VAT dependence, poverty and global export performance: an Optimal Taxation Theory approach in lower-middle-income economies

Ever since the reformation and opening of China in the late seventies, especially with the introduction of western economics theories into China, western taxation system, including the optimal taxation theory has been gradually drawn attention to. However as an Nobel prize winning theory, it is not as close to reality as to be applied into a guidance principle in practice. In fact, current studies on the western optimal taxation theory and their preliminary applications in China, as shown in literatures, have remarkable deficiency. Here we report some systematic comments and analysis on the western optimal taxation theory and the latest research processes by western scholars, based mainly on original publications. We illustrate that, as a deduction from assumptions, the optimal taxation theory only applies to a strictly supposed circumstance. In other words, without certain qualifications, conclusions in the theory couldn't be drawn; or different conclusions would be made in various conditions. Both the proportional rule and anti-elasticity rule in the system of optimal merchandise taxation and the linear model in optimal income taxation theory share the same disadvantage when facing the reality. Therefore, any theorem in optimal taxation theory is not universal and general; on the contrary, as an individual conclusion with special premise, it shouldn't be regarded as the direct and specific guidance to a nation's taxation reforming. Taxation reformation in China is most special case with extremely complicated variables in it economic system and historical, social and political characteristics. So finally we propose that especially caution must be taken in the course of applying western optimal taxation theory in China

European integration opens wide opportunities for Ukraine to cooperate with developed European countries, strengthening its position in the international arena. Export potential is the potential ability of a country to export goods or services. Exports of goods and services to EU countries in 2020 were $ 21.9 billion (37.1% of total exports), including exports of goods – $ 18.6 billion, exports of services – $ 3.3 billion. Compared to 2019, exports of goods to EU countries de- creased by $ 2.1 billion (10.3%). The export structure is dominated by agriculture products, the food industry (35%), and the metallurgical complex (16.7%). The greatest exporters of Ukrainian goods were the following EU countries: Poland ($ 3.3 billion or 6.71% of total exports of goods), Germany ($ 2.1 billion or 4.27%), Italy ($ 1.9 billion or 3, 86%), the Netherlands ($ 1.8 billion or 3.66%), Hungary ($ 1.3 billion or 2.64%), Romania ($ 1.1 billion or 2.24%). The analysis of the export potential of Ukraine shows the raw material structure of exports. Integration into the EU market as a raw material supplement is dangerous for the country because it can consolidate technological dependence on developed countries. Increasing the share of goods with a high level of processing increase the stability of export income. Promising areas of exporting activity are science-intensive industries: electronics, production of automation, technical means for non-traditional types of energy, new types of materials, biotechnology, etc. To transition Ukraine to the exporting of knowledge-intensive innovative products and successfully enter world markets, the Export Strategy of Ukraine (Roadmap for Strategic Trade Development) has been developed, which identifies the following promising sectors: information and communication technologies, software development, creative services, tourism, maintenance and repair of aircraft, production of spare parts and components for the aerospace and aviation industries, mechanical engineering, food industry. Sectors are grouped into clusters. An individual sectoral strategy is developed for each sector. Key words: export, export potential, European integration, goods, competitive advantages, market, sector.

