Income Tax System Research Articles

양도소득세와 취득세 및 주택임대소득세제의 정책방향

Capital gain tax and acquisition tax are representative real estate related taxes of Korea as well as comprehensive real estate tax. In case of capital gain tax, tax-free conditions of one-household-one house cases were re- peatedly strengthened and relieved and acquisition tax rates were increased and decreased depending on real estate price fluctuation. That is, when real estate prices fell, the policy to reduce tax burden of real estate was executed by relieving tax-free conditions of one-household-one house cases or reducing acquisition tax rates and, when real estate prices rose, the policy to increase tax burden of real estate was executed by strengthening tax-free conditions of one-household-one house cases or increasing acquisition tax rates. However, it is questionable whether it was effective to change real estate taxation system depending on real estate price fluctuation and the effect might be negative in most of cases. In such respect, the measures to improve capital gain tax and acquisition tax may be arranged as shown below. First, in case of capital gain tax, it is desirable to increase the standard of a high-price house from KRW 1.2 billion to KRW 1.5 billion. Second, when it would be desirable to define a one-household-one house case based on dwelling period rather than possession period. Third, as special deduction for long-term possession basically intends removal of nominal gain, it is desirable to apply special deduction for long- term possession in case of multi-house holders, too. Fourth, it would be desirable to abrogate heavy tax rates exceeding 50% for short-term holders and multi-house holders. Fifth, it would not be desirable to reduce overall acquisition tax rates. Sixth, it is desirable to maintain current 4% of acquisition tax rate for acquisition of houses with payment and to abrogate high acquisition tax rates for multi-house holders. Seventh, it is required to set consistent taxation benefit in case of house rental income taxation system in order to give predictability and legal stability to registered rental businessmen.

Commentary on Return Preparer Obligations

This paper was originally written for the Second Invitational Conference on Professionalism in Tax Practice, which was scheduled to be held in Washington in January 1996 under the sponsorship of the American Bar Association Section of Taxation, the American College of Tax Counsel, the American Institute of Certified Public Accountants, the National Association of Enrolled Agents, the National Association of Tax Practitioners, the National Society of Public Accountants, and the Tax Executives Institute. The Conference was postponed because of the Blizzard of 1996.Copyright © 1996 by Michael B. Lang.Our income tax system requires that taxpayers report their income annually and assess the correct amount of tax on this income. This selfassessment system, however, depends on taxpayers ferreting out the provisions of the tax law that apply to them and properly applying those provisions to their factual situations. The immensity and complexity of the tax law and the difficulty of applying even apparently clear legal provisions to complex sets of facts (the most difficult lesson in law school for the typical law student) make this process impossible for many taxpayers. As a result, they turn to tax professionals for assistance in preparing tax returns.These professionals generally fall into one or more of four groups: (1) lawyers licensed to practice law in at least one state or the District of Columbia (licensed lawyers); (2) certified public accountants (CPAs); (3) those admitted to practice before the IRS under the provisions of Circular 230; and (4) "income tax return preparers," as defined in section 7701 (a)(36 (return preparers). Professionals in each category are subject to their own set of practice standards. Many professionals in the tax field are members of more than one group and thus subject to multiple sets of standards. For example, licensed lawyers or CPAs may be subject to their respective state regulatory authorities, Circular 230 (because they are admitted to practice before the IRS), and the statutory provisions affecting return preparers.Once the taxpayer seeks the help of a professional, several difficulties inevitably mar the return preparation process. First, although the professional should be more skilled at finding the tax law relevant to the taxpayer's situation, the professional's knowledge of the facts underlying the taxpayer's tax situation depends entirely on the information known to and conveyed by the taxpayer. The way in which the professional inquires about the facts may influence how the facts are reported by the taxpayer. Hence, the taxpayer's response is a function of the professional's inquiry. Furthermore, the taxpayer may deliberately slant the facts in the hope of reducing her tax, or simply fail to report all of the relevant facts because of misunderstanding, misperception, forgetfulness, or the like. These considerations raise the prospect that a return prepared by even the most assiduous professional may be less accurate than what a well-informed, well-intentioned taxpayer might have prepared independently.

