Expected Tax Revenue Research Articles

Towards true prices in food retailing: the value added tax as an instrument transforming agri-food systems

AbstractCurrent crises (i.e., climate crisis, COVID-19 pandemic, Russian invasion of Ukraine, and the resulting energy and food shortages) indicate the need for robust, and sustainable supply chains with regional food production and farmland to secure food supply in the European Union (EU). Recent research shows that organic food is more resilient to supply chain disruptions and price fluctuations. In this context, we examine an approach for the sustainable and resilient transformation of agri-food networks: can an adaptation of value added tax (VAT) levels work as a financial incentive to amplify resilient agricultural practices and sustainable dietary patterns? Within the setting of the amendment of the European framework directive on the use of VAT in 2022, we model the effects of adapting the current German VAT system by (1) reducing VAT on organic vegetarian food to 0% and (2) raising VAT on conventional meat and fish to 19%. Based on historical data on organic sales shares and price elasticities, we project sales shares differentiated by product group for each scenario. Then, we calculate expected tax revenues, changes in consumption patterns, and arising total external climate costs in Germany for both scenarios. Our results show that the overall consumption share of organic food would increase by 21.83% due to the modeled VAT reform compared to the status quo. Despite the VAT reduction to 0% on organic vegetarian products, the measure would yield €2.04 billion in extra tax revenues in Germany per year due to the increased taxation on conventional meat products. We find that annual environmental costs of €5.31 billion can be avoided as a result of lower external climate costs of organic and vegetarian food. Therefore, adjusting VAT rates in the food market can be a political instrument to drive organic food consumption and reduce animal livestock. This supports re-territorialization of agriculture and a more sustainable and resilient European food supply.

Աշխարհի տխրահռչակ «հարկային դրախտները»/Notorious «Tax Havens» of the World

Significant differences in tax policy, banking and financial secrecy and similar issues have led to colossal accumulation of financial resources and tax abuses in a number of countries/jurisdictions around the world. Such countries/jurisdictions are characterized as «tax havens». However, if such territories provide «paradise» conditions for the business sector, which strives in every way to reduce the tax burden, then for states deprived of a significant part of the expected tax revenues, they are a real «hell». Perhaps, this is the reason for the universal interest in tax havens and offshores. The paper compiles and analyzes «black» and «gray» lists of countries/jurisdictions that have received the status of tax havens by various international structures, and their classification according to the indices of financial secrecy and corporate tax havens.

Impact of Goods and Services Tax on Indirect Tax Revenue of India: With Special Reference to Odisha State

Goods and Services Tax is considered to be one of the revolutionary tax reforms in India since independence. The foundation of this new taxation system is to remove the cascading effect and increase the tax revenue with more transparent mechanism. The present paper is an attempt to assess the impact of this new taxation system on indirect tax revenue of India in general and of Odisha in specific. The study is analytical in nature and is based on published data. Collection of revenue under goods and services taxes has been considered from July 2017 to March 2021. The results show an increasing trend of indirect tax in India due to implementation of new tax except a few months because of some administration complexity and prevailing Corona pandemic. Future tax revenues have been forecasted using Exponential Triple Smoothing function and are compared with actual collection up to March 2021. So far Odisha state is concerned, expected tax revenue is not yet realised and the situation may be unfavourable when Central Government will stop giving Compensation cess after July 2022.

Sample Size Determination for Risk-Based Tax Auditing

Summary A modern system of Revenue Administration requires an effective and efficient management of compliance which in turn requires a well-designed taxpayers audit strategy. The selection of taxpayers to be audited by Revenue Authorities is a non-standard sample size determination problem, involving an initial random sample from the population and, based on the statistical information derived from it, a risk-based auditing scheme whose sole objective is to select for auditing the taxpayers with the highest estimated risk in the population. This paper provides a methodological approach that estimates the initial optimal random sample size such that the Revenue Administration Authority maximises their expected tax revenues. The methodology is illustrated using administrative data from the UK’s Revenue Authority, Her Majesty’s Revenue and Customs (HMRC).

Spanish New Orleans: An Imperial City on the American Periphery, 1766–1803 by John Eugene Rodriguez

