Higher Tax Rates Research Articles

Analyzing the Impact of Tax Policy on Financial Performance and Compliance of MSMEs in Indonesia

The complex relationship between tax policy components and the financial performance of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia is examined in this study. A survey was conducted with a sample of 250 MSMEs to capture different industry types, firm sizes, and geographical regions. The study assessed the relationship between tax rates, tax incentives, firm size, industry type, and financial performance indicators using Structural Equation Modeling with Partial Least Squares (SEM-PLS). The structural model yielded important insights, while the measurement model demonstrated good validity and reliability. As lower profitability correlates with higher tax rates, policymakers should consider the tax burden of MSMEs. On the other hand, tax incentives show a good correlation with financial performance, suggesting that they may be useful in encouraging MSME expansion. The complex interaction between firm size industry type and financial performance is highlighted. The SEM-PLS model fits the data well, according to the model fit assessment. To support the sustainable expansion of MSMEs in Indonesia, policymakers and MSME owners can benefit from the results of this study, which has practical implications such as for the Government is the present policies need to be evaluated in order to improve MSME compliance. Meanwhile, it is important for MSMEs to improve their competencies such as financial literacy.

Policy linkages, country size, and international capital distribution

We investigate the linkage between environmental taxes and import tariffs between two countries, which differ in their capital endowments and the number of consumers. We consider the consumption-generated pollution in an intra-industry trade model with monopolistically competitive industries, and focus on the regime with the environmental taxes only and that with environmental taxes and tariffs. We find that imposing tariffs lowers the environmental taxes, leading to greater global pollution. Another finding is that when tariffs are infeasible, the capital-abundant country charges a relatively low environmental tax rate; when tariffs are available, it adopts a relatively high tax rate. In addition, we investigate the effects of the international distribution of capital and consumers on the global pollution. We also extend the model to investigate the policy-making when the distribution of capital is endogenously determined.

The Impact of Taxation in the Tourism Industry: Dynamic Approach

Tourism is becoming one of the essential pillars of any economy. Therefore, the best way to grow and upgrade this industry is to position the best tax rate that encourages tourism development. The Government should adjust the economies' tax system based on developing their tourism industry to improve this area's investment. Therefore, this study's main objective is to investigate the effect of the tax rate on the tourism industry in selected countries using the dynamic panel modeling (SGMM) method in the range of 2011 to 2016. The results indicate that the position of a robust tax system will harm the tourism industry. The high tax rate will hurt competition, and a major disaster will be toward competition and revenues. So, the hypothesis of this research indicates the negative impact of the tax rate on tourism revenues is accepted. Other variables such as per capita income and trade openness have a positive effect on tourism revenues

Factors Contributing to Tax Compliance among Small and Medium Sized Enterprises: A Case of Selected SMEs in Iringa Municipality

The purpose of the study was to determine factors contributing to tax compliances among small and medium sized enterprises (SMEs) in Tanzania, with reference to selected SMEs in Iringa Municipality. The study objectives were; to evaluate the contribution of taxpayer’s education, to determine the contribution of tax rate and to assess the contribution of tax penalties on tax compliance among SMEs in Iringa Municipality. The targeted population were 172 SMEs where a sample size of 63 SMEs was drawn using descriptive research design. The study used stratified sampling technique and data were analysed using linear regression through ordinary least squares estimator showing relationship between tax compliance among SMEs as dependent variable to taxpayer education, tax rate and tax penalties as independent variables. Taxpayer education and tax penalties had a positive relationship and tax rate showed the negative relationship with tax compliance among SMEs. The results from the regression and t- test showed that taxpayer education, tax rate and tax penalties have a significant impact on tax compliance since the p-values were less than 0.05. In the case of the normal regression output the adjusted R2 equals 0.534 implying that the model explains about 53.4% variations in tax compliance among SMEs. The study concludes that tax payers’ education has positive effects on tax compliance while high tax rates discourage the SMEs on tax compliance. Nonetheless, high tax penalties positively influence tax compliance.. The study recommends fair and at moderate level tax levels and there should be more emphasis on tax payers’ education and awareness to increase tax compliance

This deserves a Huh?

