Implicit Tax Research Articles

Impact of Implicit Tax on Personal Income Tax Compliance Behaviours

The objectives of this study are to examine the impact of implicit tax, income level and the perception of corruption on personal income tax compliance level in Kaduna State, Nigeria. The data were retrieved from primary sources, and 486 questionnaires were screened and analysed. The Breusch-Pagan-Godfrey Heteroskedasticity test was conducted to determine the presence of heteroskedasticity or otherwise, while the weighted least square regression model was used to analyse the study’s data. It was found that implicit tax and perception of corruption have a significant negative impact on personal income tax compliance behaviour, while income level has an insignificant positive impact on personal income tax compliance level. This study concluded that implicit tax and perception of corruption are important determinants of personal income tax compliance behaviour in Kaduna State, Nigeria. Therefore, the study recommended that Kaduna State government and its relevant agencies should do as much as they can to discharge their constitutional responsibilities and provide the necessary public services. The relevant tax authority should double its efforts in ensuring that all taxpayers, no matter their level of income, comply with the provisions of the relevant tax laws and the regulations of the relevant tax jurisdictions.

The Benefits of Uncertainty: Uncertain Tax Strategies and Implicit Taxes

The Benefits of Uncertainty: Uncertain Tax Strategies and Implicit Taxes

The Impact of Corporate Governance on Implicit Taxes: Evidence from Brazilian Publicly Traded Companies

The Impact of Corporate Governance on Implicit Taxes: Evidence from Brazilian Publicly Traded Companies

Market Concentration and Implicit Taxes: An Analysis of Brazilian Firms

Market Concentration and Implicit Taxes: An Analysis of Brazilian Firms

Fiscal Policy, Growth, Financial Development and Renewable Energy in Romania: An Autoregressive Distributed Lag Model with Evidence for Growth Hypothesis

This research aims to identify the influence of fiscal policy, financial development and economic growth on the increase of renewable consumption in Romania. To achieve our objective, we employ bivariate regressions through the Autoregressive Distributed Lag method, over the 2000–2020 period, to examine these influences. We find clear evidence that the variables observed (implicit tax rate on energy, external debt stocks, real GDP per capita, environmental tax revenues from energy taxes, and market capitalisation of listed domestic companies) have significant effects on the use of renewable energy. Four unidirectional causal relationships were identified in the long run: two from independent variables towards the dependent variable and two from the dependent variables towards two other independent variables. The importance of this study is that its results can contribute to the finding of the most suitable solutions to improve renewable energy consumption in Romania and mitigate the impact of climate change. Consequently, the results of this study reveal significant conclusions and policy recommendations for Romania moving towards sustainable and green economic growth, through a balanced set of policies and measures smartly applied, accompanied by a solid rate of absorption of green funds.

Preferential corporate income tax treatment: Valuation in the market portfolio

AbstractIn the setting of the market portfolio, the impacts of preferential corporate income tax treatments through the valuational reduction for risk are opposite to and offset the impacts through the expected proceeds. This suggests that focusing on the absolute valuation of tax‐favored firms results in the undermeasurement of implicit taxes on returns on investments in tax‐favored firms and the relative valuation with reference to fully taxed (i.e., tax‐disfavored) benchmark firms be used. In addition, corporate income taxes imposed on entities and capital income taxes imposed on investors have opposite valuational effects through the endogenously derived market‐aggregate aversion to risk.

Does political orientation affect economic indicators in the Czech Republic?

The article evaluates the relationship between the tax burden on labor and magic quadrangle indicators in the Czech Republic in the years 1993 through 2020. The article examines whether indicators such as the effective rate or tax rate on labor affect the macro-economic indicators of the magic quadrangle. The originality of this study lies in the fact that it deals with the influence of political factors. The analysis shows the strongest correlation between the growth of gross domestic product and the implicit tax rate on labor. Moreover, the study finds that the factor with the most significant – and surprising – bearing on the findings is that fact that right-wing Parliament behaved like left-wing parties. The conclusions reached by this study further underline the significance of the tax burden on labor on the selected magic quadrangle indicators.

Public support of science: A contingent valuation study of citizens' attitudes about CERN with and without information about implicit taxes

Large-scale projects in fundamental science, such as major particle colliders, radio telescopes, synchrotron light sources are promoted by scientific communities in the first place, mainly funded by governments, and ultimately by taxpayers. Little is known, however, about preferences of the latter except in the form of qualitative social attitudes survey. We suggest that understanding taxpayers' preferences in the form of their willingness to pay (a money metric) for fundamental science is feasible and informative. We have designed a contingent valuation (CV) experiment about public support of science as reflected in the preferences of Swiss taxpayers for particle physics research at CERN, the laboratory where the Higgs boson has been discovered in 2012. Differently from a previous study on the attitudes of French citizens, in this paper we propose a novel methodological framework by a dual repeated bidding mechanism where sub-samples of respondents are respectively given/not given the information on the implicit tax they already pay to support CERN in the first place. We find clear convergence of results between the groups and discuss why such a finding has policy and methodological implications for research on government funding of basic research. We compare findings in Switzerland and France. The experiment is replicable in different countries and scientific fields and opens the way to a new empirical research avenue on the public support to science.

