Actual Tax Research Articles

Examination Factors Affected the Personal Income Tax Compliance In Aceh Province, Indonesia

The collection of tax revenues is essential for a government to ensure its funding. From the structure of national budget 2011, it can be seem that tax revenues represent 79% of all government revenue. Now tax can play important role in all aspect government like political and economic perspective. Tax revenue from Aceh in 2011 contribute .....% (Rp....) for national tax revenue. It seems too small number of contributing for national tax revenues. Aceh Province was the site of the December 2004 tsunami, which killed an estimated 167,000 people. It was also the site of a 30-year civil war between the separatist Free Aceh Movement (GAM in Indonesian) and the Indonesian government, which ended with the signing of a peace agreement in August 2005. After the Aceh Recovery Framework (ARF) was announced by the Governor of Aceh in 2007 as a turning point in strategic planning and coordination around the broader spectrum of transitional issues that must be more fully understood and managed as a whole, Aceh became a province that be growth normally and would be a sustainable place for improvement land. Those situations affect to the economic growth in Aceh from 2008 until 2011. The ARF is at once the Governor’s mission and vision translated into a transitional roadmap from 2008 to 2011; a transparent and shared planning and monitoring mechanism; and a coordination structure for partners and stakeholders that enriches government policy and planning with the acquired wisdom, lessons learned and targeted assistance of those helping Aceh to fully recover and flourish. All situation change can not effect more significant in tax revenue. Event the tax compliance in Aceh. We knew that Indonesia adopts the self-assessment method for individuals to calculate, settle, and report income tax. So in Aceh this could be treating like another province that applied tax regulation exchange since 2008. In this case, it’s not easy to measure tax compliance in Aceh, because the applied of taxation still a new thing that applied after Tsunami and civil war Free Aceh Movement. As we know that noneconomic factors are a dominant factors affected in tax compliance in Aceh. The question is how Directorate General Tax to measure tax compliance and find out the solution to increase tax revenue and to reduce tax evasion.Tax compliance had involved many economic factors such as: the level of actual income, tax rate,tax benefits,tax audit, audit probabilities, fines and penalties and there are many noneconomic factors to affect the level of tax compliance. Many researches have been done to include these noneconomic factors to explain tax compliance behavior under the framework of economic analysis ( for example; Alm, Jackson, and McKee (1993), Alm, Sanchez, and DeJuan (1995), Park and Hyun (2003)). These noneconomic factors include the willingness to pay for public provision, pubic education, tax morale, tax information, and etc. As there are some limitations to include all noneconomic factors for the analysis of tax compliance behavior, most studies pay attention to just one or several factors for rigorous analysis. Even though we understand that noneconomic factors are the important determinants for the level of tax compliance, it is hard to compare these noneconomic factors between Korea and Japan, due to limited information. We just focus on one noneconomic factor to partly explain the difference of the levels of tax compliance between them, which is the policy of tax information disclosure. Directorate General Tax still just had examined any factor that affected to the tax compliance in all over the the province in Indonesia. But in Aceh, there are differences aspect that became factors dominant which found in many cases tax audit and tax report. This research had the aim to analyze the factors that affected to the individual tax compliance in Aceh province from 2005 until 2011.

Salience and taxation: salience effect versus information effect

Posting tax-inclusive price tags on grocery products can reduce demand through an information effect that corrects consumers who misperceive the actual tax status. We disentangle the information effect from the salience effect developed by Chetty, Looney and Kroft (2009, CLK for short). By utilizing CLK's survey finding that 20% of shoppers mistakenly think there is no sales tax on toothpaste, we show that the information effect actually explains 31% of the sales drop in CLK's field study. Therefore, ignoring the information effect may overestimate the salience effect by a large degree.

