Alternative Tax Research Articles

Personal Tax Planning: New AMT Rules—Is the Alternative Minimum Tax a Paper Tiger with New Fangs?

Cet article donne un aperçu général des modifications proposées au régime actuel de l'impôt minimum de remplacement, qui ont été annoncées dans le budget fédéral de 2023. Il met en évidence leur incidence sur les clients à revenu élevé et examine les considérations pratiques de planification pour atténuer les résultats fiscaux défavorables dans certains scénarios.

Matrix multipliers, demand composition and income distribution: Post‐Keynesian–Sraffian theory and evidence from the world's ten largest economies

AbstractThis paper builds and explores in detail a post‐Keynesian–Sraffian one‐country model of effective demand, which, on the one hand, extends the Kurz multiplier model to open–with state‐economies of single production and, on the other hand, is applicable to data from the National Input–Output Tables of the World Input–Output Database. Thus, it estimates the net output, import and employment matrix demand multipliers for the world's 10 largest economies. The overall findings provide general support for and new insights into Sraffian theoretical and policy arguments: (i) the multiplier effects depend heavily on the physical composition of autonomous demand; (ii) the incremental share of wages in net national income can move in either direction with an increase in the savings ratios out of wages and profits and/or the corresponding direct tax rates; (iii) there is, in general, no one‐to‐one correspondence between alternative tax–transfer policies and their multiplier effects; and (iv) there is not necessarily an inverse relationship between the overall level of the profit rate and the multiplier effects or the wage share.

Households food consumption pattern in Pakistan: Evidence from recent household integrated economic survey

The analysis of food consumption pattern is a primary concern of any developing country because it is related with food security. Pakistan is one of the emerging nations of the developing world.Due to the similarities and differences in households' food consumption behavior, income distribution, the effects of alternative tax structures, cost-benefit analyses, and the choice of cost of living index, the study of households' food consumption pattern is crucial for a developing nation like Pakistan. Furthermore, for Pakistan's food security in the present and the future, an analysis of food consumption pattern is crucial. The main objective of this study is to analyze the households' food consumption pattern. Linear Approximation Almost Ideal Demand System (LA/AIDS) is applied using data from Household Integrated Economic Survey (HIES) for the year 2018–19. This study makes a significant contribution by estimating household age composition elasticities, which were absent from earlier studies. Results from the income elasticities reveal that milk, meat, and fruits are luxuries food items. Similarly, on the basis of inelastic income elasticities we declared cereals, pulses, vegetables, sugar, and ghee as necessity food items. Results from the compensated own price elasticities show that the eight food commodity groups have inelastic own-price elasticities. This implies that these food commodities are integral food items of household diet. Results from the compensated cross-price elasticities shows that cereals and pulses, cereals and vegetables, pulses and vegetables, milk and fruits, meat and fruits, and milk and ghee are gross substitutes. On the other hand, pulses and meat, pulses and fruits, and ghee and meat are gross complements. According to the findings of the household age composition elasticities, adding children to a household significantly increases its sugar consumption while significantly reducing its fruit consumption. Any increase in the size of the household by an adolescent, adult, or a person in their middle age results in a significant increase in the consumption of cereals and a significant drop in the consumption of fruits. Finally, any increase in the size of the households brought about by an elder resulted in a significant rise in the consumption of cereals and a significant drop in the consumption of vegetables.

Made in America: International Tax Reform 2.0 – Part 3

This is Part 3 of the author’s article, “Made in America: International Tax Reform 2.0”. It first considers the Inflation Reduction Act of 2022, followed by an exploration of the new Corporate Alternative Minimum Tax based on information available as of 5 February 2023, the date this article was written. It then deals with the Excise Tax on Repurchases of Corporate Stock.

