Direct Tax System Research Articles

Corruption in Taxation System and Its Effects on Indian Gross Domestic Product : An Analysis Study

Abstract: Purpose: This study aimed to examine the impact of corruption on the relationship between taxation and Gross Domestic Product. It required determining whether corruption acts as a controlling factor that interrupts the positive association between taxation and Gross Domestic Product rate. The study employed fundamental analysis methods to establish a deeper understanding of the fundamental relationships between taxation, corruption, and Gross Domestic Product. Methodology: A well-structured questionnaire was distributed to teachers, Advocate, Engineer, Businessman and others in the Haryana, Delhi, Chandigarh and Rajasthan states for this purpose. The responses of 530 people were organised in a systematic way. These responses reflect the respondents' perceptions and attitudes. These perceptions represent respondents' attitudes about the corruption in direct tax system in India Findings: The F value and the corresponding E values of all the attributes which is less than 0.05 (E >0.05), the F value (26.997) is greater than the tabular value. This indicates that there is enough evidence to reject the null hypothesis (H0), that the perception of respondents regarding reasons for high level of corruption is different he result of Chi-Square .It is clear that the significance value (p value) of Pearson Chi- Square (0.047) and Likelihood Ratio (0.045) are less than the criteria value at 5% level of significance. They are statistically significant. Hence, the null hypothesis is rejected. So it can be inferred that there is a significant relationship between occupation/types of respondent and their opinion regarding corruption is prevalent in direct tax system

Ethiopian Direct Tax System: The Reform of 2016 and Perception of Business and Employment Income Taxpayers

The objective of the study was to analyze the Ethiopian direct tax system focusing on the reform of the 2016 and perception of the taxpayers towards the fairness of the direct tax system. To achieve the objective of the study descriptive and inferential research design and mixed research approach was adopted. As data sources, both primary and secondary data sources were collected. Primary data was gathered from 768 employment and business income taxpayers found in Addis Ababa via a standard questionnaire. Besides, secondary data were gathered from the Ministry of Finance and economic cooperation for the period 2007/08 to 2020/2. The collected data were analyzed by using descriptive data analysis tools. In order to compare the perception and the tax collection performance Mann Whitney U test and paired samples t-test test was conducted respectively. The major findings of the study show that there is a significant variation in the perception of employment and business income taxpayers on the fairness of the Ethiopian direct tax system. The employment income taxpayers didn’t believe that the current income tax system of Ethiopia is fair from the different dimensions of fairness while the business income taxpayers agreed to most of the dimensions. The paired samples t-test confirmed that the direct tax revenue shows a significant mean increment after the reform of 2016 than before at a 5% level of significance. The Ethiopian direct tax system needs a major revision or reform to enhance the contribution of business income tax revenue, rental income tax revenue, and other taxes. In addition, the tax authority is recommended to employ sound administration and control systems for the collection of domestic indirect tax.

СИСТЕМА ПРЯМОГО ОПОДАТКУВАННЯ В УКРАЇНІ

For the development of any country, everything in the country's economy needs to work at the highest level. This article is devoted to the system of direct taxation in Ukraine. It is determined that the main document regulating taxation is the Tax Code of Ukraine. The Tax Code clearly states that the tax is a mandatory, unconditional payment to the budget received from taxpayers. The direct taxation system in Ukraine could be better, but a number of problems prevent it from functioning fully. Direct tax is important for the activities of producers of various goods. The system of direct taxation in the world occupies a significant niche, in turn, as in Ukraine. Therefore, for development, it is necessary to start relying on the experience of the countries of the World. From this we get that it is important to reform the taxation system in Ukraine, starting with direct taxation. The direct tax system has many benefits that do not allow obtaining financial resources in full. Analyzing the data on the consolidated budget in Ukraine, it can be noted that it is formed from 80% of tax revenues. This is not enough by European standards. This suggests that in Ukraine the suboptimal structure of the revenue side of the state budget. Examining the factors influencing the system of direct taxation of individuals and legal entities, it was found that the most important qualitative factor from the standpoint of fiscal orientation is the level of tax evasion. The problem of taxation at all times, and especially in our time and for our country is extremely relevant, because it is taxes that are the source of income to the state, without which no country can exist. Direct taxes and are the basis for taxation. Direct and indirect taxes are also important for tax culture. Tax culture is important for effective tax collection. This can be explained by the receipt of income and income taxes, which depend on the correctness of the declaration of these incomes. In European countries, declaration is a prerequisite for every citizen, and public morality is focused on condemning those who hide something. In turn, this culture in society in Ukraine does not yet have a proper level. Therefore, the country should pay more attention to the control of the direct taxation system and create conditions for the payers of these taxes.

