Income Tax Reform Research Articles

Taxpayer response to greater progressivity: evidence from personal income tax reform in Uganda

Taxpayer response to greater progressivity: evidence from personal income tax reform in Uganda

Recent Changes in Income Tax and GST: Implications for Commerce

The landscape of taxation in India has undergone significant changes in recent years, particularly in the areas of Income Tax and Goods and Services Tax (GST). This paper examines the latest amendments in both these areas, focusing on their impact on businesses and commerce in India. The Income Tax reforms introduced in the Finance Act 2023 aim to simplify the tax structure and enhance compliance, while GST amendments focus on addressing loopholes and improving the efficiency of tax administration. This study explores these changes in detail, their expected effects on businesses, and the broader economic implications for the Indian commerce sector.

Personal income tax reform and household savings rates: Evidence from a quasi-natural experiment in China

This study examines the effects of the 2018 personal income tax reform on household savings rates using data from the China Household Finance Survey (CHFS). Employing a quasi-natural experiment approach, our findings demonstrate that the reform has led to an increase in savings rates among Chinese households. Mechanism tests indicate that income uncertainty serves as the underlying mechanism linking the personal income tax reform to household savings rates. Heterogeneity analyses reveal that the impact of the personal income tax reform on household savings rates is particularly pronounced for households with lower income and those whose heads have lower levels of education. Additionally, the personal income tax reform has elevated the proportion of household development and enjoyment consumption in total consumption. This study provides a novel micro-perspective on the influence of Chinese fiscal policies on residents' saving behavior and offers valuable insights for promoting high-quality consumption and fostering high-quality economic development.

Can changes in corporate income tax rate affect corporate innovation?

The relationship between corporate income tax rates and innovation is a critical international issue. Existing studies often overlook the potential mechanisms of market competition and productivity heterogeneity. This paper addresses these gaps by integrating these elements into a unified mathematical analysis framework. Using China's corporate income tax reform as a quasi-natural experiment, this study empirically tests the model. The findings reveal that decreases in tax rates significantly foster innovation, while increases have the opposite effect. The underlying mechanism involves market competition, with the impact of tax changes being more pronounced in firms with higher productivity. This study deepens the understanding of the nexus between corporate income tax and innovation, providing new insights to refine tax policies that promote innovative economic development globally.

Corporate income tax reform and intra-industry resource reallocation

ABSTRACT Taxation is a crucial tool for government economic regulation and resource allocation. Our study, using data from the Chinese Industrial Enterprise Database from 1998 to 2010, highlights the significant role of corporate income tax reform in reducing resource misallocation in the industry. Employing the robust Difference-in-Differences method, we empirically confirm this effect. Our mechanism analysis reveals that the reform promotes increased competition among industry firms, resulting in enhanced resource allocation efficiency. These findings emphasize the vital role of tax policy in shaping resource allocation dynamics in Chinese market, underscoring its broader economic significance.

Rising allowances, rising rates — Can growth arise through business income tax reform despite government debt limit?

The system of business income taxation consists of two instruments, namely a statutory tax rate and a depreciation allowance on investment. We will show in this paper that by acting on both instruments simultaneously it is possible to achieve both a growth and a fiscal net revenue target even in cases when a trade-off prevails when each instrument is used individually.As will be shown in the paper, depreciation allowances have a more favorable trade-off between growth and net revenue in the long run compared to statutory business income tax rates. Thus, by rising depreciation allowances and the statutory tax rate at the same time, it is possible to both increase growth and fiscal space.In a model simulation calibrated to the German economy and tax system, an increase of the tax depreciation rate for all investments from 10% to 25% leads to a more than 2 percent GDP increase and more than 6 percent higher private investments in total. Whereas GDP and investment rise steadily over time, the government budget becomes negative in the short run. In the long run, the sign of the fiscal budget effect is determined by the indexation of government consumption to GDP. However, according to our findings, slight adjustments in the statutory business income tax rate could balance out these deficits and generate additional fiscal space.