The Environmental Tax Scheme in China’s Large-Scale Pig Farming: Balancing Economic Burden and Responsibility

China has implemented an environmental protection tax for large-scale agricultural farming to address environmental pollution caused by livestock and poultry breeding. Studying the environmental management of large-scale pig farming is crucial for controlling agricultural pollution. However, the economic impact and effectiveness of the current tax design, including responsibility sharing, tax rates, and taxpayers, are unclear. This study aims to address these gaps. Firstly, two types of taxation principles, production-based and consumption-based, are established, and their effects on pollution emissions distribution between pig production and marketing areas are comparatively analyzed. Secondly, the economic impact of consumption-based environmental taxes is estimated from inter-provincial and rural–urban perspectives under the current tax mechanism. Thirdly, a new alternative tax rate aligned with inter-provincial pig consumption levels is proposed based on the consumption principle. By comparing alternative tax systems, the potential impact of the current environmental tax on the regional economic burden is analyzed. The results highlighted that a production-based tax system resulted in 83% of regions experiencing varying degrees of implicit emission transfers, and a consumption-based tax system helped coordinate the environmental economic burden between pig production and marketing regions. Additionally, a linear relationship between tax rates and pork consumption expenditure not only alleviated the overall economic burden, leading to tax savings in 30% of regions, but also increased the national environmental revenue from the pig farming industry, resulting in a remarkable 147% rise in overall environmental tax revenue. These findings provide theoretical support for adjusting responsibility and economic burden through environmental tax modifications, facilitating the establishment of a compensation mechanism for the benefits between pig production and marketing areas.

Amount A vs Article 12B: One Size May Not Fit All

In this article, the authors attempt to compare the tax revenues that may be raised by certain middle-income countries under the Amount A and under an alternative multilateral tax regime based on the principles of article 12B of the UN Model Convention. The authors’ results indicate that while some middle-income countries may be better off under the Amount A regime, others may prefer the alternative regime based on the article 12B principles. The choice between these alternatives depends on factors such as the domestic economic activities of multinational enterprises in scope of Amount A, the level of domestic economic activities of companies engaged in automated digital services, the design of the taxation regime based on article 12B, and the specifics of double tax relief policies by the countries that host either companies in scope of Amount A or in scope of article 12B. The authors also offer some thoughts on how the multinational regime based on article 12B may coexist with Amount A under Pillar One.

A tragedy of the horizons? An intertemporal perspective on public support for carbon taxes

Most collective dilemmas—that is, situations in which private interests contrast with collective interests—have an embedded intertemporal component in that they often imply that the rewards from defection are immediate but the rewards from cooperation are delayed and often accrue to people in the future. This also applies to carbon taxes since they imply additional individual costs for benefits which will mostly be enjoyed by future generations, which undermines their political support. In an experiment on a representative sample of 1000 United States adults, we presented individuals with twelve alternative carbon tax formulations with varying start dates, temporal horizons of carbon abatement objectives and revenue uses. We find that public support is highest when individuals can pre-commit to policies that start a few years into the future and for policies that express their emission cuts objectives in more distant and ambitious terms —i.e. achieving carbon neutrality by 2050 as opposed to halving emissions by 2030. Individual temporal discounting, exogenously measured, account for large part of these preferences. These preferences are in contrast with the most efficient policy, which is the one that starts immediately and distributes equitably mitigation costs across time. We find two ways to realign preferences with it. First, the most efficient policy becomes politically feasible when the tax includes a dividend that is redistributed to citizens. Delivering an economic compensation at the same time of the individual costs of the tax neutralizes the effect of individual discounting and of the policy's temporal context on tax support. Secondly, when the price of the carbon tax is adjusted upward to compensate for the opportunity cost of delaying its introduction, individuals start trading off its delay with avoidance of tax increases.

Endogenous labor migration and remittances: Macroeconomic and welfare consequences

This paper develops a macrodynamic model of two small economies – a host country and a labor-exporting developing country – to address the impact of migrant workers and remittances on the two economies. It endogenizes the migration decision as part of the intertemporal utility maximization of households in the developing economy. This setup captures the dynamic process of migration, in which evolving circumstances may lead to fundamental differences from those based on treating remittances as exogenous. Extensive numerical simulations consider two diverse sources of structural change that impinge directly on the migration-remittance relationship. In both cases the long-run impact on the remittance-GDP ratio differs markedly from the immediate response, primarily as a consequence of the impact on the evolving migration during the transition. The welfare consequences of the different constituents – domestic residents, migrant workers, and host economy native workers – are considered. Alternative tax policies to offset effects, deemed adverse, are also discussed.