Research methodology To complete this case, students will need to access financial statements from the Securities and Exchange Commission’s webpage. The links are provided. Students will also need to review the conceptual framework that is typically covered in Intermediate 1 to respond to question 5. Case overview/synopsis This case is based on the three financial statement restatements that Weatherford International Ltd. made over an approximately 18-month period. The restatements were due to a fraud committed by manipulating the income tax accrual in the financial statements. The manipulation used was to overstate the amount of income used to calculate the dividend exclusion and then use a relatively high tax rate to calculate the resulting tax benefit. The tax rate used for the fraud was substantially more than Weatherford’s effective tax rate (ETR), which was a prominent part of the company’s strategic growth plan. The tax senior with the external auditors who reviewed the entry made for the dividend exclusion captured the inconsistency with the comment that “This [the entry] deserves a huh?” The case is intended for students in Intermediate 2, where financial statement restatements and their effect on the company’s financial statements are typically covered. During the years covered in this case, Weatherford was also under investigation for violations of the Foreign Corrupt Practices Act (FCPA). Weatherford’s FCPA violations included multiple instances of bribery, the inappropriate use of volume discounts, improper payments and kickbacks in the United Nation’s Oil for Food program. Weatherford received the eighth-largest fine in the history of FCPA violations (at that time) of $152m. Weatherford’s FCPA investigation expanded, and the company paid another $100m in fines for violations of sanctions law and export control law. This case focuses only on the fraudulent manipulation of the financial statements through the tax accrual and does not delve into the other investigations. However, the linkage between those investigations and the fraud in this case is Weatherford’s nonexistent internal controls. Complexity academic level This case was designed to be used in Intermediate 2 financial accounting classes to highlight financial statement restatements and review the conceptual framework and materiality. The students who used the case did not have difficulty with the tax aspect of the case. However, most of the students had taken one tax class previously or concurrently. If students have not had any exposure to tax, the instructor might want to walk students through the tax aspects of the case.

How much capital should be taxed? A review of the quantitative and empirical literature

AbstractThis paper reviews the literature providing quantitative and empirical results on capital taxation. In doing this, we differentiate between individual and corporate taxes, respectively. From existing literature, it emerges that capital income taxes for individuals increase with the degree of heterogeneity within the population, market competition, and the economy's maturity, being negative (i.e., subsidy) in the presence of monopolistic competition or developing countries, no higher than 15% in Mirrleesian economies and as high as 45% when coupled with incomplete insurance markets and labor income taxes in competitive‐closed economies. Excessively high wealth tax rates for redistributive purposes, however, are prevented by the larger tax elasticity of rich (−1.15) with respect to poor (−0.09) individuals. Negative tax elasticities concerning employment (from −0.5 to −0.2), innovation (from −2.8 to −1.3), and investments (−4.7) suggest low corporate taxes, whose magnitude should be negatively related to the degree of the economy's openness, given also the possibility for firms to relocate abroad. Finally, although still inconclusive, the main conclusions concerning dividend taxes suggest that tax rates increase with the firm's size and, thus, be set at low levels for start‐ups.

Logistics mode selection and information sharing in a cross-border e-commerce supply chain with competition

Selecting an appropriate logistics mode is crucial for overseas suppliers (OSs) who enter new markets through the cross-border e-commerce platform (CEP), but it is challenging because OSs are unfamiliar with the local markets. Thus motivated, we aim at a supply chain where an OS sells its product through a CEP that holds demand information advantages, and the OS faces competition from the domestic supplier (DS). By constructing a multi-stage game model, we study the OS's logistics mode selection between direct-mail and bonded-warehouse, which has different logistics costs and inventory risks. Moreover, the influence of the CEP's information sharing decision on the logistics mode selection is investigated. Our results show that with information sharing, the OS always selects the bonded-warehouse logistics mode; while without information sharing, the OS makes a choice between direct-mail and bonded-warehouse mode according to the tax rate and market fluctuation. Particularly, under a high tax rate, with the increase in market fluctuation, the uninformed OS not only needs to adjust the logistics mode choice but also change the inventory strategy. We also reveal that information sharing could lead to the OS changing the logistics mode from direct-mail to bonded-warehouse, and then cause fierce competition between the OS and DS. Therefore, sharing information does not always benefit the CEP. Under certain conditions, it is more beneficial for the OS to choose the direct-mail mode when the information is shared, as doing so can help chain members escape the prisoner's dilemma and thus lead to a “win-win-win” outcome.

