Domestic Tax Reform Research Articles

THE PAKISTAN FACTOR IN SOUTH ASIA AND CENTRAL ASIA RELATIONS

This article discusses the multilateral relations between Pakistan and Central Asia. Pakistan's experience of unstable development is the result of our over-reliance on foreign aid and exogenous factors. To ensure a stable and sustainable trajectory of high growth, we focus on endogenous factors of growth such as domestic resource mobilisation, tax reforms, science, technology and innovation, stimulating export growth and we attract foreign direct investment. Remittances have provided significant support for our financial needs, but their true potential has not been realized. We will introduce reforms to increase remittances by offering incentives. Nevertheless, in order to achieve this long-term goal, we need to build a solid and self-sustaining platform using external funding sources in the medium term.

Export to elude

How does domestic value-added tax (VAT) reform affect firms' export? We address this question via a model in which firms choose their sales for the domestic and foreign markets optimally. The model predicts that strengthening domestic tax enforcement has a negative effect on domestic sales but a positive effect on exports when firms face a convex production cost function. We test the model predictions using detailed firm- and product-level data from Chinese industrial surveys and customs records. Our empirical analyses rely on China's Golden Tax Project, which is an information technology introduced in 2001–2002 that dramatically reduces the cost of VAT enforcement. We find that, after the adoption of the technology by the government, firms located far from local tax offices face a larger increase in their effective VAT rates than those located nearby (the enforcement effect), and the former increase their export more than the latter (the elusion effect). We also find that the elusion effect is stronger for firms subject to higher export rebates or more severe financial constraints.

Chinese State Capitalism and the International Tax Regime

As signaled by its participation in the G-20/OECD Base Erosion and Profit Shifting Project, China is gaining significant influence over international tax rules. Yet, how exactly China intends to shape international tax law remains an open question, even amongst leading Chinese tax scholars. As both a major capital importer and exporter as well as a developing economy with tremendous global economic power, China does not fit neatly into the traditional dichotomies of the international tax regime. This article argues that China’s international tax policy is likely to be strongly influenced by its unique system of state capitalism. Both the history of Chinese domestic tax reforms and the Communist Party’s current mechanisms of control over the Chinese economy suggest that China’s tax policy cannot be understood separately from its system of state capitalism. This article contends that as a result, China is likely to adopt distinctive international tax policies including maintaining a worldwide system of corporate taxation, providing tacit state support for international tax planning by major Chinese multinationals, and negotiating for broad exemptions in tax treaties for state-associated entities. If not proactively addressed by OECD countries, these policies may lead to significant fractures within the international tax regime.

Reforming Value Added Tax System in Developing World: the Case of Nepal

Value Added Tax (VAT) has become an integral part of domestic tax reforms in many developing countries. Taking the case of Nepal, VAT associates a number of refunds to different private sector activities for promoting investment in higher growth and export potential sectors. Total refund, more specifically, export refund has a significant positive impact on the level of GDP. Furthermore, non-agricultural GDP has strong positive influence to VAT C-efficiency ratio. Likewise, higher the VAT gap, lower is the C-efficiency ratio. If C-efficiency is improved coupled with higher compliance, the capability of the government is strengthened in domestic revenue generation.

The Political Economy of Domestic Tax Reform in Bangladesh: Political Settlements, Informal Institutions and the Negotiation of Reform

ABSTRACTThis paper explains the persistence of a tax system characterised by low revenue collection and extensive informality in Bangladesh. It combines analysis of long-term formal and informal institutions and of micro-level incentives shaping negotiation of short-term reform. The system is unusually informal, discretionary, and corrupt, but remains resistant to change because it delivers low and predictable tax rates to business, extensive opportunities for corruption to the tax administration, and an important vehicle for fundraising by political leaders and rent distribution to their elite supporters. We then explore the dynamics of micro-level reform and external pressure within the constraints of this overarching political bargain.

Welfare‐improving Coordinated Tariff and Sales Tax Reforms under Imperfect Competition

AbstractThis paper studies the welfare effects of coordinated domestic sales tax reform associated with a reduction of the import tariff under imperfect competition. We set up a simple oligopoly trading model where domestic and exporting firms compete in the home market. We show that, if the initial levels of import tariff and sales tax are positive, there always exist welfare‐improving sales tax reforms. In some cases, a reduction of the sales tax accompanied by a reduction of the import tariff increases social welfare, whereas in other cases, raising the sales tax can increase social welfare.

