Classification of European Union Countries in the Context of Tax Burden: Cluster Analysis

In the context of the wave of anti-globalization, the rise of trade protectionism, and the trade friction between China and US, could China employ internal reform, such as fiscal and tax policy, to achieve the upgrading of firm export performance? Or rather, could tax relief provide Chinese firms a taxation-driving force for improving export performance? The discussion on this issue is of great practical significance.In view of this, based on the data of World Bank’s Chinese Firm Survey in 2005, supplemented by World Bank’s Chinese Firm Survey in 2012, this paper makes the first attempt to systematically explore the impact of tax burden on firm export behavior. Our main finding is that tax burden has a negative impact on firms’ export propensity, export scale, and export intensity. Furthermore, the negative impact mainly comes from VAT burden.The innovation and contribution of this paper are as follows: Firstly, to the best of my knowledge, this is the first paper to directly explore the impacts of different kinds of tax burden on firm export behavior based on the data of World Bank’s Chinese Firm Survey in 2005 and World Bank’s Chinese Firm Survey in 2012, which provides the micro evidence for verifying the substantial effect of tax burden on firm export behavior. Secondly, this paper compares the impacts of turnover tax（indirect tax） burden and income tax（direct tax） burden on firm export behavior, and finds that the negative impact mainly comes from turnover tax（indirect tax）burden, which indicates that tax structure biased toward direct tax is a better tax arrangement for export firms under the premise that the general target of taxation is determined. “Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform” adopted at the Third Plenary Session of the Party’s 18th National Congress clearly put forward that we should “deepen the reform of taxation system, perfect the local taxation base, and gradually raise the share of direct taxation”. This paper provides empirical evidence for the rationality and necessity of this reform form the perspective of stabling foreign trade. Thirdly, to get to the bottom of the origins of the negative impact, this paper inquisitively explores which kind of turnover tax（indirect tax） burden has a substantial effect on firm export behavior by comparing the impacts of VAT burden, business tax burden and consumption tax burden, and finally finds that VAT burden has the strongest negative impact on firm export behavior, followed by business tax burden and consumption tax burden, or rather, the negative impact of turnover tax burden on firm export behavior mainly comes from VAT burden. Fourthly, this paper supplements the empirical study on firm export mode by comparing the impacts of tax burden on firm direct export and firm indirect export, and finds that tax burden mainly affects indirect export. Fifthly, this paper makes the first attempt to explore the channels through which tax burden affects firm export behavior in detail, and thus systematically gives an answer to the question that how tax burden affects firm export behavior.

The impact of the current financial crisis on changes in the taxation of consumption, labour, and capital in the European Union. The responses reflected in the tax policies pursued in the EU countries to the current crisis will be analysed in three ways: 1. Distribution of total tax burden by economic function, i.e. assessment of the share of taxes on consumption, labour, and capital in relation to GDP and total tax revenues. Therefore, the analysis will cover backward-looking ta Xburden indicators; 2. Analysis of trends in the implicit tax rate (ITR) on consumption, labour and capital. The ITR is an indicator which expresses the relation of tax burdens levied on different activities to total revenue from this activity. The ITR takes into account the legislation and the resulting tax burden(s) which may affect the behaviour of various entities and their decisions. This approach is described as forward-looking effective tax rate; 3. Trends in the EU countries are compared with the changes taking place in Poland. This includes an explanation of the specificity of the fiscal policy pursued in Poland. 4. For the purpose of this paper we used statistics prepared according to the methodology adopted by the European Commission, published in “Taxation trends in the European Union”, Eurostat 2012.

The article discusses the existing approaches to estimations of tax burden in Russia in comparison with the European countries. Calculations are based on the macroeconomic approach to tax bases estimations used by the European statistical service. Tax burden is evaluated by the implicit tax rates, which are the ratio of the paid taxes and macroeconomic valuation of the respective tax base. The article examines some issues in the allocation of the tax burden on corporate income, labour, and consumption; thus, the implicit tax rates on corporate income, on labour, and on final consumption in Russia and the European countries are examined. The problem of significance of the total amount of tax burden and its allocation between different categories of tax bases (corporate income, personal income, final consumption) is formulated. It is shown that tax burden at different bases varies sufficiently and differs from the European analogues. Tax burden on corporate income and labour is not very high in comparison with most European countries. But the gap between the statutory and the implicit tax rates on corporate income is too small to provide sufficient incentives to economic actors (for long-term investments). Tax burden on labour mostly lies on employers and creates a noticeable imbalance on the national labour market. Tax burden on consumption is very close to the highest European levels (estimated without taxes associated with exported energy products). It is shown that if the “exported part” of indirect taxes is taken into account, the burden will move to an extremely high level. The environmental tax burden in the Russian Federation is very low in comparison with the EU countries, and it is mostly created by resource taxes instead of energy taxes, as in Europe.