Optimal vergileme ve optimal vergi sistemi tasarımı hem etkinlik ve adalet ödünleşmesi bakımından önemli olmakta hem de bu araştırmalar kamu maliyesi ve uygulamalı iktisat alanında çok eskiye dayanmaktadır. Bu çalışmada odak noktası optimal tüketim ve gelir vergileri olacak şekilde sınırlandırılırken, öncelikle konuyla ilgili olan aşırı yük ve etkinlik kavramları açıklanmakta; akabinde optimal vergileme ve optimal vergi sisteminin yapısı ele alınmaktadır. Daha sonra, optimal tüketim ve gelir vergileri incelenerek teorik tartışmaların ekonomideki yansımaları üzerinde durulmaktadır. Çalışmanın amacı, tüketim ve gelir vergilerinde optimal kavramının nasıl ele alındığını literatür incelemesi ile ortaya koymak ve teorik çalışmaların vergi politikalarına dönüşüp dönüşmediğini incelemektir. İnceleme sonucunda optimal vergi teorisinde çalışmaların (i) gelirin düz oranlı vergilendirilmesi, (ii) yüksek gelire sıfır marjinal vergi oranı uygulanması ve (iii) vergilendirmenin dolaylı vergilere kaydırılması üzerinde odaklandığı görülmekte ve bu odak noktaları vergi reformlarında karşılık bulmaktadır. Fakat görülmektedir ki optimal vergileme her ülkenin aynı reçeteyi uygulaması demek değil, gelişmiş ve gelişmekte olan ülkelerin kendine has sosyo-ekonomik yapılarına göre ve toplumu kapsayıcı biçimde dinamik olarak ele alınması gerekmektedir. Optimal vergi teorisinde geçmişten günümüze süregelen tartışmalar etkinlik ve adalet ilkeleri çerçevesinde gerçekleşirken, teknolojinin de gelişmesiyle beraber gelecekte de vergilemede optimalite tartışmalarının devam edeceği söylenebilir. Ayrıca ülkelerin gelişmişlik seviyeleri, uluslararası vergi rekabeti, sermaye akımları ve çevresel unsurlar gibi etkenler de konuyu politik açıdan her zaman canlı tutmaya devam edecektir

and Key Results With the rise of the global service economy, and understanding of the export competitiveness of nations is critical for managers seeking offshore export locations, and for government policy makers who wish to bolster the attractiveness of their nation as an exporting location. Services globalization — reflected in the growth of outsourcing and offshoring — calls into question the role of human capital investment, whose effect in past studies has been mixed. Drawing on human capital theory, we developed three propositions and analyzed the effect of human capital investment, infrastructure, and the business environment on the export of services and goods from 25 countries from 1989 to 2003. Human capital did have a significant effect on the exports of goods and services. However, contrary to the expectations of human capital theory, human capital was not significantly more important for services exports than for goods exports. In line with expectations of human capital theory, human capital investment had a greater effect in emerging Asia than in developed countries. These findings have important implications for managers and future research.

The literature on taxation and transfers primarily relies on two theories of distributive justice: resource egalitarianism and welfarism, as elaborated through optimal tax theory.In recent years, optimal tax theory has garnered even greater prominence. But nonwelfarists argue it fails to address a number of serious philosophical objections. This article considers the primary critiques of optimal tax theory, especially by resource egalitarians. It argues the gap between these two theories is narrower than most appreciate. Indeed, once one focuses on egalitarian optimal tax theory and reads that literature broadly, the ideal policy design principles implied by each theory largely mimic the other. In addition, this article explores how both theories have dealt with concerns that they respond inadequately to preferences to help or harm others, hold individuals unduly responsible for their choices, or fail to account for real world social dynamics and human behavior. It argues that egalitarian optimal tax theory has responded—or, as laid out here, could respond—more effectively to these objections than resource egalitarianism.Specifically, optimal tax theory should adopt three innovations: (1) applying welfare-weighted Pigouvian taxes and subsidies to other-regarding preferences, (2) modeling the optimal endowment tax as one that is risk-neutral and only partially based on ex ante potential income, and (3) treating choices as providing less information about well-being when they are further in the past or relatively predictable. More explicitly and consistently adopting these assumptions and modeling approaches would clarify that egalitarian optimal tax theory does not entail the extreme limits on autonomy, and unrelenting responsibility for prior choices, that have troubled nonwelfarists.Instead, the focus of egalitarian optimal tax theory would move toward sequalizing outcomes, and away from equalizing ex ante endowments.