СИСТЕМА МЕТОДИЧНОГО ЗАБЕЗПЕЧЕННЯ ОЦІНЮВАННЯ РЕЗУЛЬТАТИВНОСТІ ДОХОДНО-ПРИБУТКОВИХ ПОДАТКІВ

У статті характеризується система методичного забезпечення оцінювання фіскальної результативності доходно-прибуткових податків в Україні, проводиться аналіз методик оцінювання його економічної ефективності, а також визначається інтегральний показник результативності для визначення напрямів його реформування з метою нарощування фіскальної результативності. До доходно-прибуткових податків в Україні відносяться податок та збір з доходів фізичних осіб, податок на прибуток підприємств, єдиний податок із суб’єктів малого підприємництва. Фіскальна результативність доходно-прибуткового оподаткування визначається ефективністю механізму справляння кожного податку окремо чи системи прямого оподаткування в цілому. Складовими фіскальної результативності є фіскальна значимість, фіскальна ефективність, постійність і рівномірність надходжень, соціальна справедливість. Окремими характеристиками фіскальної результативності є обсяги надходжень, частка податку у загальній структурі доходів бюджету та у ВВП, рівень ефективної ставки податку, рівень виконання планових податкових надходжень тощо. З метою вдосконалення механізму справляння доходно-прибуткових податків в Україні визначено факторні залежності фіскальної результативності доходно-прибуткових податків в Україні за період 2014-2018 рр. від рівня фіскальної значимості, рівня виконання планових надходжень, витратомісткості оподаткування, навантаження працівників органів державної податкової служби, ефективності та нерівномірності податкових надходжень. На основі проведених розрахунків визначаються основні пропозиції та рекомендації щодо пошуку шляхів зміцнення фіскально-регулюючих засад доходно-прибуткового оподаткування, які дадуть змогу у майбутньому вивести податкову систему на якісно новий рівень.

An Empirical Study on the Journey of Tax Reforms in India

Reforms in the taxation system of a country are an integral part of its development. India has witnessed series of reforms in its taxation system. The tax rates have been rationalize d with simplification in the tax laws results in better compliance, ease of tax payment and better enforcement. India has witnessed reforms in both direct tax system and indirect tax system. After every reform, it becomes quite essential to measure its effectiveness. There are various parameters to measure the affects of the reforms and the tax to GDP ratio is considered to be the one. One of the major objectives of tax reform measures has been to increase total tax to GDP ratio as a means of achieving fiscal consolidation and improving resource allocation. Government of India is working to enhance its revenue collection, at the same time ensuring that cumbersome taxes do not bother the investors. This paper makes an attempt to highlight the journey of tax reforms taken place in India since the post liberalization period. The paper also highlights the tax to GDP ratio over the period of five years of study.

German Rules on Loss Forfeiture Ruled Partly Unconstitutional

This note describes a recent decision of the German Constitutional Court regarding the German rules on loss forfeiture applicable to corporations and its consequences for the German direct tax system. The decision has upended the entire German regime for loss forfeitures since a vital aspect of the rules governing loss utilization has been declared unconstitutional. The German legislature must amend the rules, according to the decision, by the end of 2018 or they will be invalid from the date of their introduction in 2008.