Reformen bei Elterngeld und Ehegattensplitting könnten gleichstellungspolitische Impulse setzen

Abstract Germany is characterised by large gender gaps in the labour market. Both the gender pay gap as well as the gender gap in working hours are among the highest in Europe. Family policy reforms such as increasing the parental leave period that is ear-marked for fathers as well as reducing the high marginal tax rates for secondary earners resulting from the joint taxation of married couples with full income splitting (“Ehegattensplitting”) could help to mitigate the existing gender gaps in the labour market. These reforms are also paramount due to the increasing labour scarcity stemming from the demographic change.

Burden of Government Debt on Economic Development and Debt Overhang Proposition: Analysis of Empirical Evidences

The study examined empirical works on burden of government debt on economic development and debt overhang proposition: analyses of empirical evidences. It was discovered that many studies predominantly found out significant negative relationship (Ajayi & Edewusi, 2020; Matandare &Tito, 2018; Ehikioya et al., 2020; Rafindadi & Musa, 2019; Amaefule, 2018; Ay'unku & Markjackson , 2020; Yusuf & Said, 2018; Elom-Obed, 2017; Pegkas, 2018; Moussa & Shawawreh, 2017; Obisesan et al., 2019; Marafa, 2017; Idris &Ahmad, 2017; Charles & Abimbola, 2018; Akhanolu, 2018) between government debt burden and economic development while very scanty and few studies revealed a positive significant relationship (Lucky & Godday, 2017; Eke & Akujuobi, 2021;Akhanolu, 2018; Iacobo & Ialile, 2017) and non-significant relationship (Ofurum & Fubara, 2022); Mensah, 2018; Ay'unku & Markjackson, 2020) between the public debt and economic development. Several of the empirical study are not premised on debt overhang theory that goes to a great extent to explain the consequences of external debt on countries exceeding certain threshold of external debt stock with attendant consequences associated with external debt as discouraging private investors due to high tax rates in order to raise fund to compensate for the debt (Cohen, 1993). The study discovered other factors namely government expenditure, in?ation rate, interest rate, and exchange rate that have effect on economic development. The empirical studies examined recommended as follows: that borrowed funds, particularly foreign debt, should be reduced. That corruption, especially on borrowed monies, be avoided at all costs and that the government should limit foreign borrowing since it has a detrimental in?uence on the economy. That public debt not tied to investment does not contribute to economic growth of the studied country; that the government should increase efforts to increase domestic revenue sources to ?nance its growth

The effect of bilateral currency swap agreements on foreign capital inflows: Evidence from China

AbstractThis study empirically explores the effect of bilateral currency swap agreements (BCSAs) on foreign capital inflows. Using data on foreign enterprises' cross‐border investments in China over 2005–2020 released by Bureau van Dijk (BvD) Zephyr database, a multiperiod difference‐in‐differences (DID) estimation is used based on the signing of China's BCSAs over the period of 2009–2020. We find that the signing of BCSAs increases the total amount of foreign capital inflows by 9.97% and the number of foreign capital projects by 8.68% on average. Moreover, foreign capital inflows that come from economies with higher bilateral exchange fluctuations, fewer foreign exchange reserves, higher interest rates, higher tax rates, and lower institutional qualities are more responsive to the signing of BCSAs, especially for those horizontal capital inflows.

Shrinking the shadow economy: Experimental insights into the role of financial development

In this experiment-based study, we examined how development in the financial sector influences people’s propensity to participate in the shadow economy. We used a within-subject and between-subject design to examine the impact of various shadow economy structures, with a focus on the credit supply as a common proxy for financial development. Our research shows that people are more likely to operate in the formal economy when the level of financial development is higher, even if it associated with higher tax rate. We also found that the structure of the shadow economy affects people’s propensity toward it only when financial development is sufficiently advanced to create certainty in receiving credit.

The Role of Tunneling in Doing Transfer Pricing

Transfer pricing practices carried out by companies by shifting profits from countries with high tax rates to countries with low tax rates, so as to minimize the tax burden in an effort to maximize company profits. In fact, tax revenue on income from multinational companies is a very significant part of tax revenues in the total tax revenues in the countries where these multinational companies operate. This study aims to determine the effect of profitability and taxes on transfer pricing with tunneling as a moderation variable. The study used secondary data as many manufacturing companies listed on the Indonesian Stock Exchange in 2019-2022. Sample selection using purposive sampling method which resulted in 40 manufacturing companies. This study used linear regression analysis with SPSS tools. The results of this study show that profitability and taxes have a significant positive effect on transfer pricing. Furthermore, tunneling is able to moderate the effect of profitability and taxes on transfer pricing.