International economic relations at the level of export and import of goods and services have a significant impact on the development of the economy of each country. At the same time, the export of goods and services by enterprises of Ukraine at the regional level plays an important role, which is a source of significant inflow of foreign exchange funds, ensuring financial stability and investment attractiveness. The subject of the research is theoretical, methodological, and practical aspects of the development of foreign economic activity by enterprises of Ukraine at the regional level. The methodological basis of the study is the dialectical method of cognition and the basics provisions of economic science. The use of the system approach allowed considering the object and subject of research as a system and element of the general economic system. In the process of research, a number of methods are used, such as: abstract-logical, economic-statistical, monographic, and graphic. The purpose of the study is to analyse trends and prospects for the export and import of goods and services by enterprises of Ukraine at the regional level. The stated purpose led to the following tasks: conducting research on the volumes of export and import trade in goods and services; identification of factors influencing foreign trade; definition of geographical changes in the sphere of foreign trade and the coefficient of export coverage by import; substantiation of cooperation with foreign partners on a toll basis. According to the results of the research, the following conclusions are obtained: trends and prospects of the export and import of goods and services are investigated; it is found that the low competitiveness of national industrial products, the crisis financial situation of most industrial enterprises, the lack of development of national certification systems and quality control of export goods, the low world rating of Ukraine’s reliability for loans and investments affects foreign trade; a significant expansion of the geography of export trade and import supplies is revealed, which positively influenced the balance of foreign trade in goods and services. Therefore, in order to build a highly efficient national economy, the foreign economic activity of Ukrainian enterprises at the regional level should be oriented towards the development of export of finished products, rather than raw materials and partial import substitution for those products that can be successfully produced in Ukraine. The process of import substitution solves a range of socio-economic tasks, such as the revival of the agro-industrial complex, the reduction of unemployment, and the strengthening of the country’s economic security. At the same time, the modernization of agrarian and industrial enterprises can take place at the expense of foreign exchange earnings from export.

The neglect of administrative issues is a serious limitation of optimal tax theory, with implications for its practical applicability. We focus on an important class of administrative problems, namely that the tax bases are measured with some error. We also consider the full set of tax instruments. We find that consumption taxes can perform the ‘social insurance role of taxation’, a role previously ascribed only to income taxes. A combination of income and consumption taxes can hedge income and measurement‐error risks better, relative to the imposition of either type of tax alone. The optimal tax rate is increasing in the precision with which the corresponding tax base is measured. The taxpayer engages in precautionary savings in response to income uncertainty and measurement problems. Differential commodity taxes tailored to the measurability characteristics of the different tax bases dominate uniform commodity taxes. However, as an economy becomes large, optimal taxes converge to uniform (or flat rate) taxes.

The critical role of the state’s trade policy in the development of Ukraine's integration potential and the key role of services in international trade are emphasized. The prospects for the development of Ukraine's integration potential through the expansion of the Free Trade Agreement with the State of Israel to trade in services are highlighted. The analysis of the data taken from the State Statistics Service of Ukraine allows to consider the dynamics of exports, imports, balance of trade in goods and services between Ukraine and the State of Israel for the period of 2016 and 2021. The results show that the integration relations between the countries are strengthened primarily thanks to the exports: in 2016, the exports of goods and services – 657.0 mln USD, and in 2021 – more than 1,0 bln USD, i.e. increased 1.6 times, while the imports of goods and services in 2016 –204.4 mln USD, and in 2021 – 267.6, i.e. grew 1.3 times. In the context of the signed Free Trade Agreement, it is emphasized that the exports of goods rose by 23% in 2021, and the exports of services – by 27% compared to 2020. The balance in trade in both goods and services has been positive. The share of exports of services in all exports of goods and services of Ukraine to the State of Israel has been growing and in 2021 it reached 29% which also confirms the necessity to develop Ukraine’s integration potential by covering trade in services in the expanded FTA. The types of exported and imported services are presented. According to the State Statistics Service of Ukraine, the main types of services exported to Israel are the services in the sphere of telecommunications, computer and information services – 232 mln. USD, or 63%, with positive balance of 226 mln. USD and transport services – 117 mln. USD, or 32%, with positive balance of 94 mln. USD. The main types of services imported from the State of Israel are the transport services – 24 mln. USD or 59% and services in the sphere of telecommunications, computer and information services – 6.4 mln. USD or 16%. The trade in services of innovative nature are also to be covered by the FTA