The Global Direct Tax System between Tax Diversification and Tax Integration

The Global Direct Tax System between Tax Diversification and Tax Integration

Assessment of direct taxation instruments

Creation and development of a favourable business environment in regions is unthinkable without an appropriate tax system. The research study aims to assess the direct tax system in Latvia comparing it with the tax systems in Estonia, Sweden, Finland and Denmark in order to detect common features and differences, as well as to learn the experience that could be adopted in Latvia. The research tasks are to evaluate criteria of the tax policy and to analyse development directions of the direct tax system. The monographic descriptive method, statistical methods in economics, methods of logic and construction are used in the research. Relationships between the elements of the direct tax are explored, and differences between them are determined in the research; the conclusions that could be considered for the tax system improvement in Latvia are made. Evaluation of the direct tax systems in other countries shows that only distributed profit is subject to the corporate income tax in Estonia. The progressive rates are applied to the personal income tax; non-taxable income is higher; as well the tax distribution among budgets differs. In its turn, social security contributions depend on the financing arrangements of the services provided, and the property tax rates are determined by the municipalities, and they are affected by the location of the property and purpose of its use.

Tax Complexity: A Sine Qua None for Tax Fairness

Taxation for every country is more than just an expression of a country’s sovereignty; it is a condition of each country’s existence and ability to meet its most basic responsibilities to its people. From inception of tax systems throughout the world, only complaints about tax complexity have grown as fast as complexity of the tax systems themselves. The debate over tax simplicity and Tax complexity has long occupied tax practitioners and tax policy aficionados. Some have argued that tax simplicity, meaning simple tax systems, should be the only guiding principle for tax policy makers throughout the world. Others, going even 2 500 years back (with the biblical tithing); have taken their argument to the extreme by claiming that no tax system can be simple. The tendency however, at least in theory, is a convergence between most in this debate to agree that tax simplicity is more advantageous. Some arguments put forward include the easy compliance, more participation, less transaction costs. These arguments are true facts and known to everyone but they do not carry the day. Known advantages of simplicity in tax seem paradoxical with the ever growing complexity of tax systems. Complexity has grown so exponentially throughout the world that it seems fair to ask, after Blaufus and Ortlied: “Is Simple Better”? Why is it that tax complexity keeps thriving? Why is it that tax systems throughout the world are becoming more and more complex? Why is it that whatever the form of taxation considered, whether direct or indirect, whether local or global, complexity seems to be the common trend of tax systems worldwide?As recognized by many including former senator Russell Long, tax complexity is “there in the effort to do more perfect justice”. Though arguments of tax simplicity are legitimate, they do not consider and weight the main raison why Tax Complexity is a necessity. This essay intends to show that tax fairness can only be achieved through “complexified” tax systems. Tax complexity is thus a sine qua none, a condition without which there would be no fairness in tax. To acknowledge the legitimate arguments put forward by proponents of tax simplicity, we recognize that we all would like to have simple tax systems, easy to comply with and easy to administer. However, if these advantages can only be obtained through sacrificing fairness, then we should not pursue simplicity. In fact, if the cost of simplicity is fairness, if the results of simplicity are unfair, if the choice is between simplicity and fairness, then there is no place for simplicity in modern tax systems where the need for fairness is forever more pressing.This essay demonstrates that tax complexity is necessary for tax fairness through analysis of tax systems throughout the world. We will analyze how complexity achieves fairness in direct tax systems such as the United States on the one hand, and how complexity achieves tax fairness in indirect, consumption based tax systems such as Cameroon or France on the other hand.

Direct Taxes Code (DTC): What Does it Seek to Achieve?

DTC seeks to consolidate and amend the law relating to all direct taxes, namely income tax, dividend distribution tax and wealth tax so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the tax-GDP ratio. All the direct taxes have been brought under a single code and compliance procedures unified, which will eventually pave the way for a single unified taxpayer reporting system. The need for DTC arose from concerns about the complex structure of half a century old Income Tax Act, 1961, which has been amended a large number of times, making it incomprehensible to the average taxpayer.

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.

The Contemporary Meaning of ‘Sovereignty’ in the Supranational Context of the EC as Applied to the Income Tax Case Law of the ECJ

