EMPIRICAL ANALYSIS OF EFFECTS OF INCOME TAX ON ECONOMIC GROWTH OF WESTERN BALKAN COUNTRIES

In a research paper, the authors provide an empirical approach to taxes and economic growth in the United States in the period 1996-2016. The basic goal is to explore how taxes affect economic growth. The subject of the research is measuring the effects of tax revenue growth and tax form as a personal income tax, corporate income tax and social security contributions on gross domestic product as a proxy for economic growth. Methodology framework includes several tests to clear the potential problem of heteroscedasticity, autocorrelation, multicollinearity and specification of the model. Based on diagnostic tests, a regression model is adequately created where fundamental econometric procedures are applied. Correlation matrix reflects a strong and positive relationship between tax revenue growth and corporate income tax on the one side and gross domestic product growth, on the another side. Also, personal income tax and social security contributions are weakly related to gross domestic product growth. The model shows a significant effect of tax revenue growth and social security contributions, while personal income tax and corporate income tax do not have a significant impact on gross domestic product growth. Interestingly, personal income tax as the main tax form in the tax structure of the United States has no significant impact on economic growth compared to social security contributions which percentage share is lesser.

Tax rate changes are some of the most significant and far-reaching decisions a government can take. A good understanding of the odds of any such changes is essential for any business debating the timing and location of investments. This paper investigates the factors that affect the timing of statutory tax rate changes by Canadian provincial governments. The authors develop a simple theoretical model to explain the “stickiness” of tax rates — the factors that lead a province to decide against tinkering with the tax system — based on the presence of fixed costs of adjusting tax rates. The results indicate that if the current rate falls within a range of tax rates bracketing the optimal rate, then the government will not adjust its tax rate because the cost of the reform outweighs the potential benefits. To build up a body of evidence, this paper employs a multinomial logit model to examine the likelihood of changes to personal income tax (PIT), corporate income tax (CIT), and provincial sales tax (PST) rates by provincial governments over the period 1973-2010. Regression results indicate that provincial governments that start with higher tax rates are more likely to cut, and less likely to raise, their tax rates. A higher provincial budget deficit reduces the probability of a CIT rate cut and raises the probability of a PST rate increase. Party ideology seems to matter. Provinces with leftleaning governments are less likely to cut PIT and PST rates, and more likely to raise PIT rates compared to non-left-leaning governments. The authors also find that a federal PIT rate cut raises the probability of a provincial PIT rate increase, whereas a federal CIT rate cut raises the probability of a provincial CIT rate reduction.

The Effect of the VAT Rate Change on Aggregate Consumption and Economic Growth

This study adopts a qualitative approach to analyze the comparison between Personal Income Tax (PPh) and Corporate Income Tax (PPh Corporate) in Indonesia. Through literature studies and observations, this study explores the tariff structure, tax relief, and tax compliance level of the two tax systems. The economic implications of the implementation of Income Tax and Corporate Income Tax on economic growth, investment, and income distribution were also discussed. The findings show that tax reform, as stated in the Law on Harmonization of Tax Regulations (UU HPP), has a significant impact in improving the effectiveness and fairness of the tax system. The results of this study provide in-depth insights into the importance of appropriate tax policies to support inclusive and sustainable economic growth in Indonesia.

The aim of this paper is to evaluate the impact of individual types of taxes on the economic growth by utilizing regression analysis on the OECD countries for the period of 2000–2011. The impact of taxation is integrated into growth models by its impact on the individual growth variables, which are capital accumulation and investment, human capital and technology. The analysis in this paper is based on extended neoclassical growth model of Mankiw, Romer and Weil (1992), and for the verification of relation between taxation and economic growth the panel regression method is used. The taxation rate itself is not approximated only by traditional tax quota, which is characteristic by many insufficiencies, but also by the alternative World Tax Index which combines hard and soft data. It is evident from the results of both analyses that corporate taxation followed by personal income taxes and social security contribution are the most harmful for economic growth. Concurrently, in case of the value added tax approximated by tax quota, the negative impact on economic growth was not confirmed, from which it can be concluded that tax quota, in this case as the indicator of taxation, fails. When utilizing World Tax Index, a negative relation between these two variables was confirmed, however, it was the least quantifiable. The impact of property taxes was statistically insignificant. Based on the analysis results it is evident that in effort to stimulate economic growth in OECD countries, economic-politic authorities should lower the corporate taxation and personal income taxes, and the loss of income tax revenues should be compensated by the growth of indirect tax revenues.

