Corporation Income Tax and Administrative Costs of the Public Sector

Abstract

This contribution examines the issues of measurement of corporate income tax effectiveness in the circumstances of the Czech Republic, referred to as the tax on income of legal persons. The tax on income of legal persons represents a significant part of the public budget revenue, with the volume of collection of CZK 128,002 million in 2012. The theoretical basis for this contribution is the principle of tax system effectiveness, which is one of the principles characterizing a good tax system and is related to costs inherent in a tax system. The contribution defines two existing types of costs expended on the collection of taxes, i. e. administrative costs (direct or indirect) and in theory describes excessive tax burden. In this contribution we shall focus on the measurement of direct administrative costs. The measurement of effectiveness of corporation income tax is performed with the use of the full-time equivalent (FTE) method, which is based on the classification of revenue authorities’ staff according to their jobs and on the determination of conversion coefficients in order to identify costs related to the collection of a particular tax.A separate part of the article deals with measurement of administrative costs performed by the Organisation for Economic Co-operation and Development on the timeline ranging from year 2009 to 2011. The author of this article performed his own measurements concerning the direct administrative costs related to the collection of tax on income of legal persons in the Czech Republic. Results achieved in the respective monitored years are lower by the average (in the Czech Republic 2 percentage) of ca 1.66 percentage points in relation to the average value of direct administrative costs of the Czech tax system.