Innovative Approaches for Tackling Tax Evasion in the South African Minibus Taxi Industry: Lessons from Ghana, Zambia, and Zimbabwe

In South Africa, minibus taxis are a crucial mode of public transport for many commuters and a vital informal business sector with an estimated value of R90 billion. Concerns have been raised that the South African Revenue Service (SARS) is not collecting the optimal amount of tax revenue from this industry, with estimated tax collection at only R5 million in 2021. As a result of concerns that this industry might be involved in tax evasion or massive tax avoidance, this study investigates the taxation of minibus taxis in South Africa and explores alternative tax regimes that could be implemented to improve revenue collection. The study compares the current South African turnover tax system for minibus taxi operators to other African tax systems and evaluates a viable alternative tax regime or tax collection system. To improve tax collection from the industry, South Africa could consider a tax system tailored to the industry’s informal nature, utilising metrics such as vehicle seating capacity or distance travelled. A standardised tax system for small, medium, and micro enterprises may not be suitable. Consultation with industry stakeholders is essential for the proposed tax system to be acceptable. The study’s findings could inform South Africa’s National Treasury in creating a tax structure or collection scheme targeting the minibus taxi industry. This could increase tax revenue collection from the industry and support government expenditure, including income and wealth redistribution. This study distinguishes itself from prior publications on the South African minibus taxi industry by addressing tax compliance and collection challenges. It offers recommendations for alternative tax regimes to mitigate these challenges.

Does Notice 2014-21 Need an Update? An Analysis of Potential Tax Classifications for Cryptocurrency

ABSTRACT The IRS issued Notice 2014-21 in which they classify cryptocurrency as property. However, the variety and usage of cryptocurrency has increased since Notice 2014-21 so that cryptocurrency has become a significant and widely accepted component of the global financial system. Cryptocurrency includes a diverse group of digital assets with different origins and uses. One type of cryptocurrency, Bitcoin, has been adopted as legal tender in two countries. Yet the IRS guidance for reporting cryptocurrency has not changed. In this paper, we examine the current regulatory framework regarding cryptocurrency. Next, we discuss alternative tax treatments for cryptocurrency and the tax effects of those potential treatments. Finally, we make policy recommendations for the tax treatment of cryptocurrency.

Impact of the alternative tax base measurement policy on the VAT revenue performance in the Indonesian agricultural sector

Informality issues and government distributional objectives cause the need for VAT special treatment for the agricultural sector. The treatment forms and resulting impacts vary, depending on each country's conditions and necessities. This study aims to estimate the impact of the alternative tax base measurement policies on the VAT revenue performance in the Indonesian agricultural sector. Using input-output table modeling, the authors found that the policy positively impacts the compliance level and VAT revenue in the agricultural sector but reduces the aggregate national VAT revenues and increases the VAT burden that the agricultural sector entrepreneurs must bear. The normal VAT mechanism is preferred for the long-term goal, but the alternative policy is still needed during the transition period.

Impacts of the Small-Tract Forestland Tax Program on Forestland Use in Oregon

Abstract Preferential tax programs for forest landowners are used to achieve land use–related environmental and social objectives. Nonindustrial landowners are likely to own forests near development boundaries, which may lead to a higher likelihood of land conversion from forests to alternative uses. This article answers the question of how preferential tax programs for small-tract forestland (STF) owners have influenced the conversion of forested lands in Oregon since 2005. We find that a 10% increase in STF program participation within a county (as measured by acreage enrolled) can lead to a conversion of 127 ac from wildland forest to mixed forest/agriculture since the prior forest inventory period. Compared with the default “Forestland” tax program, participation in the alternative STF tax program has had a smaller and statistically weaker effect on the number of acres converted to low-density residential use. However, hypothetical elimination of the STF tax program would increase enrollment in the default Forestland tax program, which was measured to have a greater effect on the conversion of wildland forest to low-density residential land. Hence, the results overall provide evidence that the STF program has achieved its objective of mitigating development pressures and reducing conversion of forestland to nonforest uses.