Accommodating the "Low-Income" in a Cash-Flow or Consumed Income Tax World

I presented an outline of this paper to a meeting of the Tax Structure and Simplification Committee of the Tax Section of the American Bar Association in August, 1993, and a draft of the paper to a University of Virginia law school workshop.Copyright © 1995 by George K. Yin. All rights reserved.This article concerns a tax policy issue of keen current interest: the possible replacement of the income tax with a broad-based tax on consumption. The leadership of the new 104th Congress has promised early scrutiny of consumption tax proposals.The weak link of most consumption tax plans relates to how they would distribute the tax burden across income classes. Critics charge that consumption taxes are regressive or at least not as progressive as the existing income tax. Many theorists believe, however, that one form of broad-based consumption tax, a cash-flow or consumed income tax, is immune to such criticism because it is an individualized consumption tax and could be implemented in a manner very similar to the income tax. Supporters of the cash-flow tax assert that it is flexible enough to attain any desired degree of progressivity.In this article, I examine that proposition. Focusing on the impact of the cash-flow tax on low-income taxpayers, I conclude that it would be surprisingly difficult to fashion a cash-flow tax as redistributive at the lower end of the income scale as the current income tax system while still preserving the asserted advantages of the cash-flow tax. Although it may still be advisable to move towards a cash-flow tax system, it is important for policymakers to recognize the inherent limitations of such a system for achieving progressivity at the lower end of the income spectrum.

Tax Burden on Labor Income in Croatia: Calculation and Analysis Based on Administrative Data

ABSTRACT The tax wedge for employment income in Croatia is calculated using administrative microdata. The analysis covering the period 2014–2018 demonstrates that the average tax wedge dropped from 33.2% in 2014 to 31.2% in 2018, which is the result of changes to both the social insurance contributions and personal income taxation systems. In addition, the analysis shows that tax wedge levels in Croatia are substantially lower than what had been shown in previous research, where results were primarily derived by analyzing hypothetical individuals.

Investment Income Withholding in the United States and Germany

In a reversal from its historical roots, the United States income tax system now taxes income from labor significantly more heavily than income from capital. It does so not only facially, through explicit preferences for income from capital, but also more subtly, through more hidden features of the tax system - specifically, enforcement strategies. This Article focuses on a prominent disparity in enforcement between the two forms of income: Wage income is subject to withholding while investment income is not. In its critical examination of this disparity, the Article first offers a brief history of withholding in the United States, in which withholding on wage income was eagerly embraced as a part of a patriotic war effort, while withholding on investment income was rejected again and again. The Article then contrasts the United States experience with that of Germany. Under Germany's remarkably robust constitutional principle of equality in taxation, the failure to withhold on interest income was held unconstitutional, and the German legislature was required to enact it. However, instead of leading to greater equality in tax enforcement, the new withholding law led to widespread evasion. The German experience is cited as a cautionary tale on the dangers of international tax competition. Yet, ultimately, it may prove to have been the tipping point for countries to engage in the cooperative behavior needed to overcome undesirable tax competition. The last Part of the Article draws upon lessons learned from past U.S. and German experiences to make the normative and practical case that now is the time to adopt investment income withholding in the United States.

Legal Ethics and Federal Taxes, 1945-1965: Patriotism, Duties, and Advice

"We are professional men not mere hired hands."In 2013 we will celebrate (or, at least, commemorate) the century-mark of the Sixteenth Amendment and the federal income tax. We should anticipate a flow of historical reflections on this first century of income taxation. These historical reflections on the income tax should develop our understanding of what has changed in the past century, and just as importantly, what has not changed, and will give us some idea of why one change occurred rather than another in any given case. It is likely that these reflections will focus on acts of Congress, nearly acts of Congress, and acts urged on Congress by enthusiastic supporters of one persuasion or another; the ebb and flow of economic theories and fiscal policies; responses to political, business, and technological changes; and, of course, important court cases that went this way and that way and, sometimes, the right way.Yet the history of the income tax is, in large part, also the history of tax lawyers. Without these lawyers working to interpret the tax code, to advise clients on planning with the tax code, and to advocate for the rights of clients under the tax code, the income tax system would not be what it has become. The role of these lawyers, especially their own sense of right and wrong, is rarely the subject of legal histories. Economics, politics, and financial innovations may make better reading, and may be better at explaining legal histories, but legal history includes legal ethics.