Corporate tax reform has long been a contentious issue in Canada. Official commissions, academics and others have often proposed changes in the way we tax corporations. During the last 30 years, perhaps largely owing to concerns about international competitiveness, the corporate tax rate has been substantially reduced. Since revenues did not decline as a result, those concerned by increased inequality who believe that corporate taxes are paid mainly by the rich have suggested that corporate rates should be increased. Others, more persuaded by the increasing evidence that much of the burden of the corporate tax ultimately falls on workers and wages and that even to the extent it falls on capital the economic price paid in terms of reduced output and productivity for each corporate tax dollar collected is high have taken the opposite tack and argued that, if anything, corporate tax reform should be aimed at reducing even further the effective tax rate on corporate capital. Both the technical and the political aspects of corporate taxation are thus at play in the current discussion of possible corporate tax reform. After a brief review of the history, we consider what is now known about the relation between corporate rates and revenue, the surprisingly complex question of who ultimately pays the tax, and the largely undesirable economic effects of corporate income taxes. If all voters were economists and familiar with the evidence, it is unlikely any would favour big increases in corporate taxes. However, even economists who have read all the studies mentioned here (and more) do not agree about the best way to reform the corporate income tax. We sketch three recent major reform proposals Canadian experts have recently put forward (1) replace the existing corporate tax by a tax on ‘rents’ (above-normal returns on capital), (2) replace both it and the current personal income tax by a ‘dual income tax’ with a flat rate on all capital income (corporate and personal), or (3) adopt a more gradual approach to reform that would broadly keep the present system but make it more uniform in its treatment of investment. On the whole, we suggest that, although the ‘rent’ proposal is clearly the favourite in the academic horse race, and we think a much closer look should be taken at the second (dual income tax), the more incremental third proposal – improve what we now have – is perhaps not only the way we should go now but is also likely to be the politically most acceptable of these schemes. Finally, since one reason corporate tax reform is so difficult is because it is closely related to a number of other issues that are often both technically complex and politically sensitive, we consider several such issues. Some, such as small business taxation, could be reformed independently of the sorts of more general reforms just mentioned. We sketch several reforms that would simplify the system, maintain some incentive for small businesses and reduce the extent to which the current system provides a shelter for the rich. But other issues cannot be dealt with separately. What is the appropriate level and nature of ‘integration’ between the corporate and personal income taxes? What is the appropriate role of federal and provincial governments with respect to the corporate income tax? And, assuming that we continue to use taxes to provide preferences (incentives) to specific sectors and activities, what is the best way in which to do so? Within entering too far in the ‘dismal swamp’ of the inner workings of the tax system, we suggest some possible directions for reform in these areas such as a ‘sunset’ clause for tax preferences to reduce the likelihood that they will be indefinitely preserved whether socially useful or not.

distribution of the proposed personal tax This paper presents a method of study- changes was a primary concern of the leging the distributional consequences of cor- islators as they modified tax rates and tax porate tax changes by imputing to indi- rules, no attention was given to the disvidual tax returns the net effect of changes tributional consequences of the change in in effective corporate tax rates. Particular corporate taxation. This procedure had the attention is given to the difference between anomalous (and politically convenient) implication that the individuals at each nominal and real capital income, to the income level were projected to receive a problem of corporate pension funds, and tax reduction even though the tax bill as to the automatic effect of corporate tax a whole was designed to be revenue neuchanges on dividends and retained earn- tral. As the analysis of the present paper ings. Application of this imputation method indicates, including the changes in the to the tax changes enacted in 1986 shows corporate income tax as well as the that the actual distribution of the total tax changes in the personal income tax rechange was very different from the tra- , sults in a very different picture of the disditional distribution of only the personat tributional consequences of the 1986 tax income tax change. bill. rpM distributional consequences of any There has been surprisingly little atA proposed tax change are always a cen- tention in the public finance literature to tral focus of attention and debate among the problem of imputing the corporate inpolicy officials and the general public. The come tax to individual taxpayers in order staffs of the Treasury and the Congres- to evaluate the distributional consesional Joint Committee on Taxation use quences of alternative corporate tax rules. microeconomic simulation models based Neither the Treasury nor the staff of the on individual tax return data to calculate Joint Committee on Taxation ever inthe effect of any proposed change on the cludes corporate tax changes in calculatdistribution of average tax burdens by in- ing the distributional consequences of come class, the numbers of gainers and proposed tax legislation. Some private losers in each income class, etc. A major analysts (e.g., Pechman, 1985; Browning shortcoming of such analyses, however, is and Johnson, 1979) have reflected the that they always focus exclusively on the corporate income tax in assessing the dischanges in the personal income tax. The tribution of current tax burdens but, as distributional consequences of changes in explained below, there are a number of the corporate income tax are completely serious problems with the methods that