Introduction. Due to the deepening processes of globalization of the world economy, there are quantitative and qualitative transformations taking place in international economic relations between countries. Changes in connections in the world market for goods and services, as one of the largest in scale and power, reflect the general trends of geoeconomic transformations. Analysis of these transformations allows us to understand their causes, main trends and consequences.Purpose. The purpose of the article is to model world exports of goods and services in the context of geoeconomic transformations with the use of cluster analysis. Methods. General scientific methods of analysis and synthesis, comparison, classification, system analysis, etc. were used in the paper. Special methods that were applied include the methods of cluster analysis: the single linkage method and Ward’s method. The results were visualized in the form of hierarchical trees. Results. Using cluster analysis methods, international trade relations were modeled in the context of geoeconomic transformations in the field of world exports of goods and services. The analysis is based on the value of export transactions of seventy-five countries in six regions for the period from 2005 to 2019, which was divided into three time intervals. The results confirm the existence of transformations in trade relations between the countries. In particular, when modeling the export of goods, changes occurred in the first two time intervals. It was found that during the first period the following three clusters were formed: European, South American and a cluster that is formed by a number of countries in Europe, North America and Asia. The results of modeling in the second time period show the reduction and isolation of the European region and the formation of a large cluster, which included countries of the Asian and American regions. This trend continued in the future. In the process of modeling the export of services, significant transformations were revealed in the first and third time intervals. Initially, the European cluster was absent, as most European countries were members of other clusters, the Asian cluster in particular. However, in the third period, not only Asian, but also North American countries formed joint clusters with European countries. Thus, the results showed that the trends in the reformatting of trade relations between countries in exports of goods and exports of services have their own characteristics associated with the crisis, foreign trade policy and other exogenous and endogenous factors.Originality. The application of cluster analysis for modeling international trade relations in order to identify their reformatting under the influence of various factors gives particular relevance to this problem. Conclusion. The results of the study showed the presence of radical qualitative and quantitative changes in the export of goods and services, as one of the manifestations of the geoeconomic transformations of world space. Under the influence of various factors, these changes provoked reformatting of international trade relations between countries of different regions. The applied methods of cluster analysis reflect and confirm the presence of these changes.

With the growth of services economy worldwide, it has become essential for policymakers to comprehend the export competitiveness of nations to identify offshore export locations or alternatively offer their own sites as an exporting location. Human capital investment is considered as a key component in attracting foreign countries for outsourcing purposes. Earlier studies have shown mixed role of human capital investment on off shoring activities. This study assesses the effects of control variables (business environment, wages and IT infrastructure) and human capital investment on export of goods and services from the selected Asian outsourcing countries. Panel Estimated Generalized Least Square (EGLS) technique is used with country weights to specifically overcome the problem of autocorrelation. Empirical findings show that investment in human capital is significant for both goods and services exports. We found a large impact of human capital investment on exports of goods and services in selected Asian countries as compared to selected developed countries. Empirical findings further suggest that human capital is more essential for export of goods than export of services. From these findings, the study draws important implications for policymaking in countries who intend to offer themselves as an attractive location for exporting and for those who intend to locate their production activities overseas.

Although developing countries face high levels of income inequality, they rely more on consumption taxes, which tend to be linear and are less effective for redistribution than a non-linear income tax. One explanation for this pattern is that the consumption taxes are generally more enforceable in these economies. This paper studies the optimal combination of a linear consumption tax, with a non-linear income tax, for redistributive purposes. In our model, households might not comply with the income tax code by reporting income levels that differ from their true income. However, the consumption tax is fully enforceable. We derive a formula for the optimal income tax schedule as a function of the consumption tax rate, the recoverable elasticities, and the moments of the taxable income distribution. Our equation differs from those of Mirrlees (1971) and Saez (2001) because households respond to income tax not only through labor supply but also through mis-reporting their incomes. We then characterize the optimal mix between a linear consumption tax rate and a non-linear income tax schedule. Finally, we find that the optimal consumption tax rate is non-increasing in the redistributive motives of the social planner.

The purpose of the present paper is to compare the impact of implementing Value Added Tax on Export of goods and services in selected countries. In this paper, we used four different indices for export; export of goods and services, export of goods and services (BOP), export of goods and services (annual % growth), export of goods and services (% of GDP) to investigate the sensitivity to different definitions .To do so, study concentrated on a sample of 140 countries that have applied Value Added Tax in their tax system from 1990 to 2008. Findings of the study based on Mean Difference Statistical Test in a two threeyear periods before and after introduction of VAT. In general, the results show that, in different indices, the impact of VAT on export is positive. Therefore, it is suggested that other countries have not yet introduced the VAT to reform their tax system by introducing the VAT.