Utopian Visions Toward a Grand Unified Global Income Tax

A grand unified global income tax (GUGIT) may prove as elusive as the grand unified theory (GUT) that physicists have sought for many years. Yet, just as recent discoveries bring physicists closer to a GUT, developments in the international financial and tax worlds may move a GUGIT into imaginable reach. Since the discussions of a global unified corporate tax base in the early 1990s, significant and often surprising changes have taken place in the financial and tax worlds. Several of those changes include: (1) the European Union (EU) expanded eastward to include many of the former Soviet satellite countries; (2) seventeen member states of the EU, including several from the eastward expansion, eliminated their national currencies in favor of a single common currency; (3) the Organization for Economic Cooperation and Development (OECD) shamed and coerced many tax havens into cooperating in the exchange of information in tax matters; (4) Switzerland and Liechtenstein began to negotiate limitations on the protection they offered to foreign investors under their financial institution secrecy laws; (5) Russia’s suspension of payments on its sovereign debt in 1998 driving the failure of major investment pools and their managers and the subprime crisis in the United States in 2007 leading to the financial crisis in 2008 threatened to undermine the world economy and brought the concept of systemic risk to prominence; (6) in the United States, the 2008 financial crisis led to enactment of systemic risk–focused regulation of the economy; (7) the Securities and Exchange Commission (SEC) adopted a proposed rule to converge and convert financial reporting in the United States from generally accepted accounting principles to International Financial Reporting Standards; and (8) the European Commission (EC) took the first definitive step toward cross-border combined income tax reporting in the EU. While barriers to development of a working GUGIT may be just as formidable as barriers to discovery of a GUT, this paper argues that each step toward a GUGIT is a step toward tax transparency, distributional fairness, and public acceptance of the legitimacy of the income tax system.

Policy Forum: Cross-Border and Multijurisdictional Issues in Carbon Taxation—Carbon Pricing and the Income Tax

Canada's federal carbon-pricing scheme and its subnational counterparts might not be sufficient to meet the target of net zero by 2050. In the meantime, carbon dioxide (CO<e3>2) emitters are allowed to profit by externalizing environmental costs and risks on to present and future taxpayers. When the income tax ignores these externalities, it implicitly subsidizes CO<e3>2-intensive activities relative to less harmful alternatives. In examining our carbon tax policy options, we ought to consider whether the externalization problem could be addressed within the income tax to ensure that the income tax system assists, rather than undermines, the net zero pledge.

Consumption indivisibility and the optimal tax mix

This paper reexamines optimal commodity and income taxation with consumption indivisibility. We show that, in the presence of indivisible-good consumption, the Atkinson-Stiglitz theorem on the uselessness of commodity taxation fails. Without a distortion on consumption, the optimal commodity tax on indivisible goods acts as a differential lump-sum tax to engage in income redistribution and achieve the social optimum. The optimal tax rate for a specific divisible good is higher (lower) if the divisible good and the indivisible good are substitutes (complements). Differential commodity taxation can always improve welfare under a simple linear income tax system.

Bilateral tax agreement and FDI inflows: Evidence from Hong Kong investment in the Mainland China

This paper explains the changes in the composition of the source countries or regions of FDI in China from the perspective of taxation. Based on FDI data from 2003 to 2012, the empirical test, employing the difference-in-differences (DID) model, shows that, after the implementation of the tax agreement between the mainland and Hong Kong in 2007, FDI from Hong Kong increased significantly. After the integration of domestic and foreign-funded enterprise income tax systems in 2008, Hong Kong capital inflows increased even more drastically. The extended analyses show that, the substantial increase in Hong Kong capital after the implementation of this bilateral tax agreement was partly related to the diversion effect of investment. MNCs might have diverted investment from other tax havens to the mainland via Hong Kong, resulting in a sharp increase in the amount and proportion of Hong Kong investment, whereas those of FDI from other tax havens have declined.