In the more than twenty years that the European Court of Justice (ECJ) has been deciding income tax cases, it has become clear that Community law has had a progressively increasing impact on the direct tax systems of the Member States. On the occasion of several seminal judgments, many legal scholars have raised concerns whether the ECJ was heeding a sufficient amount of respect for the ‘income tax sovereignty’ of the Member States. Especially on the occasion of the Bosal decision of 2003, many tax scholars thought and wrote that the ECJ had started interpreting the internal market freedoms too broadly and that the Court did not give sufficient consideration to the particularities of direct taxation. In light thereof, the present article will address the following three questions: (1) What significance, if any, does the concept of ‘sovereignty’ have in the contemporary supranational environment of the European Union/European Community? (2) Within such contemporary meaning, can the quality of ‘sovereignty’ with regard to direct taxation be considered to have remained with the Member States, has it been acquired by the European Union/European Community or has it been shared by the Member States and the Union/Community level? (3) What are the normative implications of the answer to the previous question and have these normative implications been respected by the states and supra-state actors? All too often, tax scholars equate ‘sovereignty’ with the concepts of ‘competence’ or of ‘jurisdiction’. With regard to acquiring a thorough understanding of the ‘sovereignty’ concept, however, it is necessary to abolish a tax legal perspective altogether and venture into the field of political sciences. An analysis of the non-legal background of the concept ‘sovereignty’ will show that it is defendable to confer an epistemic and normative significance to the ‘sovereignty’ concept that goes beyond the strictly legal concepts of ‘competence’ or ‘jurisdiction’.

Governing in Good Times: Fiscal Policy and Tax Reform in Australia 1996–2006

Over the course of a decade in office since 1996, the Howard government has pursued a policy and a politics of fiscal responsibility. Moving the budget out of deficit, retiring the Commonwealth government's accumulated debt and running continued surpluses to hedge against future demands have been the main expressions of this policy. The virtuousness of this has been contrasted with the record of previous governments, in particular with the record of the Keating government, which left office after 4 years of economic sunshine with an undisclosed deficit of $10 billion on top of a greatly swollen public debt. In addition, the Howard government has staked a claim to being a government of tax reform—having reformed the indirect tax system by introducing the GST in 2000, and having reformed the direct tax system by making a number of accompanying and following adjustments to the personal income tax. The economic and financial data suggest, however, that the Coalition's budgetary achievements must be credited much more to good fortune than to good government. The challenge—unprecedented in a generation—has been of governing in good times, indeed of governing in extraordinarily good times. At the same time, tax reform has been much more modest than many of the Howard government's market-oriented supporters would have liked.

Tax Policy in India

The tax reforms of recent years in India are based on Chelliah’s recommendations of simple broad-based taxes with a moderate and limited number of rates. The reduction in direct tax rates in the economy has not only increased revenue collection but also accelerated economic growth. This article aims to investigate the effect of India’s tax policy on private capital formation. A time series analysis of data for the economy for the period 1950–51 to 1994–95 reveals that a one percent increase in the direct tax ratio has led to a reduction of 0.12 percent in the ratio of private capital formation to GDP. The article also examines whether there is any gain in opting for an expenditure tax to promote savings and capital formation in the economy. The major problem facing the Indian direct tax system is evasion of income taxes. The article concludes that an expenditure tax is a powerful tool to combat evasion

Una tardía defensa de la reforma tributaria de 1785: las «Cartas económicas» de RaMón María Cañedo

RESUMENDurante los primeros años del siglo XIX, son muchos los teóricos de relieve que defienden el sistema de contribuciones directas como el que más armoniza con el sistema de libertad a implantar, defensa más patente si cabe en los debates de las Cortes gaditanas. No obstante, un importante núcleo de autores niega la posibilidad de implantar un impuesto directo en sustitución del sistema de rentas vigente. Esta corriente crítica con la abolición se inicia con Vicente Alcalá Galiano, sigue su recorrido en los debates de Cortes y en las impugnaciones de Duaso, Pinilla y Plana al Decreto de 13 de septiembre de 1813, sobre Nuevo Plan de contribuciones públicas, y culmina con los escritos de Cañedo, en la década de 1820. Ramón M.a Cañedo apostará por un sistema impositivo con predominio de impuestos indirectos. Apoyándose teóricamente en Smith, intentará adecuar sus principios tributarios al sistema de rentas reformado en 1785. En su opinión, el impuesto indirecto es el que mejor se adapta a las condiciones sociales y materiales de la España de la época.