Reviewed by: Spanish New Orleans: An Imperial City on the American Periphery, 1766–1803 by John Eugene Rodriguez Dean Sinclair Spanish New Orleans: An Imperial City on the American Periphery, 1766–1803. John Eugene Rodriguez. Baton Rouge: Louisiana State University Press, 2021. Pp. xiii+247, map, tables, charts, notes, bibliography, index. $55.00, hardcover, ISBN 978-0-8071-7489-0. A common perception of the Bourbon Spanish Empire in the Americas is that it was characterized by neglect, as well as economic and cultural drift, and that the incompetently managed Louisiana Territory was much better off under French rule, rife with corruption and dramatic contrasts between rich and poor. Spanish New Orleans explores the Spanish period in the long history of New Orleans and serves as a corrective to this perception, challenging narratives like DeConde's This Affair of Louisiana (1976) or Pitot's Observations on the Colony of Louisiana from 1796 to 1802 (1980), which portray Louisiana as a corrupt and neglected part of the Spanish Empire, longing for return to France or even attachment to the United States. France founded New Orleans in 1718 and it became the capital of Louisiana in 1723. The French held Louisiana for only forty-nine years before it was ceded to Spain in the Treaty of Paris in 1763. Spain occupied Louisiana for almost as long as the French, forty years, until the retrocession of Louisiana to France in the Treaty of Ildefonso, signed in 1800 but not in effect until 1803. Rodriguez employs a wide range of archival sources to argue that Bourbon Spain was not neglectful of its American possessions but rather employed a variety of means to encourage demographic, [End Page 124] economic, and political development of its empire. That success was mixed is obvious, yet in Spanish Louisiana throughout the years of Bourbon rule, there was little unrest in the cities or the countryside, and no active movement toward independence. In fact, it can be inferred that without Napoleon's retrocession, Bourbon Spanish rule might have lasted several years past 1803. Rodriguez's Spanish New Orleans is an innovative and engaging addition to the literature on Bourbon Spanish America. The author's purpose "is not to merely reinsert New Orleans into Spanish imperial history . . . [but] to consider what Spanish New Orleans reveals about the challenges and opportunities for the large Bourbon empire" (5). To accomplish this, Rodriguez examines demography, trade, and political discourse, framing these issues in a historic context, taking an evolutionary approach to New Orleans as an integral part of the late eighteenth-century Bourbon Spanish Empire. The evolutionary approach suggests that as Spain took control, demographic changes led to economic changes, including the creation of a multiethnic elite, which led to a vibrant political discourse, little of which generally correlate with later-stage Bourbon Spanish America. Rodriguez begins with population. There is a perception of demographic stagnation in the late 1700s Spanish Empire, but the author firmly establishes New Orleans as a place of population growth, using a variety of census data to establish this, as well as a unique use of economic records. As it was important for the Spanish rulers to understand the people in the empire and the expected tax revenues, several censuses were taken during the Spanish period. Census counts, including a 1795 "chimney census," are analyzed, yielding not only counts of people but also data on age and sex, ethnicity, and status as free or slave. Rodriguez also examines the voluminous notarial records for demographic changes. The twenty thousand pages of handwritten documents from the Spanish period track the routine business practices in the city, providing a data set that can be used to follow business transactions. Using this data, Rodriguez confirms that as the Spanish period continued, the city became less French and more Spanish, while revealing a growing population with northern European surnames as well as free people of color. He establishes that during the Spanish period New Orleans grew in population, and though the French presence remained significant, the population became more cosmopolitan with the arrival of immigrants [End Page 125] from Spain and other European countries and an increasing presence of Anglo-Americans. Rodriguez spends chapters...

Оцінка впливу бюджетної децентралізації та податкових надходжень міста Ірпеня

The article considers the theoretical foundations and problems of functioning of local self-government bodies in the implementation of budget decentralization in Ukraine. In the process of reforming local authorities, the dependence of local budgets on the State budget is determined. The development of budget decentralization for the period 2015–2021 is considered, namely: the number of amalgamated hromadas, the share of the local budgets’ own revenues, and the structure of the share of revenues of the general fund of local budgets (without transfers). The revenues to the budget of the city of Irpin, their tendencies and efficiency of use are highlighted and analyzed. The forecast of budget revenues in the city of Irpin is developed taking into account all indicators used to assess tax revenues and fees, expected indicators of socioeconomic development and expected tax revenues of taxes and fees, as well as taking into account the proposals of the bodies that control the distribution of tax revenues and fees to local budgets of the region. The role of taxes in the system of local regulation of economic processes provides an impact on society, its structure and dynamics, ensures the stability of budget revenues and self-sufficiency, which provide for the development of an effective strategy for the development of the tax system based on realistic forecasts of socioeconomic development. The methods for improving control over the financing of local authorities are proposed. Local self-government bodies are able to transform the tax base at the local level through tax revenues, which provides opportunities for the full implementation of their functions and powers influencing the financial and economic processes. For the future forecast and improvement of sustainable development, it is necessary to anticipate the threats and risks of financial stability. Thus, their negative manifestation in the future is minimized or ways to minimize losses from their impact are determined