Is redistributive policy of EU welfare state effective in tackling income inequality? A panel data analysis

Research background: Income inequality has risen sharply since the 1990s, despite the increase in the average size of redistribution in countries representing different welfare state models. The problem of increasing income inequality is currently a challenge for the EU economies, not only with well-established liberal traditions, but also with conservative and social-democratic ones. Therefore, it is worth conducting research on the redistributive effects of fiscal policy. Purpose of the article: The article aims to show the redistributive effects of fiscal policy, paying particular attention to the most characteristic trends in redistribution, which are responsible for the growing income inequality. An overview of the fiscal instruments ? mainly personal income tax and benefit systems ? along with an empirical research on their potential impact on income inequality, allows for conclusions to be drawn about the effectiveness of redistributive policy in the EU countries. Methods: Both descriptive analysis and panel data analysis is implemented to examine the effectiveness of redistributive policy in tackling income inequality in the EU?28 countries in years 2005?2017. Findings & value added: Based on the panel analysis, it has been found that social transfers were much more effective than direct taxes in combating income inequality. In addition, the largest increase in income inequality ? as previously assumed ? was observed in the liberal welfare states, while the smallest in the social democratic welfare states. The empirical analysis extends the existing knowledge on main weaknesses of fiscal welfare state, indicating the required changes that may improve both its equity and efficiency.

Carbon pricing policy, revenue recycling schemes, and income inequality: A multi-regional dynamic CGE assessment for China

Carbon pricing policies are effective tools for mitigating carbon emissions; however, they also alter income distributions. Progressive individual income tax systems help redistribute income and reduce inequality. This paper evaluates the effects of carbon pricing policies and revenue recycling schemes on inequality and assesses the redistributive effects of individual income tax. We adopt a dynamic multi-regional CGE model and extend it in terms of the labor supply, tax revenue, and government expenditures. We obtain several key findings. Carbon pricing without revenue recycling increased income inequality, and the Gini coefficient was 0.59% and 1.88% higher than the benchmark in 2030 and 2040, respectively. When the revenue was recycled via individual income tax returns, the proportional recycling scheme, i.e., all income groups had the same tax return rate, continued to widen the income gap. The progressive recycling scheme, i.e., lower income groups received higher tax return rates, narrowed the income gap by reducing distortions in the economy and enhancing the redistributive effects of individual income taxes. The Gini coefficient was 0.34% and 0.71% lower than the benchmark in 2030 and 2040, respectively. If the central government allocated the carbon revenue to the local governments via general transfer payments, the redistributive effect was magnified, but a pronounced economic distortion widened the income gap. If the tax return rates were categorized by labor groups, the pronounced vertical effect of the redistributive effect benefited income equality most, while the reranking effect weakened that benefit.

Tax systems as (non-) participatory mechanisms

The paper investigates the Brazilian and American income tax system to analyze how tax expenditures may act as a participatory mechanism in public budgeting. The literature on charitable deductions and tax expenditures suggests that tax systems may have a ballot nature, nonetheless few studies have addressed the issue. Thus, the paper aims to fill this theoretical gap by exploring how citizens may express their preferences to the government via tax deductions and by proposing a framework to compare the implications of each institutional design. Data showed that, yet differently, both tax systems allow a certain degree of participation and result in a substantial modification in how governments execute public policies and spend public resources. The comparison of the cases indicated that the same mechanism can be more or less participatory and those tax expenditures should be analyzed not only in terms of their financial results but also concerning their influence on democracy.