Using Microdata to Estimate Pakistan’s Tax Gap by Type of Tax

This study provides estimates of Pakistan’s tax gap by type of tax. We adopt a bottom-up approach that provides detailed estimates of the tax gap by type of tax of the sort that are useful for tax administration. For fiscal year 2004–05, we estimate Pakistan’s federal tax gap to be about 40 percent of potential tax revenue. We estimate the tax gap for direct taxes to be about 60 percent of potential direct tax revenue and for indirect taxes about 25 percent of potential indirect tax revenue. Direct and indirect taxes account for about 30 percent and 70 percent, respectively, of actual tax collections. When potential tax revenues are used to measure Pakistan’s tax structure, the proportions are 45 percent and 55 percent, respectively. If the indirect tax system is more regressive than the direct tax system, then Pakistan’s tax system is less progressive in practice than by design.

Substitution Patterns Can Limit the Effects of Sugar-Sweetened Beverage Taxes on Obesity

Substitution Patterns Can Limit the Effects of Sugar-Sweetened Beverage Taxes on Obesity

Generalized Social Marginal Welfare Weights for Optimal Tax Theory

This paper proposes to evaluate tax reforms by aggregating money metric losses and gains of different individuals using “generalized social marginal welfare weights.” Optimum tax formulas take the same form as standard welfarist tax formulas by simply substituting standard marginal social welfare weights with those generalized weights. Weights directly capture society's concerns for fairness without being necessarily tied to individual utilities. Suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice, as well as unify in an operational way the most prominent alternatives to utilitarianism such as Libertarianism, equality of opportunity, or poverty alleviation. (JEL D60, D63, H21, H23, I38)

Decision heuristics and tax perception – An analysis of a tax-cut-cum-base-broadening policy

In this paper, both a conjoint analysis and a lab experiment are conducted to analyze the influence of changes in the tax rate and the tax base on the perceived tax burden. Our results show that the majority of individuals do not make rational tax decisions based on the actual tax burden but rather use simple decision heuristics. This leads to an irrationally high impact of changes in nominal tax rates on the perceived tax burden. Taxpayers favor tax options that apply a lower tax rate on their gross income over a higher tax rate applied on their net income despite the lower actual tax burden of the latter option. This result suggests that politicians could combine increasing fiscal revenues and decreasing subjects’ tax perception. Furthermore, overestimation of tax rate changes increases considerably when information on tax rate is considered first (framing effect).

Tax-efficient sourcing and supply-chain management

With such significant growth in the LNG industry and the broader energy and natural resources sector, the supply-chain risk and the cost of sourcing capital equipment and materials is increasingly difficult to manage. Many organisations are beginning to consider the merits of moving to a tax-efficient supply chain and procurement model, both through sourcing from a low-cost country and also centralising purchasing and supply operations in a tax-efficient location. Tax-efficient sourcing integrates supply chain and procurement-operating model design with tax planning to deliver significant cost reductions and profit increases through centrally controlling procurement operations. The consideration of the most efficient tax structures to support sourcing and distribution of equipment also delivers. Centrally controlled strategic and tactical supply chain and procurement operations in a tax-efficient location support an organisation in: realising benefits through leveraging scale in operations and procurement; designing a flexible framework that can be used to decide which categories of spending are managed globally, regionally, and locally;and, the acceleration and sustainability of significant procurement savings delivery from low-cost locations. Planning and management of the tax implications of physical supply-chain operations to reduce the actual taxes paid on profits and operations happen through: the potential to reduce corporate taxes on company profits; reducing absolute value-added tax (VAT) payable or cash-flow cost of VAT; reducing duty payable; optimising the indirect taxes paid on physical flows; and, change of transfer pricing driving reduction in effective corporate tax rates.

Consuming Your Way to Efficiency: Public Goods Provision Through Non-Distortionary Tax Lotteries

We revisit the classical result that financing a pure public good through taxation of private consumption is inefficient. To this standard setup we add a consumption contest in which consumers can win a prize. We show that an appropriately chosen contest—which we call a ‘tax lottery’—can correct the distortion in private consumption while, at the same time, inducing efficient provision of the public good and balancing the government’s budget. The result does not depend on whether the public good is provided exogenously or dependent on actual tax revenue. We show that neither pure fundraising contests nor a sales tax combined with a ‘simple’ lottery can induce efficiency in the standard environment.

