax administration is devolved, local governments could at least be given some authority over the property tax rate, presently one of the lowest in the world. Copyright © 2003 John Wiley & Sons, Ltd.     

Designing a Property Tax Reform Strategy for Sub-Saharan Africa: An Analytical Framework Applied to Kenya

Countries throughout Sub-Saharan Africa are exploring options to improve local property taxation. Using the case of Kenya, this article provides an analytical framework for designing an effective property tax reform strategy. The first section presents a general conceptual model of property tax revenues, identifying four critical ratios that ultimately determine the effectiveness of any property tax system—namely, the coverage ratio, the valuation ratio, the tax ratio, and the collection ratio. The second section applies this conceptual framework to the property tax system in Kenya, focusing on the status of these four ratios and outlining possibilities for improving each ratio. The article concludes by summarizing five basic lessons from the Kenyan analysis that can assist in the development of appropriate property tax reforms in other developing countries in Sub-Saharan Africa.     

虚开增值税专用发票犯罪的侦查与控制

虚开增值税专用发票犯罪的发生率不断上升,犯罪涉案金额越来越大,国家税收流失非常严重,呈现出严峻态势,必须加强对这类犯罪的侦查和控制。为此,要大力加强增值税专用发票的管理工作,加强公安机关与工商、税务等部门的协调合作;在侦查工作中,应及时调查相关企业的工商税务和银行资料并取证,及时发现犯罪嫌疑人和控制赃款赃物。     

Who Gains from Charitable Tax Credit Programs? The Arizona Model

The Bush administration and some states have promoted charitable tax credits as a way to increase private charitable giving, to support antipoverty programs, and to allow taxpayers to directly determine the utility and effectiveness of nonprofit services. Looking at Arizona's charitable tax credit program, this study assesses the strengths and limitations of this policy approach. Although charitable giving increased during the first two years of the program (1998 and 1999), tax returns from 2000 suggest it may be difficult to sustain these gains in a weak economy. Larger and better-known nonprofits and taxpayers who itemize their returns are the primary beneficiaries of the program. The program may put small but well-run organizations at a competitive disadvantage, weaken accountability in the sector, and pose administrative challenges to state departments of revenue. This analysis suggests that tax credits are not a panacea for the funding needs of nonprofits.     

Interstate Banking: Current Status and Unfinished Agendas

In 1986, most of the centuries-old barriers against interstatebranch banking fell. By the end of the year, thirty-seven stateshad passed legislation authorizing some form of interstate branchbanking. Moreover, two federal judicial decisions had clearedthe way for interstate banking by restricting state regulatoryauthority over interstate branch banking when it is conductedeither through a shared-use automatic teller machine or by a"nonbank bank." These developments have dramatically changedthe nature of the business of banking, creating an entirelynew legislative agenda for states. High on the list of the itemsthat states must now consider are regulatory and tax parityamong competing financial institutions; multiple taxation offinancial institutions that do business in several states; taxavoidance by out-of-state banks; and out-dated jurisdictionalstandards.     

CORPORATE TAX CUTS AND FOREIGN DIRECT INVESTMENT

Accurate policy evaluation is central to optimal policymaking, but difficult to achieve. Most often, analysts have to work with observational data and cannot directly observe the counterfactual of a policy to assess its effect accurately. In this paper, we craft a quasi‐experimental design and apply two relatively new methods—the difference‐in‐differences estimation and the synthetic controls method—to the policy debate on whether corporate tax cuts increase foreign direct investment (FDI). The taxation–FDI relationship has attracted wide attention because of mixed findings. We exploit a quasi‐experimental design for Russian regions, which were granted autonomy to reduce corporate profit tax in 2003, enabling them to simultaneously experiment with different tax policies. We estimate both the average and local treatment effects of two types of tax cuts on FDI inflows. We find that, on average, relative to the absence of tax cuts, nondiscriminatory tax cuts on direct investment profit increase FDI, but discriminatory tax cuts on selected government‐sanctioned investment projects do not. Yet for both types of tax cuts, local treatment effects vary dramatically from region to region. Our research has important implications for the design of tax policy and fiscal incentive, and the assessment of fiscal policy reforms.     

Differential taxation of nonprofits and the commercialization of nonprofit revenues

The effects of the favorable tax treatment of nonprofit commercial activities are best understood in a framework that explicitly accounts for a number of interactions. These involve differential taxation of nonprofits and for-profits and of nonprofits’ “related” and “unrelated” activities; the preferences of nonprofit executives who may be averse to commercial activity; donors whose giving may be sensitive to nonprofit organization commercial activity; and cost-complementarities between nonprofit core mission-related activities and their secondary money-raising efforts. Differential taxation encourages nonprofits to pursue otherwise avoided commercial ventures by providing excess financial returns that nonprofits can exploit because of their tax-exempt status. Data from the 1992 Statistics of Income (SOI) public use file of Internal Revenue Service (IRS) Form-990 returns indicate that the propensity of nonprofit organizations to undertake both tax-exempt and taxable activities depends on their primary mission-related output and size, the relative importance of government versus private contributions, and the size of the excess return created by differential taxation of nonprofit and for-profit business. Additional analyses of SOI data also show that organizations that engage in taxable commercial activities are likely to allocate joint costs in ways that reduce, and in most cases eliminate, their taxable income.     