Taxation-Based Indicators as a Measure of Income Inequality in Russian Regions

Russia is one of the most unequal of the world’s major economies, with its wealth and income inequalities having drastically increased in recent years. This study aims to describe the influence of the flat personal income tax on income inequality in Russia and its regional characteristics by analyzing per capita tax revenues. The hypothesis is that the system of income taxation that existed in Russia until 2021 did not help reduce income inequality but on the contrary, exacerbated it, which is particularly evident on the regional level. Methodologically, the article relies on statistical analysis of concentration indices, time series analysis, index method, and comparative analysis. The calculations were made with the help of the Analysis ToolPack in MS Excel by using the data on 85 Russian regions. To test the hypothesis, 7 indicators were calculated: the range of variation, standard deviation, coefficient of variation, decile ratio of funds, decile ratio of differentiation, quintile ratio of funds, and the Gini index for 85 Russian regions for the period from 2006 to 2020. In the given period, these indicators remained steadily at a high level with a slight decrease in 2008–2010. Judging by the dynamics of the Gini index calculated by Rosstat, income inequality tended to decline although there were no significant changes in the regional differences in income while regional inequality also remained high. Monetary income and gross regional product are distributed more evenly across Russian regions in comparison with the personal income tax revenues and tax revenues in general of the regional governments’ consolidated budgets. The findings confirm the hypothesis and show that the personal income tax, which is an essential element of the tax system, exacerbated the situation of inequality in Russian regions. These findings can be of use to policy-makers and contribute to further research on taxation instruments and their potential to reduce or mitigate inequality.

APPROACHES TO FAIR AND EFFICIENT DISTRIBUTION OF THE TAX BURDEN IN TERMS OF INCOME TAX

The article discusses the advantages and disadvantages of applying income tax in three different regimes. The features of taxation of citizens with different levels of income were calculated and compared in case of application of progressive, flat and regressive system. Economic evaluations were given regarding the preservation and violation of the principle of justice in three taxation regimes. The article argues that in the case of applying a flat income tax system in Armenia, high and low wage earners are taxed at the same rates, which is certainly an unfair approach. Due to legislative changes, the tax burden of the socially disadvantaged class has increased, as the rates of excise taxes have also increased. The tax burden is unfairly distributed, due to which the social polarization in the country deepens. As a result of the study of international experience and taking into account the features of our country's economy, proposals were made that will contribute to the more fair distribution of the tax burden in terms of income tax. In order to distribute the tax burden fairly, it was proposed to review the current income tax system in the Republic of Armenia, in particular, to apply the former progressive system, but reducing the differences between the rates, and in case of leaving the current system, to set a non-taxable threshold. It has been presented under which regime the probability of the occurrence of tax loopholes is the greatest.

The Wealth Tax and the Tax Mix

This paper explores the potential role for a wealth tax as part of the mix of taxes applying to assets in the Canadian tax system. The existing system taxes assets in a variety of ways. Asset incomes, such as interest, dividends, capital gains, and profits, are taxed in the income tax system, albeit imperfectly. The value of assets is taxed by capital taxes on selective types of corporations and by the property tax on residential and non-residential property. Taxes applying to asset transfers include the deemed realization of capital gains on death as well as probate fees. There is neither a general tax on wealth nor a tax on wealth transferred through bequests. There are some glaring shortcomings of existing taxes on assets, such as the preferential treatment of capital gains, the exclusion of imputed returns, and the absence of a tax on inheritances. The authors argue that these deficiencies are best addressed by reforming the capital income tax system and introducing an inheritance tax rather than implementing an annual wealth tax.

Personal Income Taxes in the Middle East and North Africa: Prospects and Possibilities

With the exception of a few North African countries, personal income taxes (PITs) play little or no role in the Middle East and North Africa (MENA), often yielding less than 2 percent of gross domestic product (GDP) in revenue. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Throughout the region, top marginal tax rates on labour and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue contribution from this source remains low throughout the region, averaging less than 1 percent of GDP and concentrated in oil-importing non-fragile states. Social security contributions (SSCs) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes and levies. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increases in SSCs has resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT and SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance revenue and equity objectives against efficiency objectives (in particular, labour market incentives and informality). Countries without a PIT will have to weigh whether a consumption tax/SSC system that mimics a flat tax on labour income is sufficient to diversify revenue away from oil, and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, which face more political volatility and have weaker fiscal institutions than non-fragile states, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.