Trade liberalization and the challenges of revenue mobilization: can international financial institutions make a difference?

ABSTRACTDeveloping countries are being confronted with severe fiscal challenges in the global economy. Over the last two decades, governments have been accepting significant reductions in trade taxes to support trade liberalization. This is particularly problematic for developing economies because trade taxes have been a key source of government revenues. In this paper, we investigate the conditions under which international financial institutions (IFIs) successfully assist developing countries with recovering the lost revenue from trade liberalization by implementing various domestic tax reforms. We argue that regime type mediates the effectiveness of IFI assistance in developing economies, after trade reforms have been adopted. More specifically, IFIs will be more effective at assisting authoritarian regimes with domestic tax reforms as a substitute for trade taxes than they will be in poor democracies. Democratically elected leaders inadvertently undermine multilateral assistance with tax reforms because they are more susceptible to middle- and upper-class demands for lower taxes in a competitive global economy. In authoritarian regimes, on the other hand, IFIs such as the World Bank and International Monetary Fund tend to be more effective because dictators are likely to experience far fewer political consequences for accepting IFI assistance and implementing tax reform in the global economy than their democratic counterparts.

Gender equality for whom? A critical frame analysis of the 2007 Swedish domestic services tax reform

This article considers the motivations behind a 2007 reform in Sweden to implement a tax deduction on domestic services for households, and how the reform could be passed despite extensive political opposition to it. Critical framing analysis is used to argue that at least a partial explanation for the policy reform is to be found in the inherent limitations of the gender equality policy as hitherto pursued in the country, and in the way these limitations were framed in the political debates to push for the reform. The analysis draws upon public documents and records of parliamentary and media debates.

Tax Principles and Coordination of Trade and Domestic Policies Under Imperfect Competition

We construct an exporting monopoly model to compare destination‐ and origin‐based commodity taxes in a context of a trade and domestic tax reform. We show that an export tax reduction and a change in destination (resp. origin) tax that fix the world price is strictly Pareto‐improving (resp. deteriorating), which holds whether markets are integrated or segmented. This result may provide a new rationale for preferring the destination‐based consumption tax to the origin‐based production tax that has been discussed in the literature of tax harmonisation and tax competition.

A trade and domestic tax reform in imperfectly competitive markets

This paper develops a model of an export oligopoly to examine the welfare effects of an export tax reduction and a production tax increase that makes the foreign country no-worse off. Whether or not entry into the oligopolistic industry is free, the proposed policy reform is shown to reduce welfare of the policy-implementing country and the world. Relating this result to the perfectly competitive case, we closely discuss its implications.

Trade and domestic tax reforms in the presence of a public good and different neutrality conditions

This paper develops a perfectly competitive general-equilibrium model of a small open economy with production of private traded goods and of a public good which is financed by revenues from trade and domestic taxes. Within this framework we consider the effects on public good provision and on welfare of the following tax reforms: (i) a producer-price-neutral reduction in export taxes and a corresponding increase in production taxes, (ii) a consumer-price-neutral reduction in tariffs and a corresponding increase in consumption taxes, and (iii) a partial tax-revenue-neutral reform in trade and domestic taxes.

How Does a Domestic Tax Reform Effect Protection Against Imports? The Case of the Republic of Madagascar

"Volume 2008 (2008): Issue 151 (Jun 2008): How does a domestic tax reform affect protection against imports? The case of the Republic of Madagascar" published on 01 Jun 2008 by International Monetary Fund.

How Does a Domestic Tax Reform Effect Protection Against Imports? The Case of the Republic of Madagascar

In 2008, Madagascar reformed its domestic tax system. Because the excise duties and VAT regimes were reformed, the taxation of imports has changed. This paper quantifies how the reform changes the protection against imports and the fiscal revenues from taxation of imports. It shows that, even if the reform has only a limited impact on the average rate of protection, it substantially alters the structure of protection across goods. Moreover, because the reform further increases the already high rate of taxation of imports, it will also boost revenue from taxes on imports and reduce the fiscal losses from the SADC FTA.