Contribution of Tax Reform on Reduction of Tax Evasion in Rwanda

The study aimed to explore the contribution of tax reform on reduction of tax evasion in Rwanda, guided by objectives to examine contribution of personal income tax reform, identify contribution of corporate income tax reform and assess contribution of value added tax reform. The research design was qualitative, targeting 2700 taxpayers were from Rubengera sector. The systematic sampling method are taxpayer, resulting in a sample size of 348 respondents drawn using purposive sampling. Close ended/structured questionnaires were used to primary data, which was then analyzed using the Statistical Package for Social Science (SPSS). The data was analyzed the findings of using both descriptive and inferential statistics show a strong and positive association between tax reform and tax evasion at personal income tax reform (PIT) will help with reduction of tax evasion with the mean score is notably higher at 2.74, indicating a more positive perception of the reform's effectiveness. Still, the wider standard deviation of 1.404 suggests greater variability, corporate income tax reform (CIT) combined with value added tax(VAT) will help with reduction of tax evasion with no significant correlation between VAT reforms and corporate income tax reforms or their effectiveness and the corporate income tax reform (CIT) respondents gave an average score of 2.73 on the effectiveness of these reforms in reducing tax evasion, with a standard deviation of 1.422, indicating variability in opinions. The results show that the study stated that tax reforms reduced tax evasion significantly and made the following recommendations: The Rwanda Revenue Authority (RRA) should offer comprehensive training to all taxpayers, focusing particularly on educating them about the substantial changes resulting from the tax reforms, especially the new requirements and their perceptions of the impact and effectiveness of these reforms in curbing tax evasion. The consistent nature of these results emphasizes the importance of considering a variety of viewpoints when assessing the outcomes of tax reform efforts. To ensure the continuous effectiveness of Rwanda's tax system, it's imperative to regularly review and adjust it in accordance with the current economic landscape. The study's findings underscore the substantial impact of tax reforms on reducing tax evasion. The research concludes by suggesting further investigations to evaluate the influence of tax reform on tax revenue contribution in Rwanda.

Международный опыт подоходного налогообложения физических лиц и направления совершенствования налоговой системы Российской Федерации

The article examines the international experience of personal income taxation in developed countries such as the United States of America (USA), the United Kingdom, Japan, China, Australia, Canada, and Germany. The study was conducted using general scientific methods of cognition, including observation, comparison, data collection and analysis, deduction, and induction. The sources of information for the study were regulatory and legislative acts, as well as electronic resources. The main findings include reform of the personal income tax (PIT), aimed at increasing revenues, but not too heavy a tax burden for taxpayers and ensuring fairness, is a matter of concern at present. The study of tax systems in other countries allows us to identify effective approaches to the development and implementation of tax reforms, as well as to avoid mistakes made in other states.

Analysis of Individual Income Tax Compliance in China from the Perspective of Behavioral Economics

As an essential theory for studying the decision-making of “actors,” behavior economics can effectively analyze the problem of individual income tax compliance from the perspective of taxpayers’ psychology, which is of great theoretical significance for improving taxpayers’ willingness to comply. From the prospect theory, endowment effect, and mental accounting, the 2018 individual income tax reform can help enhance the level of voluntary personal income tax compliance and strengthen the tax compliance level; maintaining tax publicity helps to increase habitual individual income tax compliance level, optimizing tax service helps to increase the level of cooperative individual income tax compliance. In the future, we can further optimize the design of individual income tax policies, intensify tax publicity, and improve the quality of tax services. In the future, we can further optimize the design of individual income tax policies, increase tax publicity, and improve the quality of tax services to increase individual income tax compliance.

Income composition inequality of Chinese residents and fiscal redistribution effect: An empirical analysis on individual income tax and transfer system.

Based on the data of China Family Panel Studies (CFPS), this paper decomposed Chinese residents' income into labor income and capital income by income source, and measured the income inequality and income composition inequality of Chinese residents during 2010-2018. We take the Gini coefficient as a measure of inequality and, by decomposing it by income source, analyze the absolute and relative marginal effects of capital income and labor income on the overall income inequality. On this basis, this paper discusses the redistributive effect of financial instruments such as personal income tax and transfer payment on income inequality and income composition inequality. The results show that capital income is not only the main driving factor for the increase of overall income inequality, but also its influence on inequality is gradually increasing. The results of the redistribution effect of fiscal instruments show that although individual income tax and transfer payment both help to reduce the overall income inequality, only individual income tax can reduce the inequality of income composition, while transfer payment will exacerbate it. In the background of the rising share of capital income, it may widen the income distribution gap in the long run. Hence, future fiscal redistribution efforts should consider the income composition inequality. This includes further promotion of individual income tax reforms, optimization of the tax rate structure, enhancement of relevant tax laws governing capital income like property income, and continuous improvement in the redistributive impact of fiscal instruments.

The Impact of China’s Tax Policy Reform on the Gap between Rich and Poor

Common prosperity is the goal that the Chinese government is constantly striving for, and the reform of the tax system is the only way to achieve this goal. In the past ten years, China has continuously carried out tax reform and achieved good results. Previous scholars have conducted in-depth research on China’s tax reform from multiple perspectives. Previous research has focused on the impact of tax policy on China’s economic growth, exploring how taxes stimulate or constrain the development of different industries and regions. And early research focused on social equity issues, examining the impact of tax policies on income distribution, and how to reduce the social gap between rich and poor through taxation. These studies provide lessons and theoretical support for current tax reforms and provide a basis for future research. This article will start from two aspects: personal income tax reform and value-added tax reform, and analyze the impact of personal income tax and value-added tax reforms on the gap between the rich and the poor.