Tax amnesty and secondary tax evasion

AbstractThough tax amnesties (TAs) are considered as a policy tool to increase revenue for governments, they have generated some puzzles. To solve the puzzles of TA we should not ignore the behavioural aspects of delinquent taxpayers. In this paper, we focus on a relatively neglected but important area of the TA literature. Considering that people who participate in tax amnesty policy (TAP) may not honestly report the whole amounts of evaded tax, thus they commit a secondary tax evasion. We indicate that even considering the risk of abstaining from TA and incurring possible uncertainty of tax evasion penalties, participating in a TA provides a higher level of utility for the delinquent taxpayers. Also, due to a secondary tax evasion usually accompanying with TA, we show that during the initial assessment period of a TAP the tax revenue drastically increases and when the assessment period is approaching the tax revenue stably declines and ultimately converges to a fixed value. Furthermore, we show that if delinquent taxpayers participate in the TAP and the penalties are larger than the expected tax revenue of the government, it increases the tax revenue without reducing the welfare of other taxpayers, so as to achieving Pareto improvement.

Voluntary disclosure schemes for offshore tax evasion

Tax authorities worldwide are implementing voluntary disclosure schemes to recover tax on offshore investments. The US and UK, in particular, have implemented such schemes in response to bulk acquisitions of information on offshore holdings, recent examples of which are the “Paradise” and “Panama” papers. Schemes offer affected investors the opportunity to make a voluntary disclosure, with reduced fine rates for truthful disclosure. Might such incentives, once anticipated by investors, simply encourage evasion in the first place? We characterize the investor/tax authority game with and without a scheme, allowing for the possibility that some offshore investment has legitimate economic motives. We show that a scheme increases net expected tax revenue, decreases illegal offshore investment and increases onshore investment, but could either increase or decrease legal offshore investment. The optimal disclosure scheme offers maximal incentives for truthful disclosure by imposing the minimum allowable rate of fine.

Tax Evasion in a Dynamic General Equilibrium Model

We model tax evasion in the context of an endogenous growth model with two actors: a private agent and the government. The private agent invests his/her endowment of physical capital in the production of a private good. The income derived is used for consumption activities and to finance a public good that improves the productivity of private investments. However, due to fiscal illusion, the private agent may decide to under-report income for tax purposes. The government is benevolent, wants to maximize long run growth and uses a public agency to collect tax revenues and to audit consumers. Tax administration chooses audit frequency and fines in order to maximise the expected tax revenue, given the institutional parameters. In this setting, we study the long term properties of tax evasion; in particular 1) how tax evasion affects the equilibrium outcomes for the economy; 2) what are the important conditions that lead to self-perpetuating tax evasion. We show that the cost incurred by private agents to evade and audit efficiency have a fundamental role in determining these relationship. When private costs are sufficiently high an increase in the tax rate leads to a decrease in the tax revenue. On the other hand, when these expenditure are sufficiently low tax evasion may be reduced by increasing the tax rate. In both cases, public expenditure will be suboptimal in equilibrium.

Devolving fiscal policy: migration and tax yields

ABSTRACTDevolution of taxes to sub-national jurisdictions could reduce expected tax revenue if some households move to lower tax regimes, constraining devolved government policy. This paper develops an indirect approach to establishing lower bound revenue impacts of possible devolved tax changes by allowing for tax-induced migration. The results suggest that limited tax devolution, such as conferred on Wales by the UK 2014 Act, could trigger substantial tax revenue and gross value added (GVA) spillovers from migration on the devolved economy. The prospect may have, and perhaps should have, discouraged decentralization of taxation to the same extent as decentralization of spending in the Organisation for Economic Co-operation and Development (OECD).

Is exit tax a good idea for the taxman?

PurposeThe purpose of this paper is to study whether it is a rational choice for a tax authority to impose an exit tax on capitalists.Design/methodology/approachThe tax authority chooses a lump-sum exit tax to maximize a weighted objective of expected tax revenue and expected tax horizon. The tax revene consists of capital income taxes and exit taxes. Capitalists are motivated by sustainable capital accumulation and hence maximize the terminal capital stock.FindingsThe author finds that the objective function of the tax authority is strictly increasing in the exit tax, which holds for extensions with sales tax, labor income tax or proportional exit tax, and hence equilibrium exit tax is equal to an exogenous upper bound.Originality/valueTo the author’s knowledge, no existing literature investigates this issue theoretically, and hence the current paper represents the first attempt. The author hopes this theoretical analysis can trigger related empirical studies.

Optimal taxation in non-life insurance markets

Insurance markets all over the world are subject to taxes, which can be collected through various tax schemes. The most commonly used tax schemes in non-life insurance include taxes on the premium income as well as taxes on corporate profits. The mix of those taxes differs substantially across regions. In Europe, for instance, premium taxes are at much higher levels than those in the United States. This paper shows that the particular mix of taxes matters for insurance companies’ solvency levels and insurance premiums, even when the expected tax revenue is fixed. The analysis provides comparative statics that reveal which combination of premium taxation and corporate taxation maximizes welfare. Numerical examples suggest that relatively high premium tax rates are welfare optimal. In general, a low volatility of insurance claims, a strong reaction of insurance demand to insurer default risk, as well as substantial agency issues between shareholders and management make corporate taxation more favorable in comparison to premium taxation.