Corporate tax reform has long been a contentious issue in Canada. Official commissions, academics and others have often proposed changes in the way we tax corporations. During the last 30 years, perhaps largely owing to concerns about international competitiveness, the corporate tax rate has been substantially reduced. Since revenues did not decline as a result, those concerned by increased inequality who believe that corporate taxes are paid mainly by the rich have suggested that corporate rates should be increased. Others, more persuaded by the increasing evidence that much of the burden of the corporate tax ultimately falls on workers and wages and that even to the extent it falls on capital the economic price paid in terms of reduced output and productivity for each corporate tax dollar collected is high have taken the opposite tack and argued that, if anything, corporate tax reform should be aimed at reducing even further the effective tax rate on corporate capital. Both the technical and the political aspects of corporate taxation are thus at play in the current discussion of possible corporate tax reform. After a brief review of the history, we consider what is now known about the relation between corporate rates and revenue, the surprisingly complex question of who ultimately pays the tax, and the largely undesirable economic effects of corporate income taxes. If all voters were economists and familiar with the evidence, it is unlikely any would favour big increases in corporate taxes. However, even economists who have read all the studies mentioned here (and more) do not agree about the best way to reform the corporate income tax. We sketch three recent major reform proposals Canadian experts have recently put forward (1) replace the existing corporate tax by a tax on ‘rents’ (above-normal returns on capital), (2) replace both it and the current personal income tax by a ‘dual income tax’ with a flat rate on all capital income (corporate and personal), or (3) adopt a more gradual approach to reform that would broadly keep the present system but make it more uniform in its treatment of investment. On the whole, we suggest that, although the ‘rent’ proposal is clearly the favourite in the academic horse race, and we think a much closer look should be taken at the second (dual income tax), the more incremental third proposal – improve what we now have – is perhaps not only the way we should go now but is also likely to be the politically most acceptable of these schemes. Finally, since one reason corporate tax reform is so difficult is because it is closely related to a number of other issues that are often both technically complex and politically sensitive, we consider several such issues. Some, such as small business taxation, could be reformed independently of the sorts of more general reforms just mentioned. We sketch several reforms that would simplify the system, maintain some incentive for small businesses and reduce the extent to which the current system provides a shelter for the rich. But other issues cannot be dealt with separately. What is the appropriate level and nature of ‘integration’ between the corporate and personal income taxes? What is the appropriate role of federal and provincial governments with respect to the corporate income tax? And, assuming that we continue to use taxes to provide preferences (incentives) to specific sectors and activities, what is the best way in which to do so? Within entering too far in the ‘dismal swamp’ of the inner workings of the tax system, we suggest some possible directions for reform in these areas such as a ‘sunset’ clause for tax preferences to reduce the likelihood that they will be indefinitely preserved whether socially useful or not.