Does corporate income tax reduction prompt firm export concentration?

Analyzing the impact of changes in corporate income tax policy on firm exports provides a critical assessment of the effectiveness of tax policies in stimulating export growth. It offers insights into the influence of tax policies on intra-firm resource allocation efficiency. However, there is limited attention in the literature devoted to examining firms’ export responses to these tax policy shifts, often overlooking the underlying mechanisms. This study investigates the causal relationship between reduction in corporate income tax rate and adjustment in export structure, employing a difference-in-differences approach and drawing on data from Chinese manufacturing firms between 2000 and 2013. Our findings indicate that China’s corporate income tax reform in 2008 heightened the concentration of firms’ export products by enhancing labor productivity and facilitating the accumulation of fixed assets. Additionally, this tax reduction expanded the range of exported products and increased the proportion of firms’ core and high-technological products.

Сценарії реформування ПДФО в контексті зменшення нерівності доходів в Україні

Introduction. The aggravation of the problem of inequality and poverty in the conditions of Russia’s full-scale war against Ukraine determines giving priority to its mitigation in the period of post-war reconstruction. At the same time, ensuring the reduction of income inequality in the period after the termination or abolition of martial law is expected to be achieved by using the redistributive role of taxes, primarily personal income tax. Problem Statement. Although a progressive income tax is considered to be one of the main tools for reducing inequality, a proportional personal income tax can also increase the progressivity of taxation through a well-designed mechanism of tax-exempt amount. The purpose of the article is to analyze the state of fulfillment of the function of reducing income inequality by the personal income tax in Ukraine and ways to increase its redistributive properties. Methods. The redistributive properties of personal income tax were studied by determining the impact of the tax social benefit before and after its reform on the tax burden at different levels of income, which was calculated on the basis of effective personal income tax rates. The assessment of the fiscal consequences of the proposed reforms was carried out using information from the Pension Fund of Ukraine on the number of people receiving wages in a certain income range. Results. It was established that the flat personal income tax in Ukraine does not fulfill the function of reducing income inequality due to existing restrictions on the right to apply the tax social benefit, which cannot be used even by the recipients of the minimum wage. This creates the problem of a high tax burden on people with low incomes. In order to increase the impact of the tax on income redistribution, the feasibility of introducing in Ukraine a differentiated tax social benefit for the taxpayer, as well as a tax social benefit for dependents (wife/husband and children) is substantiated. Another option for increasing the progression in personal income taxation was considered – the introduction of a low-progressive/progressive tax model in combination with the existing and differentiated tax social benefit. Conclusions. An assessment of the impact of the proposed personal income tax reforms on the tax burden at different levels of income, as well as their fiscal consequences, was carried out. Possible risks, as well as the procedure for reforming the tax, are substantiated.

Labour Supply Responses to Income Tax Changes in Spain

This paper simulates the response of the Spanish labour supply to income tax changes using estimates for the intertemporal elasticity of substitution of leisure, calculated using a pseudo-panel built combining information from the EPA and the ECPF, for the period 1987-1997. According to our findings, income tax reforms have an impact on Spanish labour market, although the effects are quite small, making this mechanism a restricted tool for addressing the country’s existing social security system deficit. Further, labour responses differ for men and women, across workers’ age, as well as between permanent and fixed-term contract workers.

Enterprise income tax and corporate innovation: evidence from China

ABSTRACT Using China’s 2008 enterprise income tax (EIT) reform, this study examines the effect of EIT on corporate innovation comprehensively. Based on accurate identification of the direction of changes in the corporate tax rate, we introduce two dummy variables of tax rate decline and escalation to investigate the impact of EIT changes simultaneously. Using the firm-level dataset from China’s A-share listed companies, we find that the innovation level of tax-rate-declining enterprises will increase by 0.2%, whereas the innovation level of tax-rate-increasing enterprises will decrease by 0.4%. The dynamic effect demonstrates that the aforementioned promoting and inhibitory effects are continuous. Heterogeneity analyses reveal that the changes in the EIT rates have a greater impact on the innovation level of enterprises with high innovation demand, manufacturing enterprises, enterprises in a high rule of law environment, and enterprises in the eastern region. Our study highlights the importance of the EIT reform on corporate innovation and guides how to better optimize the effectiveness of such policies.