Macroeconomic stability is very important for each economy because it constitutes the basis of sustainable economic growth and development. It means stable prices with a low level of inflation (internal stability), a stable foreign exchange rate, a relatively low and sustainable current account deficit in the balance of payments and a solvent position in the external indebtedness of the economy (external stability). International Monetary Fund (IMF) provides financial support to countries that have problems with internal and external stability. The IMF approach to macroeconomic stabilization is based on a so-called “monetary approach” to the balance of payments. The first IMF model designed for dealing with balance of payments disequilibrium was the Polak’s model on monetary programming. Its purpose is to integrate monetary, income and balance of payments analysis, and it represents the basis of the conditionality applied to IMF’s credit arrangements. This model investigates and determines the effect on income and balance of payments arising from the two important variables in the economy: (1) changes in domestic bank credits, and (2) changes in exports of goods and services. In other words, the model indicates what macroeconomics policies are required to achieve a given set of outcomes i.e. it determines policy targets consistent with explicit macroeconomic objectives. It consists of a set of four equations and contains two behavioral relationships: the demand for money function and the function of the demand for imports, and two identities: for the money supply and for the balance of payments. As such, Polak's monetary model extends classical quantitative money theory to the example of an open economy. Republic of North Macedonia, as a developing country that is remarkably open to the world (large share of export and import of goods and services in GDP) and with close cooperation with the IMF, the application of so-called financial programming based on Polak’s monetary model is of special importance. Based on the theoretical elaboration of the equations contained in the Polak’s monetary model, the paper attempts for its application to the case of Republic of North Macedonia and tries to determine and quantify the dependence of the changes in net foreign assets (foreign reserves) and gross domestic product (GDP) from the changes in domestic credits of the Macedonian banking sector. For that purpose, the data on gross domestic product (GDP), money supply (M4) and exports of goods and services for the period 2003-2018 were used from the State statistical office and National bank of the Republic of North Macedonia. By calculating the values of income velocity of money and propensity to import, the interdependence of domestic credits with gross domestic product and net foreign assets of the banking sector is calculated and analyzed.

Power deficits constitute a crucial problem affecting the production and exports of goods and services in a modern economy. This study attempts to evaluate the impact of power deficiency on the exports of services in Cameroon. Therefore, a modified Cobb-Douglas production function and selected data retrieved from the 2018 World Development Indicators dataset for the period 1972-2017 were used in the econometric estimations. The results depict that power deficits have effects on the country’s export services both in the short- and long-terms as a percentage point hike in power supply triggers an increase in the exports of services by 0.69 per cent in the short-run and 0.43 per cent in the long-run. Moreover, a one-point decline in Foreign Direct Investment causes the exports of services to decline by 0.02 per cent in the short-term and 0.07 per cent in the long-term. Overall, the results imply that electricity supply is a critical input to boost the exports of services. Thus, it is recommended that the government of Cameroon should eradicate the issue of power supply to its economy by stepping up investments in the energy sector. Key words: Electricity Supply; Exports; Services; Cameroon DOI: 10.7176/DCS/12-6-05 Publication date: June 30 th 2022

Subject. The article addresses the exports of high-technology products and services. Objectives. The purpose is to assess the impact of exports of high-technology goods and services on the condition of national economies. Methods. The study rests on a hierarchy of hypotheses from the general to the specific, i.e. that the increase in exports leads to the economic growth of the country (H1), the exports of goods and services, with varying force, affect the economic growth of the country (H2), the increase in exports of certain categories of high-technology goods directly affects the economic growth of the country (H3). In the first stage, our analysis revealed that under the world economy globalization, exports of almost all countries of the world continue growing. In the second phase, to test the hypotheses we applied methods of multivariate statistical analysis, including the study of a fixed effects model enabling to consider non-measurable individual differences of objects. Results. The study confirms H1 and H2 hypotheses. While testing the H3 hypothesis, we found that the exports of machinery and equipment, pharmaceutical products, services in the field of computer and telecommunications services affect GDP, and the exports of electronics, insurance and financial services have no statistically significant impact on GDP. Conclusions. Although the findings require further investigation of identified causal relationships, we can conclude that they may have a significant impact on feasibility and effectiveness of government measures for boosting international trade and introduced trade barriers.