Poreski obveznik kao element poreza na dobit preduzeća - ekonomski efekti i opcije za fundamentalnu reformu

Although a complex taxation system can affect a company's operations, its negative effects can be significantly greater at the macroeconomic level. Given the fact that it can make it more difficult to attract investments and collect revenue, the corporate income tax system has been the subject matter of numerous research studies for many years now. Modern business conditions initiated their frequent reforms, as well as the numerous dilemmas related to them. The paper deals with the taxpayer as an element of corporate income tax. Although numerous papers investigate the (dis)unity of tax systems in defining corporate income taxpayers, few authors examine the economic effects of these discrepancies. Also, most research studies are focused on examining the other elements of this tax form, such as the tax rate or tax incentives. In this paper, an effort is made to find a connection between the form of the organization of a business entity and the tax burden in the domain of corporate income tax. The research study aims to indicate the importance of the economic effects of this tax element and to propose its reform. The research has confirmed the initial assumption, respectively; it has shown that different forms of the organization of business entities bear different burdens of paying corporate income tax, which affects the amount of the tax revenue that could be collected. The results have shown that the sampled companies paid less tax due to corrections and adjustments in tax balances and tax returns.

Agressividade tributária como fator determinante do conservadorismo condicional no Brasil,

ABSTRACT This paper investigates whether the degree of tax aggressiveness is associated with conditional conservatism in Brazil. After a thorough literature review on accounting conservatism by Brazilian academia and a discussion about tax aggressiveness and accounting conservatism, a literature gap was found because the relationship between a firm's degree of tax aggressiveness and its conditional conservatism had not been investigated previously. Taxable income has a relationship with accounting income in the Brazilian corporate income tax system. Hence, tax planning can affect financial information properties. This study offers a partial explanation of accounting conservatism based on tax issues that contribute to the conservatism and taxation literature. The results suggest that tax strategies that aim to avoid tax burden are related to conditional conservative accounting. Hence, the practice of conditional conservatism in Brazil appears to be linked with tax-deductible alternatives of reducing earnings, which would explain tax planning’s association with the degree of conditional conservatism in financial reporting. This finding is relevant to financial reporting users that can consider our results in their analysis and to management that seeks to understand their decisions about tax planning better. For this research purpose, two Basu models (Basu, 1997) were adopted, adapted with tax-aggressiveness controls. The effective tax rate (ETR) was used as a tax-aggressiveness metric, controlling firms with both high and low ETR. The study period was from 2010 to 2019 for Brazilian firms from B3 S.A. - Brasil, Bolsa, Balcão (B3). The findings demonstrate a significant relationship between tax avoidance and conditional conservatism, that is, more tax-aggressive firms tend to use more conservative accounting.

ДИФЕРЕНЦІАЦІЯ СТАВОК ПДФО В КРАЇНАХ-ЧЛЕНАХ ЄС

In modern economic realities, special attention is paid to forming an effective tax system that promotes the sustainable economic development of all actors in the global economy. This work aims to analyse the experience of EU member states in the taxation of citizens’ incomes and assess the possibilities of implementing the expertise of EU tax reforms in Ukraine. The article examines the rates of personal income taxes in the European Union’s member states and Ukraine. It is noted that personal income tax rates in all countries of the world belong to the national taxes, which are used to form state and local budgets. In most countries, personal income taxes have a progressive structure, which means that the tax rate paid by individuals increases as they receive higher wages. It has been identified that personal income tax rates differ significantly in EU member states. Still, all European countries have introduced a progressive scale of individual income tax based on the «rich pays more» principle. The work considers the value of tax rates in the European Union member states. The peculiarities of the taxation system of natural persons in the EU member states are highlighted. Analysis of the differentiation of personal income tax rates in European Union member states has show that applying progressive personal income tax systems helps reduse income inequality. The tax system of Ukraine is assessed, and the ways of transforming the current tax burden are suggested. It is concluded that in the conditions of the Russian-Ukrainian war, unstable and turbulent economic situation, the issue of changing the tax burden on taxpayers is ripe not because we want to be in the European Union but because the point of effective tax policy is a matter of our survival. Rebuilding the economy will not be easy, and this requires implementing approaches that have proven to be the best. The need to modernise Ukraine’s tax system considering the achievements of EU member states in this area is critical today. The financial flows that our borders will face after the war can freely enter and strengthen the socio-economic development of our country.