Tax pressure can be calculated at the macroeconomic level, but also at the microeconomic level, by analysing the data provided by companies in their financial statements, or by authorities giving official statistics. In this study, the authors adapt a formula for the calculation of the effective tax rate, proposing, at the denominator, the taxes reported explicitly by companies in their profits and loss account, to which they added the reconstituted value of social and fiscal contributions of the employees. Also, unlike the literature so far, they divided these tax expenses to the sales (revenues) and not to any other indicators from the profit and loss account. The population analysed is represented by the companies listed on the AeRo market of BSE, in the period 2010- 2019, a total of almost 3,000 observations. The results allowed them to notice a systematic increase in the share of the tax burden in sales, over the period taken into account. In verifying the effects of some variables proposed by the literature on the tax burden, the authors found that large firms have a lower tax burden, more profitable firms are more taxed than others, the tax burden is lower for more leveraged firms, and increasing the share of fixed assets in the balance sheet leads to an increase in the tax burden. In addition to the literature, they introduced a new variable - audit opinion - and found out that firms that receive modified audit opinions have a higher tax burden.

The main objective of this research is to develop a model that is able to evaluate how the effects of changes in tax rates are distributed among the different income classes as well as their impact in the government revenues. This study is relevant, because Brazilian public authorities do not have mechanisms for such analysis, and this is possibly one the reasons why the way indirect taxes affect the population has not been carefully considered so far. The model developed in this study requires three fundamental types of information: the tax burden per income class, the estimate of Marshall's elasticities matrix, and the population's pattern of consumption. Simulations are based on Household Budgeting Survey (POF-2002(POF- -2003) ) microdata. Thus, to reach the objectives proposed by this thesis, a detailed study of the current incidence of the Brazilian tax system was carried out, including the evaluation of direct, indirect and per-class tax burden and the estimation of a tax function assuming equitable sacrifice. Indirect tax rates were detailed as much as possible, considering the tax regulations of the country, states and their respective capital cities. Combining this information with the 2002-2003 POF database, it could be verified that the Brazilian tax system is regressive when based on income. This is mainly due to indirect taxes, and more specifically to Value added tax (ICMS), Social Security (PIS), and Social Security Financing Tax (COFINS). However, we must point out that the low participation of indirect taxes does not allow a balance of the tax burden per income class. Income tax has an effective rate well below the rate established by the law, and municipal tax on properties (IPTU) is regressive, when the total family income is analyzed. The study also showed that there are regional differences as to indirect taxes. Particularly in the case of food, which is a relevant expense group for low income families, higher tax burdens were found for the North and Northeast regions. Marshall's elasticities matrix was estimated using a non-linear version of the almost ideal demand system (NL-AIDS), considering 27 product groups out of the 2002-2003 POF database. As not all the necessary prices for non-food products could be obtained from the POF database, other information sources were used. Tax functions assuming equitable sacrifice were estimated using the procedure proposed by Hoffmann, Silveira and The results suggest that the coefficient of aversion to inequality is increasing in Brazil and this can be interpreted as the population's desire for a fairer tax system. The simulations show that the model developed in the last chapter has a reasonable performance in the evaluation of the effect of changes in the tax system. It is certainly an additional instrument which can be used by public authorities before establishing changes in the tax rates. The model allowed us to observe that when a higher progressivity of the tax system is attempted, it is necessary to combine changes in direct and indirect taxes.

A Choice Experiment on Taxes: Are Income and Consumption Taxes Equivalent?