The logic of international tax competition requires that European countries reduce their corporate income tax rates for mobile business activities. It does not require them to reduce their tax rates on business profits overall. Yet, that is what has happened in many countries. The spill-over effects of corporate income tax competition on personal income tax revenues are considerable. The reason is obvious: smaller firms tend to incorporate, to enjoy the benefits of a lower tax rate. And wherever the policy response is to reduce the personal income tax burden on profits, labour tends to assume the legal form of business profits. And when the tax treatment of independent vs. dependent labour gets out of balance, the wage income tax base suffers from the forces of corporate income tax competition.The policy problem to be discussed in this paper is how international tax competition can be reduced in scope, to limit the spill-over effect on domestic tax bases. What is the best way to reduce the (effective) tax rate on mobile business activities while maintaining the tax burden on immobile activities? We will discuss four approaches:- mandatory transparency of corporations below a certain size threshold for personal income tax purposes;- a dual income tax with a split between labour and capital income for all smaller firms;- corporate income tax measures aimed at specific – mobile – business activities;- a general reduction of the effective tax rate for large corporations.Alternatives will be compared on four criteria: effectiveness, administrative feasibility, compatibility with EU legal framework, and political stability.

The marginal cost of public funds measures the welfare loss a society incurs in raising an additional dollar of tax revenue. Tax increases distort economic decisions and erode tax bases because of tax avoidance and tax evasion by taxpayers. This Commentary uses econometric estimates of the effects of higher provincial tax rates on the provinces’ corporate income tax, personal income tax, and sales tax bases to calculate the marginal cost of public funds (MCF) for these taxes. The results indicate that the cost of increasing provincial tax revenues through a corporate tax rate increase is very high, and in some provinces, corporate tax rate reductions in 2006 would have increased the present value of the provincial government’s total tax revenues. The results also suggest that significant welfare gains would accrue from reducing provincial corporate income tax rates. As well, increasing provincial corporate and personal income tax rates can cause significant reductions in federal tax revenues because the federal and provincial governments levy taxes on the same tax bases. Finally, Canada’s system of the equalization grants might reduce the perceived MCF of recipient provinces.

Purpose: The paper aims to explain the current tax structure of Bangladesh. It also intends to identify the relationship between different categories of taxes and the country’s economic growth. Methods: Data have been gathered from different publications of the government for a period of 29 years from 1989-90 to 2017-18. Both descriptive and inferential statistics are utilized to achieve the purpose of the study. Results: Results reveal that tax revenue constitutes, on average, 84.20% of the total revenue of the Government of Bangladesh, while 70.47% of the total tax comes from indirect sources. VAT has been found as the largest source of tax revenue (34.12% of the total tax) followed by income tax (27%). Supplementary duty and customs duty contribute significantly to the national exchequer amounting to approximately 15% of the total tax each. Concerning the influence of taxation on economic growth, indirect taxes are found significant. When corporate and personal income taxes are considered, only personal income tax is identified as having a significant impact on economic growth. As far as the specific categories of taxes are concerned, customs duty, excise duty, and non-tax revenue are found significant, while income tax, VAT, supplementary duty, and other taxes do not have any significant relationship with the economic growth of Bangladesh. Implications: The paper recommends enhancing the collection of indirect tax, as well as expansion of the tax net to bring more and more people under the umbrella of taxation rather than increasing the tax rate which may impede entrepreneurial enthusiasm at the individual level. Limitations: The study combines some types of taxes such as import duty, export duty, narcotics duty, land tax, motor vehicle tax, surcharge, etc. under one heading, namely other taxes. As such the impact of these taxes per se on economic growth remains unveiled.

One of the reasons behind declining budget revenues can be external migration. This article aims to describe the methodology for estimation of tax losses and revenues from international labor migration for specific types of taxes. Changes in personal income tax revenues are estimated by using the data on the number of labor emigrants (immigrants) for specific occupations, nominal gross monthly wage of employees in this occupation in Russia, standard child tax deductions and the corresponding personal income tax rate for residents (non-residents). Changes in VAT and excise tax revenues caused by the current trends in labor migration are estimated in accordance with the structure of household consumption. The amount of tax revenues (and losses) is calculated as the product of the sum of VAT and excise tax payments made by one member of a household per year when buying goods, works and services on the territory of Russia, and the number of emigrants (or immigrants). The research uses the data provided by Rosstat, Federal Tax Service of Russia and the Analytical Centre under the Government of the Russian Federation for 2012–2017. The conclusion is made that international migration has a negative impact on the tax revenues of the country’s consolidated state budget. Although, throughout the whole of the given period, the balance of additional revenues from VAT, excise taxes and the personal income tax (PIT) on earned income and budget losses from these taxes remained positive, in absolute terms, this balance decreased significantly. Trends in international labor migration affected the balance of tax losses and revenues. Therefore, the government’s attempts to target international labor migration by reforming the tax legislation seem quite reasonable: the upcoming tax reforms will include the introduction of the concept ‘centre of vital interests’ as the second criterion of residence and equalization of the PIT rate for tax residents and non-residents. The proposed methodology can thus prove to be an effective tool for the Federal Tax Service of Russia to estimate the resulting changes in tax revenues as well as other changes related to labor migration processes.