Pension reform and unemployment outcomes

ABSTRACT This article discusses the interactions among pension reform, labor market and inter-generational distribution issues through an overlapping general equilibrium approach with imperfect labor markets. Workers with different ages are imperfectly substitutable and wages do not clear labor markets. Increasing contribution rates has a strong negative effect on welfare and unemployment, particularly, for the youth. Contrary to the popular wisdom, postponing the retirement age does not entail an increase in youth unemployment. The change in incentives induces a substitution of old-age workers by young workers who constitute the cheapest labor category. However, this scenario substantially increases the implicit tax for older workers as well as for the youngest. Finally, the middle-aged are those that benefit the most from welfare increasing reforms.

On Coase and COVID-19

From an epidemiological perspective, the COVID-19 pandemic is a public health crisis. From an economic perspective, it is an externality and a social cost. Strikingly, almost all economic policy to address the infection externality has been formulated within a Pigovian analysis of implicit taxes and subsidies directed by a social planner drawing on social cost-benefit analysis. In this paper we examine the alternative economic methodology of the externality. We seek to understand how an exchange-focused and institutional analysis provides a better understanding of how to minimise social cost. Our Coasean framework allows us to further develop a comparative institutional analysis of the pandemic response.

Economics and Economic Substance

The economic substance doctrine has no basis in economics. The fact that a transaction has an after-tax profit but not a pretax profit is not an indication of inefficient resource allocation. Nor does economic analysis suggest that denying tax benefits to arrangements lacking economic substance will reduce the deadweight loss of taxation. Because a pretax profit requirement has no economic foundation, it is irrelevant whether the calculation of pretax profit takes account of implicit taxes. Both the conventional definition of economic substance based on pretax profit and competing formulations that give less or no weight to pretax profit appear to be based on reverse engineering to isolate features that unappealing transactions in high-profile litigation have shared. All these formulations fail to answer the critical questions surrounding the economic substance doctrine: why lack of economic substance is intrinsically bad, and why intrinsically bad transactions are more likely to lack economic substance. Some supporters of the doctrine concede its lack of economic logic but defend it based on its practical effectiveness. This line of defense is generally based on anecdotes unconnected to the actual content of the doctrine and fails to explain why a pretax profit test should be a relatively effective means of targeting objectionable transactions

An examination of the relationship between implicit taxes and market structure: Evidence from Chinese listed companies

ABSTRACT An implicit tax is a reduction in the pre-tax rate of return driven by tax preferences on an investment. The extant research demonstrates existence of implicit taxes at corporate level, but prior studies have drawbacks in tax preferences measure. This study takes the unique advantage of Chinese corporate tax rate preference setting to address research method problems. By employing the propensity score matching and multivariate regression analysis, we demonstrate the existence of implicit taxes in Chinese listed firms and the market structure impedes the realisation of implicit taxes. The market power and market concentration reduce the negative effect of tax preferences on the firm’s pre-tax rate of return.

The green potential of occupations in Switzerland

We use a data-driven methodology to quantify the importance of different skills in performing green tasks, aiming to estimate the green potential of occupations in Switzerland. By this we mean the potential of an occupation to be able to perform green tasks on the basis of the skills attributed to it, whereby it is irrelevant whether the occupation already bundles green tasks or not. The results show that occupations with a high green potential are predominantly those with an engineering and technical background. In order to substantiate our green potential measure, we provide evidence of a positive association between demand of employment in occupations with high green potential and an increase in the implicit tax rate on greenhouse gas emissions. The share of employment in occupations with a green potential above a reasonable threshold in the total Swiss labour force is 16.7% (number of persons employed) and 18.8% (full-time equivalents). These employed persons are, on average, younger, more often men, have a higher level of educational attainment and a higher probability of having immigrated than employed persons in occupations with low green potential.

Summaries of Papers in This Issue

Summaries of Papers in This Issue

The Impact of Exchange Rate on Ethiopia’s Coffee Export

Although coffee constitutes the largest share of exports, producers in Ethiopia have historically received a small percentage of the export revenue from the price of green coffee. Reasons often mentioned are heavy government intervention and high marketing and processing costs. Before 1992, government regulation of the domestic coffee market in the form of fixed producer prices and the Ethiopian Coffee Marketing Corporation's monopoly power put a substantial wedge between the producer price and the world price of coffee by imposing an implicit tax on producers. Having liberalized the market and adopted a floating exchange rate regime to boost exports (coffee) as the country struggles with foreign exchange shortages, not much has improved in exports (coffee) or foreign reserve availability. This paper utilizes monthly data from 2010-2015 to develop a multiple regression model to determine the impact the exchange rate has on coffee export if there is any. The empirical findings indicate that the exchange rate is not significant in determining or influencing exports but the prices of the two famous coffee types (Arabica and Robusta). Corroborated by the research outcome, we suggest that policymakers do not rely on the depreciation or devaluation of the ETB (Ethiopian Birr) as a tool for export promotion and growth.