Examining Tax Strategy Choice

ABSTRACTMost recent tax research examines the level of firms’ effective tax rates (ETRs), focusing on tax avoidance. However, theoretical work and research on book-tax tradeoffs and reputational costs indicate that some firms have other tax planning goals. Moreover, anecdotal evidence suggests that consistent tax outcomes are important; therefore, the volatility of ETRs may be an alternative aspect of firms’ tax planning. In this study, I find that some firms utilize a second, distinct approach to tax strategy—maintaining low ETR volatility—by documenting systematic differences in firm characteristics associated with each tax strategy approach and a predictable shift in characteristics when firms change tax strategies. In combination, these results identify at least two distinct approaches to tax strategy. I also find that firms exhibiting low ETR volatility earn significantly higher median buy-and-hold returns than firms exhibiting low ETR levels, consistent with benefits to alternative tax strategies.Data Availability: Data used in this study are available from public sources identified in the paper.JEL Classifications: M40; M41; M49.

최저한세 납부 대상 기업의 자기자본비용

This study analyzes effects of alternative minimum tax (AMT) on firm’s cost of equity capital. Investigating a sample of public firms for 2011-2020, we find that firms paying AMT have a higher cost of equity capital. We also find that the cost of equity capital is higher when the firms paying AMT are non-small and medium-sized enterprises (SMEs). This study contributes to expanding the literature by empirically analyzing how tax regulation affects the capital market. Firms’ behavior motivated by tax regulation could affect the cost of equity capital which is the basis of the firms’ real economic decisions. Thus, the results suggest that tax policymakers make tax regulation more sophisticated.

The Use of Mediation as Alternative Tax Dispute Resolution

Legal remedies that can be taken by taxpayers in the event of a tax dispute by filing an objection to the objection institution located in the Directorate General of taxes. This objection is essentially a legal remedy that is outside the Tax Court to seek justice in tax disputes. The problem is that there are several weaknesses related to fairness to objection institutions in processing objections that exist today, namely: the psychological pressure on the objection reviewer, the organizational structure that is not independent, human resource management, especially the objection review team that has not been optimal. To overcome these problems alternative dispute resolution should use mediation mechanism because it can overcome the buildup of cases in court so that an effective instrument is needed because some countries such as Australia, Britain, America, Canada use mediation as an alternative to tax dispute resolution. Keywords: Alternative Dispute Resolution, Tax Dispute, Property

Corporate Minimum Tax Options

Canada faces a quandary. Should it adopt a corporate minimum tax under the pillar two agreement that is consistent other agreeing countries, or should it adopt a US-style corporate alternative minimum tax that is more harmonized with the minimum tax of the United States, its largest trading partner? There is no easy answer to this question. The pillar two corporate minimum tax is complex and distortionary, even though it puts a floor on tax-rate competition at 15 percent; but a made-in-Canada corporate minimum tax could reduce distortions while raising more revenue by being applied to a wider group of companies. The authors of this paper argue that Canada should take its time to see whether the US corporate alternative minimum tax qualifies as a minimum tax, giving Canada better options for a corporate tax than pillar two's global tax.

Reduction in the importance of indirect methods of assessing the taxable base in the conditions of digitalization of the economy

Starting from January 1, 2021, the uniform tax on imputed income (UTII) has been cancelled. According to the Federal Tax Service, 96.2% of the subjects who paid UTII have already chosen an alternative tax regime. At the same time, in society, scientific and professional communities, and among business representatives, there are different points of view on this problem, opinions are expressed about the need to preserve indirect methods for assessing the taxable base, and UTII in particular. The state initially had a plan to abandon UTII and consistently implemented the abandonment of indirect methods of assessing the taxable base, implemented under imputed taxation (UTII), and the transition to fair taxation (STS, CTS) based on real income. The introduction of special tax regimes based on fair taxation has contributed to the growth of tax collections and an increase in the number of business entities that have chosen these regimes. Based on the results of the paper, conclusions are presented that can be used in analyzing the prospects for the development of tax systems.