<p>Tax revenue has been a great tool of fiscal policy harnessed toward the economic development of a nation. Its different components have collective effects on the economic growth of a nation. This study examined the effects of disaggregated tax revenue on Nigeria's economic growth from 1995 to 2023. The data was sourced from the Central Bank of Nigeria and the Federal Inland Revenue Service databases. This study examined the effects of disaggregated tax revenue on Nigeria's economic growth from 1995 to 2023. The data was sourced from the Central Bank of Nigeria and the Federal Inland Revenue Service databases. Employing multiple regression analysis within an Autoregressive Distributed Lag (ARDL) model, the study assessed the impact of Value Added Tax (VAT), Companies Income Tax (CIT), Petroleum Profit Tax (PPT) and Personal Income Tax (PIT) on economic growth. The diagnostic tests confirmed the model's validity, with unit root tests showing that all variables, except PIT, achieved stationarity after differencing. The findings revealed that each tax revenue component positively influences economic growth. Based on these results, the study recommends enhancing the legal and regulatory frameworks for businesses, including regular evaluations and updates of tax laws and stronger enforcement mechanisms. It also underscores the need to strengthen anti-corruption efforts, promote property rights, uphold the rule of law, and prioritise good governance to foster public confidence and ensure the effective use of tax revenues for economic development.</p><p><strong>JEL: </strong>C32, H20, H24, H25</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0785/a.php" alt="Hit counter" /></p>

In the context of Russian Federation's full-scale war against Ukraine, the idea of conducting a radical tax reform in our country, which would provide for the establishment of corporate income tax, personal income tax and VAT rates at the same level of 10%, has become widespread, and later transformed into the idea of an "anti-corruption" tax reform. According to the reform’s supporters, lowering the rates of the main taxes will ensure the de-shadowing of the economy, destroy the grounds for corruption, and on this basis will lead to an increase in tax revenues, if not in the first year of the reform, then at least in the short term. Optimistic forecasts regarding the fiscal consequences of a radical reduction in the rates of main taxes in Ukraine are based on simplified ideas about the impact of the size of tax rates on the scale of the shadow economy and tax revenues. The purpose of the article is to refute these ideas by revealing, using the results of theoretical and empirical studies, the ambiguous nature of the relationship between tax rates and the size of the shadow economy and tax revenues. A comparative analysis of the rates of VAT, personal income tax, corporative income tax and social security contributions in Ukraine and the EU countries has been carried out, which allows to establish that none of the EU countries has ever introduced low rates for all major taxes and social security contributions, reduced the VAT rate to the level of minimum EU requirements (15%), or refused to finance pension payments through social security contributions, distributing their burden between employers and employees. The author analyzes the impact of tax rates, tax burden and other factors on the level of the shadow economy and establishes why lower tax rates do not guarantee a reduction in the scale of informal activities. The absence of a direct link between the size of tax rates and corruption is substantiated. Based on the analysis of the arithmetic and economic effects of tax rate cuts, the author determines their ambiguous impact on tax revenues. A comparative analysis has been made of the fiscal efficiency of the taxes whose rates are proposed to be reduced and of the compensating taxes, and the impossibility of compensating budget losses by increasing these taxes is substantiated. The author concludes about the high fiscal risks of a radical reduction in the rates of budget-forming taxes in general and the impossibility of such a reduction during the war.

THE PARALLEL MARCH OF THE GINIS How does taxation relate to inequality, and what can be done about it?