Consumption, investment and life insurance under different tax regimes

AbstractWe study the effects of introducing taxation in classical continuous-time optimization problems with utility from consumption, bequest and retirement savings. Inspired by actual tax favoured retirement savings programs, we formulate and solve the optimization problem for various tax regimes, and compare tax effects on consumption/savings contributions, investment and purchase of life insurance under the regimes. The optimization problems have analytical solutions, which allow for easy comparison of tax effects under the different regimes. To substantiate the results we also present a numerical analysis of the results based on realistic parameter values and regimes. Based on American and Danish tax regimes we estimate the values of existing retirement saving favouring to be 1 – 2 percent of lifetime income.

Combining the Mobile Workforce and Telecommuter Tax Acts

Mobile Workforce State Income Tax Simplification Act of 2012 (“the Mobile Workforce Act”) and the Telecommuter Tax Fairness Act of 2012 (“the Telecommuter Act”) each respond to the pressing national need to rationalize the states’ income taxation of nonresident workers in light of modern technology and the work patterns such technology facilitates. Both Acts must be passed to create a comprehensive framework for the states’ income taxation of nonresident workers in the 21st century.The Mobile Workforce Act addresses the question today generally denoted as nexus, that is, who can tax. The Telecommuter Act addresses the question which is today denominated as apportionment, namely, how much can be taxed. Congress must answer both inquiries properly, lest multiple and excessive state tax burdens on nonresident workers unnecessarily interfere with the efficient work patterns of a modern economy.

IS THE TWO-CHOSEN-ONE (2C1) TAXATION IMPLEMENTATION IN THAILAND VALID TO SERVE AS A MODEL FOR HOW 2C1 TAXATION REALLY WORKS?

According to Jürgen Rehm and his colleagues, the alcohol taxation approach introduced in Thailand in the Alcohol Act 1950, the so-called two-chosen-one (2C1) taxation, aims specifically to prevent drinking initiation in addition to reducing alcohol-attributable harms. The 2C1 taxation is a system where the actual tax rate for a certain alcoholic beverage is that which is the higher one when taxes are calculated according to two alternatives, on one hand as a specific tax which is a function of the alcohol content of the beverage and, on the other hand, as an ad valorem tax, which is a function of the price of the beverage. Rehm and his colleagues conclude that ‘2C1 taxation has the potential to simultaneously reduce alcohol consumption and prevent drinking initiation among youth . . .’1. This potential impact—they do not claim that it is a real impact—is the result of the unique properties of the 2C1. The 2C1 taxation is said to put higher tax on beverages which are preferred by heavy drinkers as well as on those beverages which are preferred by potential new alcohol consumers, especially youngsters. It is true that in 2C1 taxation, taxes on cheap alcoholic beverages are determined on the basis of specific tax because it gives a higher tax on cheap alcoholic beverages than ad valorem taxation. Expensive alcoholic beverages, on the other hand, are taxed on the basis of ad valorem taxes putting their taxes onto a higher level than specific taxes on these beverages. Basically, the effects of the Thai 2C1 taxation are, or should be, what Rehm and his colleagues are presenting. However, we can question some of their assumptions. First, are heavy drinkers really preferring certain beverages, or are the beverages they actually prefer an outcome of their full price? For instance, in Finland in the early 1950s white spirits were the beverages preferred by heavy alcohol consumers. After certain changes in relative alcohol availability fortified wines became, in the 1950s, the most important beverage for becoming intoxicated, and after changes in relative physical and economic availability in the early 2000s semisweet white wines were the beverages preferred by marginalized heavy alcohol consumers 2, 3. It is also not clear that young novice drinkers would prefer certain alcoholic beverages independent of their full prices. Secondly, the paper accepts Thailand's 2C1 taxation's official motivations as they are most certainly written in the documents. However, at least when trying to propose the Thai alcohol taxation as a model for low- and middle-income countries, it should be remembered that the state has several interests with regard to alcohol. As well as maintaining public order and safety and the health of the population, the state also has an economic development interest with regard to the alcohol industry and trade 4. It can be assumed that these economic interests are the explanation as to why white spirits, followed by wine coolers, have excise tax rates as 1.82 Thai Baht (THB) and 2.36 THB per 12 g of alcohol compared to about 6 THB with regard to domestic whisky and at least 7 THB with regard to domestic beer. With reference to white spirits, this exceptionally low excise tax rate is based on specific tax; and regarding wine coolers on 25% ad valorem tax compared to 60% ad valorem tax regarding beer. The 2C1 model is an interesting model; but in order to investigate its real effects on youthful drinking and alcohol-related harm, we need to have a case where this model is implemented as it is really supposed to work, with the same specific tax rate as well as with the same ad valorem percentage for all beverages, not as it is now working in Thailand, with important exceptions motivated by political reality. None.