Co-management of large-scale and medium-scale fisheries: An assessment of the fishery tax system in Indonesia

Many fish stocks are jointly exploited by industrial vessels that employ modern fishing technologies and small- to medium-scale vessels that rely on simple gears. For the effective management of these shared stocks, it is imperative to understand how different policy options influence the behavior of fishing vessels of different sizes. A fishery tax could be a viable option where other popular market-based instruments, such as individual transferable quotas, cannot be adopted. In this study, we developed a model that incorporates the interaction between large- and medium-scale fishing vessels to evaluate the impact of alternative tax schemes. The model is parameterized using the skipjack (Katsuwonus pelamis) purse-seine fishery in Indonesia, which has over 20 years of experience in fishery taxes. The results show that the current tax system has a limited impact on reducing fishing pressure, as tax payments are determined by the pre-production characteristics of fishing entities. Moreover, vessels below 30 GT are exempt from taxes, giving incentive for fishers to invest in vessels below or far above 30 GT. When taxes are imposed on only one vessel group, the harvest reduction by this vessel group could be offset by an increase in the harvest by untaxed vessels. Imposing a production-based tax on both large and medium vessels results in a more balanced outcome in terms of the distribution of fishery benefits and vessel capacity across regions. We discuss the social and institutional implications of implementing a production-based taxation system to promote efficient and equitable resource use in Indonesian fisheries.

Legal Framework for Regulation of Income Tax on Cryptocurrency Transactions Based on the Principle of Justice: Comparative Legal Study with Canada

The Regulation of the Minister of Finance of the Republic of Indonesia Number 68/PMK.03/2022 as the legal basis for cryptocurrency income tax does not reflect the principle of fairness because the consideration is based on the principle of ease of administration. This paper aims to provide an alternative income tax legal framework on cryptocurrency based on the principle of justice. It is expected to be a step to increase state revenue through the sector of cryptocurrency tax. This paper employs a conceptual and comparative approach to normative research. Furthermore, the researcher compares income tax regulations and policies on cryptocurrency in Indonesia and Canada with the theory of justice to obtain answers to legal problems. The Regulation of the Minister of Finance of the Republic of Indonesia Number 68/PMK.03/2022 does not reflect the principle of justice because the final tax rate does not reflect the tax burden. In addition, there are limitations on the tax collector's authority, so tax collection is not comprehensive. Therefore, this paper compares and analyses income tax regulations and policies in Indonesia and Canada to obtain several alternative forms of fair tax legal framework on cryptocurrency. Alternative cryptocurrency income tax regulation that can be accommodated by the government is to change to a progressive rate to fulfill tax fairness, change the collection system to a self-assessment and do not differentiate the source of income and also cooperate with various exchanges to exchange transaction data to prevent criminal acts.

Climate change and credit risk: The effect of carbon tax on Italian banks' business loan default rates

Climate change poses severe systemic risks to the financial sector through multiple transmission channels. In this paper, we estimate the potential impact of different carbon taxes (€50, €100, €200 and €800 per ton of CO2) on the Italian banks’ default rates at the sector level in the short term using a counterfactual analysis. We build on the micro-founded climate stress test approach proposed by Faiella et al. (2022), which estimates the energy demand of Italian firms using granular data and simulates the effects of the alternative taxes on the share of financially vulnerable agents (and their debt). Credit risks stemming from the introduction of a carbon tax - during periods of low default rates - are modest for banks: on average, over a one-year horizon, the default rates of firms increase but remain below their historical averages. The effect is heterogeneous across different sectors and rises with the tax value; however, even assuming a tax of €800 per ton of CO2, the default rates are below their historical peaks.