We test the equivalence of income and consumption taxes through a choice experiment. Under a given set of income and consumption parameters, subjects were asked to choose among an income tax of 20%, a consumption tax of 25% (which is an equivalent tax burden), a consumption tax of 22%, and a consumption tax of 20%. Our results showed that subjects prefer income tax to consumption tax when the nominal consumption tax rate is higher than the nominal income tax rate. However, subjects tend to prefer consumption tax to income tax when the nominal tax rates are identical. Our result, that subjects prefer income tax to consumption tax despite a higher tax burden, implies the consumption tax miscalculation bias. The consumption tax miscalculation bias is one where subjects miscalculate the amount of consumption tax as if it is declared by tax inclusive, as in the case of income tax, despite consumption tax being tax exclusive. If the income tax burden is equivalent to the consumption tax burden, subjects prefer income tax. This result implies that income and consumption taxes are not equivalent due to the consumption tax miscalculation bias.

This paper follows our previous article, Kotlán and Machová (2012a), which presented an indicator of the tax burden that can be used as an alternative to the tax quota, or for implicit tax rates in macroeconomic analyses. This alternative is an overall multi-criteria index called the WTI - the World Tax Index. The aim of this paper is to present the new World Tax Index 2013 and its methodology, which allowed us to compute it for all 34 OECD countries for the 2000-2012 period, with special references to methodology changes from the previous version. We show that, using the WTI, the highest tax burden is measured for Denmark, Belgium and Turkey, while the lowest tax burden is in Switzerland, Ireland, Chile or Japan. The total ranking of the countries is from 66% correlated with the ranking according to the tax quota, mainly due to a strong correlation in the case of property taxes, personal income taxes and VAT-type taxes. In these cases, the tax quota seems to be a good approximator of the tax burden. However, there is no correlation between corresponding tax quotas and WTI sub-indices for corporate taxes or selective consumption taxes. In those cases, the tax quota apparently fails and is not suitable for use in further analyses.

12 - Taxable Capacity, Incidence of Taxation and the Tax Burden

The study is devoted to verification the hypothesis that a higher tax burden does not necessarily lead to the growth in the shadow economy in Russian regions. The cross-regional comparative analysis was undertaken to measure the influence of the tax burden on the shadow economy. The analysis used Rosstat workforce surveys data about the number of informal workers nationwide and by sector from 2007 to 2019. Stochastic factor analysis was used to examine the relationship between the share of informal workers and such factors as the tax burden, GRP per capita, advanced production technologies, innovation activities of organizations, industrial sectors’ and social sectors’ contribution to GRP. To determine the strength of the relationship between the factors and the resultant indicator, a correlation and cluster analysis were conducted. It has shown that there is an inverse correlation between the tax burden and informal employment. Regions with a lower tax burden tend to have higher rates of informal employment (in 2019, the correlation coefficient was –0.4274). A similar inverse correlation is observed for the level of informal employment and the macro-economic indicators – GRP per capita, innovation, and the contribution of industrial sectors to GRP. There is a direct correlation between informal employment and the contribution of social sectors to GRP. These findings shed light on the key factors conducive to the growth in the shadow economy: what matters most is the economic and innovation lag in the development of certain regions. The results of this research can be useful for policy-makers seeking to address the problem of the shadow economy in regions.

The oil industry occupies an important place in Russian economy and in the global energy supply system. The industry has recently been facing a number of internal and external problems, for example, the deteriorating quality and structure of the product base and an increase in the share of tight oil reserves. Confronting these challenges will inevitably incur costs, which will directly affect oil companies’ financial performance. The Russian government uses taxation to incentivize oil companies to improve their efficiency, which renders the question of tax burden particularly salient. This study aims to analyze the tax burden on the Russian oil industry in the period from 2010 to 2017 and to identify the key factors that shape the structure and dynamics of oil companies’ tax payments. The article provides an overview of Russian and international research literature on the problem of tax burden. The role of oil and gas revenues in the structure of the Russian federal budget is shown. The analysis demonstrates that there has been a steady decline in the tax burden on oil companies in recent years due to the changes in the method of calculating the mineral extraction tax and export duties as well as the expanding range of preferential categories of subsurface use objects. The factor analysis combined with quantitative analysis reveals the factors that determine the dynamics and structure of oil companies’ tax payments. The method of cluster analysis is applied in this study to compare the performance of Russian oil companies according to a set of tax burden parameters. The companies are divided into three clusters and specific recommendations are provided for each cluster. For example, Gazprom Neft and LUKOIL have a low tax burden and can be seen, therefore, as potential donors of tax revenues; Rosneft, Bashneft and Tatneft need to increase their efficiency through non-tax optimization; a suitable strategy for Surgutneftegaz, RussNeft, and Slavneft, in our view, would be to adjust the structure of their production activities to increase the share of the domestic crude oil market. Based on the results of the cluster analysis, the authors propose guidelines for reforming taxation of the oil industry and describe the main stages of this process. For citation Filimonova I. V., Provornaya I. V., Shumilova S. I., Zemnukhova E. A. Cluster analysis of Russian oil companies based on tax burden parameters. Journal of Tax Reform. 2019;5(1):42–56. DOI: 10.15826/jtr.2019.5.1.059 Article info Received September 24, 2018; accepted March 20, 2019