The Case for Uniform Commodity Taxation: A Tax Reform Approach

Generalizing the tax reform approach of Laroque (2005), Kaplow (2006) and Hellwig (2009), we show that for any arbitrary income tax system differential commodity taxation can be Pareto-dominated by a uniform rate with a suitably reformed income tax. Under particular preference specifications, we derive the explicit income tax reforms required in an representative-agent economy and when there is linear progressive, piecewise linear and nonlinear income taxation. Optimal uniform commodity results of Sandmo (1974), Atkinson and Stiglitz (1976) and Deaton (1979) apply with involuntary unemployment and when individuals differ in preferences for leisure and make extensive labour supply decisions.

An Overview of the Reforms of Personal Income Tax (PIT) in Bangladesh

Bangladesh is a country of about 170 million people. But the tax-GDP ratio is yet to reach the double digit. There are some tax reform efforts already have taken to update the tax policy and tax administration for expected outcome. This paper attempted to review those reform efforts highlighting the personal income tax (PIT) and to summarize the reforms already have done and their implications in the revenue performance. It is an exploratory research and secondary sources of data are used to accomplish this study. After a thorough review of the reform initiatives, this study has got some point like complexity of the tax code, number of tax payers become double in last 5 years but the collected revenue is not proportional to the increased taxpayers. Collection of tax through TDS has increased to almost 60 percent. It implies the enhanced compliance and efficiency of the tax regime. Introduction of e-filing, e-payment, and universal self-assessment have reduced the hassle of taxpayers. Administrative capacity in terms of infrastructure and manpower has increased. All these progressive efforts do not bring any mentionable change in the tax structure of Bangladesh. Ratio of direct to indirect tax is very high i.e., about 30 to 70. Of this low-slung direct tax, contribution of PIT is about 40 per cent. To grow a middle-income country and sustain, contribution of PIT to the tax structure should be increased through appropriate reforms in this field.

Налоговые механизмы сглаживания неравенства в доходах населения

The relevance of the work is due to the need to smooth out the existing income inequality in Russian society, which can be achieved through a revision of approaches to taxation of personal income. The subject of the study is the personal income tax (personal income tax) as a tool to reduce the level of social stratification and reduce income inequality. The purpose of the work is to determine the vector of personal income tax reform in terms of reducing the level of social stratification in modern Russian society and smoothing income inequality as one of the key areas of the implementation of the socio—economic development program of the state. The article assesses the effectiveness of the functioning of the current flat scale of taxation of income of the population. The proposal to introduce a progressive scale of personal income tax rates as a more effective tool for reducing the level of social stratification in society is substantiated. Proposals are formulated to establish the size of personal income tax rates depending on the income of taxpayers and the exclusion of certain types of investment tax deductions provided for the taxation of individuals. As a result of the research, the necessity of transition to a progressive scale of taxation is justified, which is considered as one of the effective tools that allow smoothing out inequality in income of the population and thereby achieving the goals laid down in national projects and programs of socio-economic development of the state.

Research on the New Round of Individual Income Tax Policy Reform

In order to analyze the reform effect of individual income tax policy in 2018, the income redistribution effect of various individual income tax collection schemes is compared through the tracking survey data of China Family Panel Studies. The research shows that the personal income tax reform has reduced the tax burden of taxpayers on the whole. Among the four reform measures, only the implementation of comprehensive income tax has a positive effect on the distribution effect. As the main beneficiaries are mainly high-income people, this round of reform has weakened the redistribution effect on residents’ income. Therefore, measures such as adhering to the direction of comprehensive taxation, prudently reforming the basic reduction of fees and tax rates, subsidizing low-income people and strengthening the supervision of high-income people will help to enhance the redistribution effect of individual income tax.

Assessing the impact of personal income tax reforms on the income inequality dynamics in Russia in the 21st century

The problem of regulating economic inequality to ensure social justice in society in the context of accelerating economic growth is of constant and obvious relevance. However, this problem does not have universal solutions due to significant country differences and the peculiarities of the social contract in a particular country. The purpose of this study is to analyse and assess the impact of reforms in the system of taxation of personal income on the dynamics of income inequality of Russian households. Dismantling the progressive personal income tax rate did not lead to a significant increase in income inequality in Russia, but the problem of excessive property inequality persisted until the beginning of 2022. The passive policy of regulating economic inequality unexpectedly yielded results in 2022. We expect, that after illegal confiscations and freezing of Russian assets abroad, coupled with anti-poverty programmes, the level of income and property inequality in Russia will significantly decrease on the horizon of 2022−2024. In the long term, the policy of passive financial regulation of inequality can produce a result that remains to be seen on the reporting data of Rosstat and international databases. In the future, when solving the dilemma between equality and economic growth, Russia should focus on the latter and make efforts to restore and then accelerate the growth of the average standard of living in the country.