Tax effects on foreign direct investment-Just a rerouting.

This paper investigates tax-related determinants of indirect foreign direct investment (FDI). In particular, it studies the effects of bilateral effective average tax rates, the strength of anti-tax avoidance rules in host countries and tax haven status of home countries on the volume of indirect FDI host countries receive. The paper uses the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment (BMD4) database, which distinguishes between ultimate and immediate FDI. Methodologically, the paper relies on the standard gravity equation for FDI and applies the Poisson pseudo-maximum likelihood estimation model. The paper shows that ultimate FDI is not influenced by tax-related factors but only real economic determinants, whereas tax rates affect immediate FDI. This finding suggests that previous research may have overestimated the tax elasticity of FDI, and taxes do not have an impact on location decisions of FDI, but rather the route of investing-direct or indirect. The paper defines indirect FDI as the difference between ultimate and immediate FDI and finds that high bilateral effective average tax rates encourage indirect FDI. The finding is robust under different specifications.

The Advantages and Disadvantages of Taxation Strategies Applied on MNEs in the European Union

Abstract In the context of globalization, the advantages and disadvantages of the taxation strategies of multinational companies include the scope of taxes collected at the state budget, as well as foreign direct investment inflows, both having the possibility to influence economic growth directly or indirectly. In this paper, we tested with unifactorial linear model the theory that direct investment inflows have an insignificant impact on economic growth as well as the impact of collected taxes on economic growth. The research was carried out on four member states of the European Union, namely Germany, France, Romania and Bulgaria, and the data collected covered the period 2012-2021. The research results highlighted that a developed country that has a lower tax rate generated more foreign direct investment inflows and less corporate taxes collected at the state budget than a developed country that has a much higher tax rate, but taxes had a larger contribution to GDP growth when we consider only this variable. On the other hand, a developing country with an average tax rate but a larger economy generated more foreign direct investment inflows and more taxes collected at the state budget than a country with a lower rate and a smaller economy.

UNDERSTANDING THE IMPLICATIONS OF TAXATION POLICY IN PAKISTAN: A CASE OF FAILED MULTI-STAKEHOLDER INITIATIVES

Pakistan has multifaceted taxation difficulties in tobacco control and administration. Tobacco taxation issues include industry pressures, blaming the unauthorized market, and revenue theft at the collecting point. To avoid tax evasion and produce taxes on a consistent basis, a simple taxation system is required and suggested by related stakeholders for the execution of policies. A huge amount of tax is collected from this sector by the revenue collection agencies adding big portion in national deposits. On the other hand, tobacco usage is responsible for greatly raising the economic burden, greater health expenditures, and indirect costs associated with premature death, disability owing to tobacco-related illnesses, and loss of productivity. Effective tobacco taxes minimize various externalities by reducing consumption, legal consumption patterns and prevalence, as well as contributing to a reduction in government spending on health care expenditures directly due to cigarette smoking diseases. The philosophy of tax administration and control is creating policy conflict between different public institutions in Pakistan. The revenue collecting institutions believe on lowering the tax rates to overcome the illicit tobacco manufacturing and sales while health institutes believes on coercive measures and high tax rates to avoid and control the tax consumption. This paper will discuss the policy conflict, control mechanism, institutes tax philosophy, tax mechanism, and best practices around the globe to avoid policy conflict and better governance.

The effect of environmental taxes and economic growth on carbon emission in G7 countries applying panel kink regression

This research aims to investigate an apposite point (threshold point) for environmental tax levels in the business sector, especially in the instance of power plants in order to effectively reduce carbon emissions. The G-7 countries have been focused upon panel kink regression data from 1994 to 2020. Their findings denote that increasing environmental tax rates substantially reduced carbon emissions when the tax rate is set below the optimal point, and that implementing environmental policy through environmental taxation mechanisms has the potential for incentives for various economic sectors, particularly power plants, to reduce carbon emissions. However, after the G-7 governments implement a high tax rate on carbon activity they are likely to face the opposite effect, resulting in an increase in carbon emissions as a result of high company taxes (power plants). This high tax implementation will likely have an effect on their income. Due to the lack of any incentives, businesses have elected not to reduce carbon emissions, because less expenses will provide them with greater benefits.