В статье представлены результаты анализа основных тенденций развития крестьянских (фермерских) хозяйств Красноярского края. Цель исследования — оценить эффективность функционирования крестьянских (фермерских) хозяйств (КФХ) в разрезе сложившейся отраслевой специализации применяемых налоговых режимов. Рассмотрена динамика экономических показателей КФХ за 2017—2021 гг., состояние налогообложения КФХ региона, востребованность ими соответствующих режимов налогообложения, структура налоговых платежей. Наиболее востребованным для КФХ является специальный налоговый режим в виде единого сельскохозяйственного налога (ЕСХН). Удельный вес хозяйств, применяющих его, за пять лет вырос в два раза. Наименее востребованной является патентная система налогообложения. При этом ряд хозяйств совмещают ее применение с другими налоговыми режимами. Крестьянским (фермерским) хозяйствам региона, применяющим режим ЕСХН, присущи наименьшие показатели налоговой нагрузки. При этом более 60 % этих КФХ имеют налоговую нагрузку в пределах 5 %. В КФХ, применяющих общую систему налогообложения, отмечается наибольшая доля убыточных хозяйств, — их удельный вес практически в два раза превышает вес хозяйств со специальными налоговыми режимами. Также в хозяйствах на ОСН имеют место самые высокие налоговые платежи. Максимальная сумма выручки в среднем на 1-го работника, занятого в сельскохозяйственном производстве, характерна для хозяйств на ПСН. Несколько меньший показатель имеют КФХ на ЕСХН. Оценивая показатели налоговой нагрузки по КФХ в разрезе отраслей специализации можно отметить, что около 66 % хозяйств, производящих продукцию растениеводства и занимающихся производством продукции первичной и промышленной переработки сельскохозяйственного сырья имеют нагрузку в пределах 5 %. Наибольшая налоговая нагрузка характерна для КФХ животноводческой специализации. В целом КФХ, применяющие ЕСХН, имеют наилучшие показатели эффективности в разрезе всех отраслевых специализаций. The article presents the results of the analysis of the main trends in the development of farming households in the Krasnoyarsk Territory. The purpose of the study is to assess the effectiveness of the functioning of farming households in the context of the current industry specialization of the applied taxation regimes. The dynamics of economic indicators of farming households for 2017—2021, the state of taxation of farming households in the region, their demand for appropriate taxation regimes, and the structure of tax payments are considered. The most demanded for farming households is a special taxation regime in the form of the unified agricultural tax (UAT), the share of farms applying it has doubled in five years. The least popular is the patent tax system, while a number of farms combine its application with other taxation regimes. Farming households in the region that apply the UAT have the lowest tax burden, while more than 60 % of these farms have a tax burden within 5 %. The largest share of unprofitable farms is noted in farming households that apply the general taxation system, their share is almost double that of farms with special taxation regimes. Also, the highest tax payments take place in the farms on the GTS. The maximum amount of revenue on average per 1 worker employed in agricultural production is typical for farms on the PTS, the farms on the UAT have a slightly lower indicator. Assessing the indicators of the tax burden on farms in the context of specialization sectors, it can be noted that about 66% of farms producing crop production and engaged in primary and industrial processing of agricultural raw materials have a tax burden within 5 %. The highest tax burden is characteristic of cattle farms. In general, the farming households that use the UAT have the best performance indicators in the context of all industry specializations.