The Monti Report: the uphill task of harmonizing direct tax systems of EC Member States

The Monti Report: the uphill task of harmonizing direct tax systems of EC Member States

Implicit and Explicit Social Policy in the Czech and Slovak Personal Tax Systems

We show that the old Czechoslovak personal tax system was opaque, inequitable and neg lected adverse incentive effects, because in large part it was being used as an instrument of social policy to encourage family formation, growth and support. We also show that because the old system's distribution effects can be generated by a simple linear tax system, its extraordinary complexity was entirely unnecessary. An analysis of the new direct tax systems of the Czech Republic and Slovakia show that they are both more progressive than their predecessors, and yet still retain some reduced influences of the now less emphasized pro-natalist policy. The new tax and benefit arrangements of the Czech Republic are incor porated in a tax-benefit model which is used to show that the variety of household preferences and circumstances within any group - social, income or geographical is such that even minor revenue-neutral changes can produce unex pected distributional results which social policy advisors and analysts need to consider.

Changing Tax for the Self‐Employed

The government’s overhaul of the direct tax system, including the 1984 reforms to the Corporation Tax, the introduction of Independent Taxation and in 1993, the introduction of ‘pay and file’ for companies, has so far left the taxation of the self-employed relatively untouched. Despite many criticisms of the system, including more recently the Keith Committee report (1983) and the Public Accounts Committee of the House of Commons (1976), it is only now that the government has considered reforming the income tax system as it relates to the self-employed, with the publication of a consultative document, A Simpler System for Taxing the Self-Employed, (Inland Revenue, 1991a). At the heart of the proposals is reform of the ‘preceding year basis of assessment’ (PY basis), introduced by Winston Churchill in 1926, itself then billed as a ‘simplification’ of the system.

Bureaucratic corruption as a constraint on voter choice

This paper has attempted to explain variations among countries in the tax level, in the importance of progressive taxes and transfers, and in the after-tax share of middle-income groups. Particular attention was paid to the declines in each of these variables which are observable in cross-section data in the intermediate ranges of development. It was argued that these phenomena are difficult to explain by variations in the demand for public spending or in the degree of tax evasion. The hypothesis set out in this paper was that these nonlinearities are a result of the inability of elected representatives to observe taxable activities at certain levels of income. The result is a loss of potential tax revenues through bribes to officials. Such bribes, it was suggested, are most likely in the income brackets where total income is increasing rapidly in developing countries. A theoretical model based on expected vote maximization by political candidates indicated that voter-taxpayers will be unwilling to make up the short fall by additional taxes. To the extent that the problem of observing taxable activities is more serious for direct than for indirect taxes, direct tax revenues should fail to keep pace with total income in the early stages of development. The presence of supply-side constraints on the capacity of the fiscal system to generate direct-tax revenues was tested by means of a simultaneous-equation model. Since in practice transfer payments or negative taxes form an important part of the direct tax system, it was necessary to include them in the empirical analysis. It was decided to define an unobservable variable, the overall fiscal structure, which reflects the effects of both tax structure and transfer payments. Use of the LISREL technique allowed this new variable to be treated as a latent variable in statistical estimation. The results indicated that overall fiscal structure varied in nonlinear fashion with the logarithm of per-capita income, as the theoretical model predicted. This variable was found in turn to be a significant determinant of the level of taxes and the distribution of after-tax income. Little evidence was found of feedback from these other variables to the overall fiscal structure. These findings were interpreted as being consistent with the hypothesis that voter choices may be constrained by the revenue-generating capacity of the fiscal system if a significant portion of taxable activities is not easily observable.

Inflation and Tax

Preamble Taxation does not escape the effects of inflation. It too is distorted by the fall in value of the national currency. No problem would arise where a tax is applied to a simple base at a single rate, with no exemptions or allowances and without a significant time lag. This is however a rare case. Certainly so far as the British direct tax system is concerned there are usually multiple rates, thresholds and other allowances and, particularly in capital taxation, there may be significant gaps in time between the date of the imposition of the tax and the time when the tax becomes payable. For example the new rates of capital transfer tax announced on 26 October 1977 would apply to the estate of a person who dies in 1978, 1998 or in the next century or would do so but for the inevitable review which will be required mainly because of inflation arising between 1977 and the date of death. If this were not adjusted the heirs of the deceased would manifestly be required to pay more capital transfer tax than the Chancellor of the Exchequer in 1977 intended them to pay. A simple example will illustrate this.