Optimism, Pessimism, Audit Uncertainty, and Tax Compliance

AbstractAs the tax authority releases or withholds relevant information, it decrease or increases the extent of uncertainty about the audit probability taxpayers perceive, affecting their reporting behavior and expected tax revenues. The effects of an increase in enforcement uncertainty on the expected tax revenues depend on taxpayer pessimism or optimism and on additional information about the audit probability taxpayers receive. The expected tax revenues tend to increase in response to an increase in audit uncertainty, and the tax authority would have little incentive to release more information to the extent that it cares about tax revenues.

A Boxing Match: Can Intellectual Property Boxes Achieve Their Stated Goals?

A patent box, innovation box, or intellectual property box (IP box) is a tax incentive under which revenues associated with some forms of intellectual property are taxed at a rate lower than general revenues. This paper discusses the common characteristics of IP boxes and how they correspond to stated goals. It presents a model of international tax competition, and shows that the highest expected tax revenue from mobile IP for a country hosting a great deal of fixed, non-IP capital comes from assigning a single tax rate to profits from both mobile and fixed capital — that is, from not implementing an IP box. As a research and development (R&D) credit, several examples show that the IP box is more easily manipulated than a traditional credit on R&D expenses.

Financial Transaction Tax: Determination of Economic Impact Under DSGE Model

The discussion about the possible taxation of the financial sector has started in the European Union as a result of the financial crisis which has spread to the Europe from the United States in 2008 and consequently of the massive financial interventions by governments made in favour of the financial sector. On 14 February 2013, after rejection of the draft of the directive introducing a common system of financial transaction tax in 2011, the European Commission introduced the financial transaction tax through enhanced cooperation. The aim of the paper is to research economic impact of financial transaction tax on EU (EU27 or EU11) with respect to the DSGE model which was used for the determination of impacts. Based on our analysis the DSGE model can be considered as underestimated in case of the impact on economic growth and an overestimated in case of the revenue collection. Particularly, the overall impact of the financial transaction tax considering cascade effects of securities (tax rate 2.2%) and derivatives (tax rate 0.2%) is ranged between −4.752 and 1.472 percent points of GDP. And further, is assumed that the relocation effects of business/trade can be in average 40% causes a decline of expected tax revenues in the amount of 13bn EUR. Thus, at a time of fragile economic growth across the EU and the increased risk of recession in Europe, the introduction of the FTT should be undesirable.

Securities Transaction Taxes and Market Quality of Equity and Futures Markets: Issues and Evidence

This paper discusses arguments for and against a securities transaction tax (STT) and evaluates the pros and cons based on a review of empirical evidence concerning the impact of STTs on equity and futures markets (i.e., trading volume, bid-ask spreads, and price volatility) and market efficiency in various countries. I find that an STT would likely reduce trading volume and increase trading cost, but may not reduce price volatility. The size of potential STT revenue depends on the STT's impact on market activity. A sizable STT on futures and equity markets would not only fail to generate the expected tax revenue, it would also likely hurt the international competitiveness of US equity and futures markets.

Income tax buyouts and income tax evasion

A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected tax revenues. This will be the case if (1) the audit probability is constant and the penalty for evasion is a function of undeclared income or (2) the penalty depends on the amount of taxes evaded, and authorities use information about income generated by the decision about a tax buyout offer when setting audit probabilities. Since individuals will only utilise a tax buyout if they are better off, higher tax revenues imply that such contracts can be Pareto improving.

The Government Debt Iceberg

The Government Debt Iceberg

Income Tax Buyouts and Income Tax Evasion

A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected tax revenues. This will be the case if (1) the audit probability is constant and the penalty for evasion is a function of undeclared income or (2) the penalty depends on the amount of taxes evaded, and authorities use information about income generated by the decision about a tax buyout offer when setting audit probabilities. Since individuals will only utilise a tax buyout if they are better off, higher tax revenues imply that such contracts can be Pareto-improving.

Penalties in the Theory of Equilibrium Tax Evasion: Solving King John’s Problem

The authors characterize equilibria of an income reporting game with bounded returns and no commitment where detected tax evaders are charged the maximally feasible amount. Introducing partial commitment to punishment relief eliminates multiplicity of equilibria. The authors identify a unique limit equilibrium where the poorest citizens evade, intermediate citizens are honest, and the richest citizens are indifferent between evading and truth telling. For small tax rates and auditing cost, committing to a discretionary punishment relief scheme increases expected tax revenue.