Evaluating the Theory and Implementation of Land Value Taxation

Land value tax, a variant of the property tax, is a recurrent tax levied upon unimproved land value, which does not include the improvements of the land. In practice, a land value tax can be imposed on both land and its improvements with a higher tax rate on land. The motivation behind adapting a land value tax is to mitigate the negative impacts brought forth by traditional property taxation, which imposes the same tax rate on land and improvements. These negative impacts include distortion of economic activities and undesirable distribution of the tax incidence. In contrast, land value taxation has stronger theoretical support. It takes the unearned revenue of the landowners, promotes economic activities without incurring inefficiency, and redistributes income and wealth to promote equality. However, the theoretical case does not entirely reflect the challenges of implementation and political resistance that land value taxation encounter.

Analysis of Citizens' Tax Avoidance Actions Based on Tax Laws in Indonesia

Tax avoidance is an effort to avoid taxes that are carried out legally and safely to taxpayers in accordance with applicable tax regulations. This is because the methods and techniques used are based on exploiting the weaknesses contained in the tax laws and regulations. This type of written research method is qualitative depending on the type of document. Qualitative research is a type of research whose results are not based on statistics or other calculations. Application of high tax rates is also an obstacle because it burdens taxpayers. Other disabilities include: Regulations that apply the law are often inconsistent with the law. There are many formal and informal taxes at the central and regional levels. Weak law enforcement, complicated bureaucracy, and so on, will certainly help achieve good governance in the form of clean and authoritative government, if done properly. Indonesia does not yet have strong enough regulations to regulate tax avoidance. This is because Article 18 of Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Tax only regulates one taxpayer effort to avoid taxes, namely the only application of the concept of transfer pricing. On the other hand, other forms of tax avoidance are not regulated. Therefore, the state needs to reform its tax system.

The optimal vehicle product line strategy considering product information disclosure under government carbon regulation

As customers focus on information disclosure of new energy vehicles and automakers attach great importance to product line strategies under carbon regulation, we study the manufacturer's optimal product line strategy considering product information disclosure under the government's carbon regulation. This study contributes to the emerging vehicle product line area by investigating how manufacturers can establish reasonable vehicle product lines and the impact of different carbon regulation policies on product line strategies. Through comprehensive analyses, we find that the carbon tax rate and carbon trading price affect the revenue of different product lines of the manufacturer and the information disclosure level of products. Importantly, we find that if the valuation (market price) of fuel vehicles is low, manufacturers should adopt a single product line strategy. Conversely, if the valuation (market price) of fuel vehicles is high, manufacturers should adopt a hybrid product line strategy. Moreover, our analyses indicate that when the market valuation of new energy vehicles is high and the valuation of fuel vehicles is low, or when the market valuation of new energy vehicles is low and the valuation of fuel vehicles is moderate, manufacturers prefer to produce new energy vehicle to fuel vehicle. In terms of regret aversion strategies for product line design, our research reveals that a low carbon tax rate (carbon trading price) is beneficial to the fuel vehicle, while a high carbon tax rate(carbon trading price) and high information disclosure cost are beneficial to the revenue of new energy vehicle. Finally, we obtain the automakers’ preferences for carbon regulatory policies through manufacturers’ willingness to disclose information, tax rate and carbon trading price.

Managing Future Meat Consumption Fulfilment in Indonesia

Peer level of animal proteins for Indonesians reach low level of consumption-per-capita (CPC), this low protein consumption is strongly associated with malnutrition. Supply and demand take a part in several studies, supply-side approval meets consumption needs. Herd size, livestock shed, and production efficiency impacting the land mass area and environment. Beef meat consumption is inherently dependent on several interlinked and dynamic system modelling. One such methodology like modelling interactive systems in multivariate impact will yield the greatest overall increase in beef supply consequently. Using systems modelling tools, the researcher tries to simulate how beef consumption patterns are a dependent factor of several interrelationships with systems thinking. The alternative cluster structure is divided into 2 parts, tax policy and budget policy, which are the source of the budget scheme. Two of the six alternative policies were selected as the best choices with acceleration of output achievement. The higher tax rate is a consequence of a depressed level of demand, which has implications for national per capita consumption.