Economic Freedom and Taxation: Is There a Trade-off in the Locational Competition Between Countries?

This paper investigates the relationshipbetween economic freedomand taxation. We argue that an economicallyfree environment improvesthe attractiveness of a location, which, inturn, enables governmentsto levy higher business taxes. To test thishypothesis empirically, weestimate the impact of economic freedom onthe national tax policy,where the latter is measured by thecorporate tax revenue related toGNP (corporate tax ratio). We utilize adata set of 46 developed and lessdeveloped countries between 1980 and 1997and find a clear confirmationof our hypothesis. Further, a simulationanalysis reveals that the observedchange in economic freedom has equalizedthe international distributionof corporate tax ratios.     

Local Property Taxation in South Africa: Current Performance and Challenges for the Post-Apartheid Era

As part of the many changes in post-apartheid South Africa, few large non-racial local governments replace relatively small, racially defined ones. The new constitution reserves property taxation for local governments, making it the only major tax available to localities. Property taxation is being extended into previously untaxed areas, principally those of the former black local authorities. It is expected that pressures on this tax will increase as it is called upon to finance services for the larger population Preliminary assessment-sales ratio studies for a handful of localities indicate a wide range of assessment levels. Such circumstances could undermine the acceptance and legitimacy of the tax and, perhaps, of local government. More frequent valuation might raise both assessment levels and uniformity. Systematic, widespread ratio studies and a closer look at the manner in which values are estimated are needed.     

How Pollution Taxes may Increase Pollution and Reduce Net Revenues

This paper develops a positive theory of pollution taxation by a federal authority when pollution abatement subsidies are used by local governments. Environmental and industry lobby groups influence governments with campaign contributions. First, pollution may increase in the pollution tax because the abatement subsidy increases (decreases) with the tax, and pollution increases (decreases) in the abatement subsidy. This occurs because the lobbying incentives change at a pollution tax reform. Second, pollution taxes may reduce net revenues because subsidy expenditures rise. Third, pollution may increase simultaneously as net revenues fall. Finally, the welfare effect of a pollution tax may be negative.     

The impact of parties,economic growth,and public sector expansion: A comparison of long-term dynamics in the Scandinavian and Anglo-American democracies

Abstract. This paper discusses (1) the extent to which the partisan composition of government affects economic policies and macroeconomic outcomes, and (2) the interrelationship between public spending, taxation and economic growth. These two issues are connected. Since target variables and instruments affect each other reciprocally, the specification of the partisan model should encompass both a reaction function and an outcome function. A pooled vector autoregressive model suggests that during the last century left–wing governments in the United States, Britain and Canada have reinforced the growth of both public spending and GNP. Only public sector expansion is affected by partisanship in Denmark, Norway and Sweden. In the Anglo–American countries changes in spending occur before changes in economic growth in terms of a lagged crowding out effect. Spending and revenues appear to affect each other reciprocally. By contrast, public sector expansion in Scandinavia stimulates growth, while taxation leads spending.     

THE IMPLICATIONS OF HIGH LEVELS OF PUBLIC SECTOR DEBT FOR ECONOMIC POLICY-MAKING: THE CASE OF SOUTH AUSTRALIA

Abstract: The relatively small and open South Australian economy has been facing the difficulties associated with the structural adjustment of its industry for over 15 years. In addition, the South Australian public sector has been contending with financial difficulties largely as a result of a reduction in grants from the commonwealth before the failure of the State Bank of South Australia. This paper reviews the growth and current level of government indebtedness in South Australia and discusses which group(s) is likely to bear the main burden of such debt. The main consequences of high levels of state public sector debt, including budgetary inflexibility, are also examined. The paper suggests that it will be necessary for relative wages and prices to adjust more freely if the negative impacts of an inevitable state government budgetary consolidation are to be minimised. If wages and prices are not free to adjust then unemployment will continue to take the brunt of the adjustment process. In addition, out-migration of businesses and people from South Australia will accelerate, leading to a further erosion of the taxation base. The State Bank indemnity arrangements and consequent levels of public sector debt incurred will require the state government to reduce the level and quality of services provided by the state public sector, sell state public sector assets and further improve efficiency and effectiveness. However, there are a number of important arguments why taxation should be an important means by which the South Australian government moves to retire public sector debt as soon as practicable. Not the least important of these arguments is the need to ensure accountability by elected representatives of government for their expenditure decisions.     

State Tax and Expenditure Limitations,Business Climate,and Economic Performance

The influence of state‐level tax and expenditure limitations on economic performance within the framework of the state's business climate is examined using a family of parametric and nonparametric tests of subsample equivalency. An index of tax and expenditure limitation strength or restrictiveness developed by Poulson is used to test for patterns in 84 separate measures of economic performance, business vitality, and development capacity. In general, we find no evidence that tax and expenditure limitations are associated with higher levels of economic performance or business climate. There is limited evidence that tax and expenditure limitations are associated with a poorer business climate and lower economic performance in some cases.