Tax Expenditure Theory and the Reform of French Loopholes

This study has a dual ambition. One is to develop, for the first time ever, a complete Theory of tax expenditures and, therefore, a proposal for reforming the French tax loophole system. Having noted the proliferation of such loopholes in France and elsewhere over the past 20 years or so, we provide a succinct analysis of their political origins and highlight the absolute necessity of stopping a deviation that risks undermining the very foundations of efficient and fair taxation, the only possible basis for a social consensus and citizens’ ongoing willingness to pay tax. The first section, from a theoretical point of view, offers our Theory of tax expenditures as well as a new and more complete definition of this construct, thereby tracing an idealized border between tax determination modalities, the elements that are inherent to any benchmark tax system and actual tax expenditures. The second section, from a pragmatical point of view, recalls three possible methodologies for assessing tax expenditures, evaluating the many different analysts that work in France (all deeply rooted in an initial spending paradigm) before offering our own methodology, one based on the double criteria of effectiveness and fairness. On this basis, we analyze France’s 17 main tax expenditures today in 2012 and invite the next Parliament to keep any legitimate tax expenditures (after modifying them, if need be) while eliminating many costly, ineffective and inadapted loopholes, along with any that generate windfall effects (what we might call illegitimate tax expenditures). Lastly, we suggest a new global architecture for tax expenditures, one relying on clear and coherent foundations.

Web Appendices to 'Progressivity and Potential Income: Measuring the Effect of Changing Work Patterns on Income Tax Progressivity'

This document contains four appendices to Sanchirico, Chris William, Progressivity and Potential Income: Measuring the Effect of Changing Work Patterns on Income Tax Progressivity. Columbia Law Review, Vol. 108, Pg. 1551, 2008. Available at SSRN: http://ssrn.com/abstract=961310These are: 1. The Stata do file creating variables from PSID data; 2. The Stata program that runs the estimation procedure and was submitted to balanced repeated replication; 3. And appendix explaining actual income tax figures and graphs in terms of tax code provisions; 4. The more technically detailed working paper version of the full paper.

Personal Income Tax in Estonia – Who’s Burden?

Despite many common features, the personal income tax (PIT) systems are broadly country specific and designed in accordance with society’s preferences. The paper focuses on PIT developments during the last decade in Estonia. There will be considered income dynamics and allocation of taxpayers to income groups. Also will be analyzed PIT burden distribution across the income earners groups and explained main factors, influencing effective tax rates. Also will be given overview and explained dynamics of various deductions, which adjust actual tax burden.Despite the existing flat tax system in Estonia, different deductions are implementing significant progression to the actual tax system.