The competitiveness analysis of Nutmeg farming as spices in Ternate, North Moluccas

Today’s agricultural business is faced with various obstacles, and cannot be measured to what extent its competitiveness, while the conception of agricultural development that has competitiveness has not been described more operationally and implementable, so that there is a gap between the ideal conception and the actual field. This study activity aims to analyze the competitiveness of Nutmeg spice farming in terms of domestic resource use in Ternate City. Nutmeg farming in Ternate City has a competitive and comparative advantage, this is indicated by PCR and DRCR values that are smaller than 1 (one). The results of PAM analysis on nutmeg farming have no input transfers because they do not use foreign inputs. The NPCI value for all is below one (<1). The value of NPCI is smaller than one, meaning that domestic prices are lower than world prices, so there can be said to be a subsidy policy from the government. Whereas for nutmeg farming. The transfer value of factors for nutmeg is positive, this indicates that there is an implicit tax or transfer from the nutmeg farmer to domestic factor, so farmers have to pay more than the price of the shadow (social).

The competitiveness analysis of Nutmeg farming as spices in Ternate, North Moluccas

Today’s agricultural business is faced with various obstacles, and cannot be measured to what extent its competitiveness, while the conception of agricultural development that has competitiveness has not been described more operationally and implementable, so that there is a gap between the ideal conception and the actual field. This study activity aims to analyze the competitiveness of Nutmeg spice farming in terms of domestic resource use in Ternate City. Nutmeg farming in Ternate City has a competitive and comparative advantage, this is indicated by PCR and DRCR values that are smaller than 1 (one). The results of PAM analysis on nutmeg farming have no input transfers because they do not use foreign inputs. The NPCI value for all is below one (<1). The value of NPCI is smaller than one, meaning that domestic prices are lower than world prices, so there can be said to be a subsidy policy from the government. Whereas for nutmeg farming. The transfer value of factors for nutmeg is positive, this indicates that there is an implicit tax or transfer from the nutmeg farmer to domestic factor, so farmers have to pay more than the price of the shadow (social).

The effects of government ownership and the global financial crisis on implicit taxes of Chinese companies

The government has implemented various tax incentive policies to support the generation and growth of corporate profits, leading to what is known as an implicit tax. In actuality, there is no implicit tax phenomenon because this phenomenon occurs in a perfectly competitive market where there are no barriers to entry, transaction costs, or transaction friction. Since most Chinese companies are owned by the Chinese government and are not fully capitalist markets, the possibility of more implicit taxes is not expected to occur. Therefore, the purpose of this study is to investigate whether the Chinese government’s ownership of enterprises and the global financial crisis have had an effect on the realization of the implicit tax phenomena. The results of this study are as follows. First, the pre-tax return on equity (PTROE) of listed Chinese companies had a statistically significant positive relationship with the pre-tax subsidy on equity (PTSE). Second, for companies with a higher level of Chinese government-owned interest, PTROE had a statistically significant positive relationship with PTSE; so this result shows that Chinese companies receive tax benefits, but an implicit tax in the market is not realized. Third, during the global financial crisis, the PTROE of Chinese companies showed an insignificant negative relationship with PTSE. In addition, companies owned by the Chinese government showed an insignificant negative relationship between PTROE and PTSE during the global financial crisis. This study provides policy implications that government ownership equity and macroeconomic events influence the level of freedom in a market economy.

An overview of the taxation of residential property: is it a good idea?

This article examines the taxation of property in the residential market as a potential revenue-raising tool in public finance. Economists generally consider taxing property to be less distortionary than taxing other tax bases. It ranks well in terms of trade-offs across long-term growth and inequality considerations. Although countries have different societal preferences, recourse to property taxation is not generally widespread. Using panel data methods and stochastic frontier analysis, we provide evidence that government revenue from property taxation is relatively inelastic to house price and quantity developments, and that countries with a higher implicit tax rate tend to be more efficient at collecting the revenue. Despite the increase of prices since 2014, low revenues can be the result of low effective tax rates and outdated house valuation systems.

The Relationship between Taxation Levels and Economic Growth in Greece: Comparison with Selected Countries

Purpose: The purpose of this paper is to examine the effect of taxation levels on the economic growth of Greece over a period and compare the results with other European countries. A theoretical model connecting taxation rates, revenue and economic growth is difficult to apply because of the multitude of legislation acts, regulations, exemptions, and reforms regarding taxation. Design and Methodology: In the paper the percentage of direct, indirect, and environmental taxes to GDP, as well as the implicit taxation rates for consumption and labor are examined as to how they affect the GDP and GDP per capita growth rate for Greece, Germany, Italy, and Portugal over the period from 1995 to 2018. Findings: The results show that any increase or decrease in these taxation figures has a different effect on the economies of these countries because of the inherent differences in each economic environment. Practical implications: The common conception that high tax rates have a negative effect on the economy seems to apply only for the steady and growing German economy. For the Greek and the Portuguese economies, depression, external debt and changes in legislation and reforms add more factors that influence the economic growth and sometimes reverse the result. Originality/Value: While many studies have investigated the effect of taxation rates on the economic growth, the originality of this paper lies in the fact that it deals with the same subject specifically for Greece and compares the results with other European Union countries.