The paper presents the research results on the relationship between the tax burden and economic development. The research methods: systemic, logical and comparative analysis of scientific literature, and statistical methods: descriptive statistics analysis, hierarchical cluster analysis, correlation analysis. Empirical analysis of this study focuses on the data of the European Union countries. Implicit tax rates are used to measure the tax burden. The study covers the period from 2003 to 2012 using annual data. The results of this study show that there are large differences in the tax burden in the European Union countries. The tax burden on capital and consumption is higher in the very high economic development countries; but implicit tax rate on capital is higher in the case of countries with lower GDP growth, high government sector and high government debt. Joining the EU in 2004 or 2007 did not have a strong effect on the change in the joined countries tax burden. However, the tax burden on labor has declined, and the tax burden on consumption has increased or remained in the similar level in the majority of countries.

Educating on the revenue enhancement system in state-supported finance is likely an essential issue for the country’s development. This content changes public sector and the sustainability of citizens’ lives; therefore, a significant focus on the broad improvement of finance studies is essential. Furthermore, the activity could be organized in connection with the applicable higher education programs. On the other hand, financial management education is treated differently in different countries. It is becoming increasingly important that such a discussion does not directly benefit common development of financial education in recent years. One of the possible ways to deal with personal finances in different economic conditions could be changing students’ attitude to finance knowledge at universities. Young people could be supported by financial education programs that are clearly incorporated into their undergraduate or postgraduate courses. The correct management of these programs helps to improve students and cadets learning experience and the economic wellbeing. Moreover, the learning based on public administration and public finance probably educates patriots of the country and people intolerant to non-transparent activities of public servants. Eventually, the best way to determine the country’s consolidated tax paid by natural and legal persons could be the tax burden rate. Likewise, the financial data supplied to the main European statistics authority by national statistical institutions sometimes can be slightly incorrect. Therefore, even more important issue could be an ordinary citizen living only from the income related to labour relations (or corresponding relations of income) and having an obviously higher tax burden. Another crucial task of the paper is to reveal how taxation, public debt and spending and fiscal policy are perceived by the citizens. In addition, it also tries to respond to questioning about the financial and economic importance on financial education. Furthermore, the theoretical task of the paper is to show the size of the government debt, its service and expenditure in Lithuania and Latvia during the last crisis in 2008. Therefore, it is possible to consider the increase of direct taxes burden by almost twice comparing to the formally announced country’s tax burden. However, additional tax burden includes hidden taxes related to the aggregated spending of an individuals’ income. In an average case, the tax burden for an ordinary employee could come near to two-thirds of the gross yearly income. Then, the overpaid debt services can be very sensitive given to the assumption that an ordinary worker has an approximately adequate level of financial and economic education. The perception of tax burden can encourage each citizen of the country to be responsible for all public servant activities and budget planning processes. Public revenue enhancement is often difficult due to the use of the same concept of taxes as fixed costs for public sector when a person directly receives nothing but additional payments for the majority of public sector services. Therefore, the confusion of terms is fairly constant, which once again shows the need for public finances literacy in all areas of study programs for students or cadets. An authorized Lithuania’s tax burden has comprised less than thirty percent of the country’s nominal gross domestic product in recent years. Nevertheless, political leaders and socalled experts suggest the necessity for increasing Lithuania’s accumulated tax burden. However, there may be a fundamental mistake that social insurance and compulsory health insurance contributions to the funds are not calculated into private individuals and legal entities tax burden. Fortunately, the last year’s budget considered social payments as part of tax revenues. Unfortunately, there are diminutive amount of signs in the continuity of Lithuania’s fiscal policy in the 21st century.

This article examines the degree of influence of the tax burden on the formation of the shadow economy in Russia in the context of types of economic activity. The perspectives of various authors were taken into consideration when discussing that taxes have the greatest impact on the desire of taxpayers to “go into the shadows”. The author has studied various methods of measuring the value of the shadow economy used in the contemporary research. He presents the analysis of scales of shadow economy of Russia in 2011-2017 with application of various methods. Using the method measuring the share of economic operations not observed by direct statistical methods, the author has analyzed the value of the shadow economy in the sectors of the Russian economy. The results prove that the highest level of the shadow economy is observed in the sphere of real estate transactions, in agriculture, and in construction. The lowest level of the shadow economy was revealed in the financial sector, extractive industries, and electric power industry. The analysis of sectoral differences in the tax burden in Russia has uncovered the existence of an inverse relationship between the size of the tax burden and the scale of the shadow economy: in those industries, where a low tax burden is detected, there is usually a high share of the shadow economy. The obtained results allow confirming the originally proposed hypothesis that the high tax burden is not the leading factor provoking business to “go into the shadows” in order to avoid paying taxes.