INTERNATIONAL TRANSFER PRICING AND THE EU CODE OF CONDUCT

International transfer pricing concerns the prices charged between associated enterprises across national borders. Associated enterprises, also known as related parties, are enterprises that control each other either directly or indirectly by means of capital participation. International transfer pricing decisions have to be made, for instance, when a mother company delivers goods, services or intangibles to its foreign subsidiaries, particularly when it receives them from its affiliates. The tax rates on company profits differ from country to country. In the EU member states the tax rate differential on company profits range between 10 % in Bulgaria to about 35 % in France. Such tax rate differentials encourage associated enterprises to set transfer prices that shift profits from high-tax to low-tax countries in order to reduce the overall tax burden for the whole Multinational Corporation. No country can allow its tax base to suffer because of international transfer pricing. It is therefore necessary to set up guidelines in order to avoid arbitrary pricing. The OECD member countries have agreed that international transfer prices shall be determined according to the “Arm’s Length Principle”. The “Arm’s Length Principle” is an important element of the tax jurisdictions in EU member states. In order to reduce bureaucratic burdens imposed on Multinational Corporations operating on the European Common Market the European Commission has proposed an EU-wide common approach to transfer pricing documentation requirements. This EU Code of Conduct on transfer pricing documentation (EU TPD) shall help to prevent Multinational Corporations with affiliates in different EU Member States from taking a country-by-country documentation approach. This article describes economic implications of international transfer pricing. Furthermore it classifies and compares the possiblities to determine an „arm’s length price“ according to the OECD Guidelines 2010. Based on empirical data concerning the actual taxes on company profits in EU member states the article shows that the EU Code of Conduct on transfer pricing documentation (EU TPD) can only be an intermediate remedy towards an inevitable tax harmonization in the European Union. DOI: http://dx.doi.org/10.5755/j01.eis.0.5.1085

To Tax or Not To Tax: Is that Really the Question? – VAT, Bank Foreclosure Sales, and the Scope of Exemptions for Financial Services in Ethiopia

The Ethiopian Value Added Tax of 2002 follows the standard approach of exempting financial services from VAT. Not all ‘financial services’ are, however, exempted from VAT.  A number of services provided by the financial institutions are made taxable by the VAT laws of Ethiopia. No subject in this regard has probably attracted as much attention and controversy as that of sale by foreclosure of property held as security by banks. Both sides (i.e., members of the financial industry and the tax authorities) seemed locked in their conviction over the treatment of foreclosure sales in VAT. Members of the financial industry (in particular banks) are convinced that foreclosure sales enjoy the privilege of exemption in VAT while some within the Tax Authorities are equally convinced that foreclosure sales should be chargeable with VAT. These controversies have played out in the courtrooms, the press and a number of communications between the Tax Authorities and the members of the financial industry. This article examines these controversies and analyzes the scope of exemptions for financial institutions under Ethiopian VAT laws. Key words: VAT, exemptions, zero-rating, foreclosure sales, financial services, taxable  transactions, taxable activity

Assessments under the Tax Administration Bill

Abstract not available.

The effect of tax revenue budgeting errors on fiscal balance: evidence from the Swiss cantons

This study is an empirical analysis of the impact of direct tax revenue budgeting errors on fiscal deficits. Using panel data from 26 Swiss cantons between 1980 and 2002, we estimate a single equation model on the fiscal balance, as well as a simultaneous equation model on revenue and expenditure. We use new data on budgeted and actual tax revenue to show that underestimating tax revenue significantly reduces fiscal deficits. Furthermore, we show that this effect is channeled through decreased expenditure. The effects of over and underestimation turn out to be symmetric.

Analysis Budget Revenues Tax of Actual Income Tax: A Case Study in the Provincial Government of DKI Jakarta

Jakarta as the center of Indonesia’s economic activity, would have definitely have a number of very large tax revenues each year. Seeing the tax function is very important in national development and regional development, and therefore need to know how to budget planning and local government tax revenues as well as how the realization of tax revenues that occurred. Actual tax receipts are still minimal to date is indeed very unfortunate. So many uses taxes to society itself, one of which is to bring about development in the city, province or in the area. If all taxpayers pay taxes on time then the tax revenue will be high and construction will run fast.

Applicability of Minimum Alternate Tax in India

Applicability of MAT in India: As per section 115JB (1), every company shall liable to pay a Minimum Alternate Tax. If its tax on total income, computed at the normal rate, is less than 10% of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the company shall be 10% (from Assessment Year 2010-11 15%, 18% for AY 2011-12) on such book profit.Normally, a company is liable to pay tax on the income computed in accordance with the provisions of the income tax Act, but the profit and loss account of the company is prepared as per provisions of the Companies Act. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies. In order to bring such companies under the income tax act net, section 115JA was introduced w.e.f assessment year 1997-98. MAT proposes the corporate sector to be slim and beautiful. It has been successful so far to burn the fat and make the sloth run; the new scheme will also do the same but in a different manner.