Asymmetries and Tariff-Tax Reforms in the Asia-Pacific Economic Cooperation: A Quantitative Assessment

Many asymmetries among member countries in the Asia-Pacific Economic Cooperation may cause conflicting interests, or may offer opportunities for collaboration. This paper investigates an optimal coordinated tariff-tax reform, and examines the factors which significantly affect the level of welfare. Through the examinations, we see whether fiscal policy issues are affected by those asymmetries. An optimal coordinated tariff-tax reform keeps up with the current global trend of domestic tax reform, directed towards increasing consumption taxes. Sensitivity analyses imply that tariff-tax reforms are not likely to favor developed countries which have a lower degree of dependence upon foreign trade and lower tariff rates.

De-linking the Relationship between Trade Liberalization and Reduced Domestic Fiscal Budgets: The Experience of the Israeli Economy: 1984-2005

Issues concerning the consequences of trade liberalization and the resulting reduction in domestic fiscal budgets have always been the 'hot' topic in the trade policy community. This paper approaches this issue by focusing on the experience of the Israeli economy in the twenty year period (1984-2005) where Israel undertook both major tariff liberalization and a related domestic tax reform, with no reversion to border taxes. The Israeli experience highlights the initial budget revenue concerns associated with tariff liberalization, and quickly moves the issue away from border tax substitutes to domestic issues concerning enforcement. By de-linking the two issues the paper demonstrates that it is feasible to successfully tackling both external and internal tax reforms. Furthermore, it demonstrates that it is possible not to fall into the trap of looking at border taxes as a cure for internal high costs of tax revenue. The appropriate prescription for other developing or newly industrialized countries is to de-link the two tax issues, focus on the collection side of the domestic tax structure while at the same time reducing local taxes and broadening the tax base.

The Reagan years

Following a week of mourning in which tens of thousands of admirers paid their respects, former president Ronald Reagan was laid to rest in June 2004. Credited by former British prime minister Margaret Thatcher with having won the cold war, Reagan is best known for his supply-side economics and fiscal policy (dubbed Reaganomics), the Reagan Revolution, and his summits with Mikhail Gorbachev. A beloved president, Reagan left office as the nation was experiencing an unprecedented period of peacetime prosperity. From relations with the Soviet Union to domestic tax reform, The Reagan Years provides a comprehensive look into Ronald Reagan's presidency. In an easily accessible format, this A-to-Z guide provides approximately 90 biographical entries on the most important people in Reagan's administration and examines the consequential events, policies, and issues of this era.

Coordinating Tariff Reduction and Domestic Tax Reform under Imperfect Competition*

A major constraint on trade liberalization in many countries is the prospective loss of government revenue. Recent results, however, have established a simple and appealing strategy for overcoming this difficulty, whilst still realizing the efficiency gains from liberalization, in small, competitive economies: combining tariff cuts with point-for-point increases in destination-based consumption taxes unambiguously increases both national welfare and total government revenue. This note explores the implications of imperfect competition for this strategy. Examples are easily found in which this strategy unambiguously reduces domestic welfare.

Coordinating Tariff Reduction and Domestic Tax Reform under Imperfect Competition

A major constraint on trade liberalization in many countries is the prospective loss of government revenue. Recent results, however, have established a simple and appealing strategy for overcoming this difficulty, whilst still realizing the efficiency gains from liberalization, in small, competitive economies: combining tariff cuts with point-for-point increases in destination-based consumption taxes unambiguously increases both national welfare and total government revenue. This note explores the implications of imperfect competition for this strategy. Examples are easily found in which this strategy unambiguously reduces domestic welfare.

Coordinating tariff reduction and domestic tax reform

A key obstacle to fundamental tariff reform in many countries is the revenue loss that it ultimately implies. This paper establishes and explores a simple and practicable strategy for realizing the efficiency gains from tariff reform without reducing public revenue, showing that for a small economy a cut in import duties (respectively, export taxes) combined with a point-for-point increase in domestic consumption taxes (production taxes) increases both welfare and public revenue. Increasingly stringent conditions are required, however, to ensure unambiguously beneficial outcomes from this reform strategy when allowance is made for such important features of reality as non-tradeable final goods and tradeable intermediate inputs.

Coordinating Tariff Reduction and Domestic Tax Reform

Coordinating Tariff Reduction and Domestic Tax Reform