Indirect Taxes Research Articles

Impact of GST on MSMEs: A Critical Assessment of Rajasthan State

Goods and Services Tax (GST) 2017 implement in India with the vision of simple indirect tax structure and enhance economic growth. However, its impact on micro, small and medium enterprises (MSMEs) has been a topic of concern. This critical assessment study focuses on the impact of GST on MSMEs in Rajasthan State (Pareek & Sharma, 2019). The study adopts a mixed-method approach, including a survey of 200 MSMEs and in-depth interviews with 20 industry experts and government officials. The study found that the implementation of GST has resulted in several benefits for MSMEs, such as simplification of tax procedures, increased efficiency in logistics and reduced corruption. However, MSMEs have also faced several challenges such as increased compliance costs, a lack of awareness about GST and issues related to the availability of input tax credit. Indian government must take proactive measures to educate MSMEs about the GST and simplify compliance procedures (Antonyraj & Kumar, 2023). It also recommends that policymakers should revisit the GST structure to make it more MSME-friendly. Overall, this study provides insights into the impact of GST on MSMEs and highlights the need for ongoing assessment and policy reform to ensure the long-term sustainability of these enterprises (Choudhary, 2019).

Factors Affecting Compliance with Tourism Taxes: Evidence from Malaysia

Due to the fact that tax noncompliance directly impacts the source of national income, the Malaysian government and academic researchers have critically discussed the topic of tax noncompliance. Indirectly, noncompliance has an impact on a nation’s social and economic development. The Royal Malaysian Customs Department (RMCD) is in charge of overseeing and implementing Malaysia’s indirect tax laws. Existing initiatives include boosting penalties, increasing operations and inspections, hiring more enforcement agents, and pursuing tax obligations in court. These activities are largely tied to economic factors. The purpose of the study is aligning with the research’s goal which to highlight the fact that tax payers and policymakers should view and address this issue from non-economic viewpoints for a variety of reasons. First, non-economic variables’ actions are more closely tied to those that can be taken to control taxpayers’ behaviour before noncompliance occurs. Second, noncompliance prevention and control procedures can be improved because they reduce the amount of time, effort, and money needed to resolve the problem after it arises. A conceptual framework on factors that influence the compliance with tourism tax in Malaysia by using the Theory of Planned Behaviour (TPB). The study intends to characterise the behaviour and activities taken by the noncompliant tax payers in Malaysia in order to comprehend their noncompliance behaviour. This research contributes to the broader understanding of tourism tax dynamics and offers practical recommendations for policymakers aiming to enhance compliance and foster sustainable tourism practices.

Examining the Influence of Direct and Indirect Taxation on Economic Growth: A Case Study of Pakistan

Taxation and expenditure administration represents a significant concern for governments at all levels. Taxation plays a crucial role in the funding and formulation of economic policies. This study undertakes a comparative analysis of Pakistan's direct and indirect taxation systems, their impact on economic progress, and their relationship with inflation. The available data indicate that the impact of indirect taxes on economic growth is more significant compared to that of direct taxes. More precisely, a rise of one percent in indirect taxation results in a corresponding increase of 0.49% in GDP, while direct taxation leads to a GDP increase of 0.22%. Indirect taxes have a greater impact on inflation compared to direct taxes. It is recommended to consider long-term planning, expanding the tax base, reducing tax evasion, and enhancing the efficiency of the tax mix strategy. Indirect taxation has the potential to mitigate wealth inequality and foster economic growth. Tax and monetary policy have the potential to reduce inflation levels.

The Effect of Tax Revenue Mobilization on the Economic Growth of Ethiopia

A study on the long run and short run effects of tax revenue mobilization on the economic growth of Ethiopia was conducted using an explanatory research design and mixed research approach. Secondary data from world development indicators spanning from 1990 to 2021 were analyzed using Auto regressive distributive lag (ARDL). The study found no long run causal relationship between taxation, different tax classifications, and economic growth in Ethiopia during the study period. However, in the short run, the current period of tax revenue had a positive and significant impact on economic growth, while a one-period lag in tax revenue had a negative and significant effect. Specifically, the one-period lag in direct tax negatively affected economic growth. Indirect tax did not show a significant effect in both the short run and long run. Based on these findings, the study recommends that the Ethiopian government and the Ministry of Revenues review the tax system and implement mechanisms to shift tax revenue sources from direct tax to indirect tax. This can be achieved by introducing strong tax collection methods and emphasizing the collection of domestic indirect tax.

Measurement of Value Added Tax (VAT) Efficiency of Nepal

VAT is indirect tax, becoming major sources of Government revenue worldwide. VAT is paid in an effort to uplift the tax collection efficiency in order to recover their budget deficit and enhance the economic stability. But the efficiency of VAT collection has played negative roles like standard VAT rate, threshold, list of tax exempted or zero rate goods and services, tax evasion, political commitment, stable government etc. This research has taken secondary data from Government’s authentic publication from 2010/011 to 2020/021. All these data were analyzed on the helps of trend analysis, VAT to GDP ratio, VAT efficiency ratio and C-efficiency ratio. All the indicators have been found positive. The collection of VAT and GDP appear in increasing trend. The increasing trend of VAT is higher than GDP. The VAT to GDP ratio reaches from 3.95 to 11.84, VAT efficiency ratio extends from 30.38 to 91.12 and average C-efficiency ratio of the study period 64.7. The studied indicators proved that VAT has improving collection efficiency, increasing trend of collection and improving in role on GDP on Nepalese economy. From all these, VAT should be more income generative in the future and help to minimize the budget deficiency of Nepal Government.

Effect Of Imports, Industrial Sector, And Service Sector On Value-Added Tax With Regulatory Quality As A Moderating Variable

State revenue to organize its government is mostly collected by taxation as the main source. In its implementation, taxes are imposed directly and indirectly. The indirect tax that plays a role in the structure of state revenue is Value Added Tax (VAT). VAT is imposed on goods or services consumed in an area based on a set rate. VAT imposition of the highest rates on average is imposed in European countries. There are 11 European countries with the highest VAT rates, which are the object of research, namely Hungary, Croatia, Denmark, Norway, Sweden, Greece, Iceland, Finland, Ireland, Poland, and Portugal. This study will discuss the effect of value added on the industrial and service sectors, which are the main sectors in the 11 countries as well as the effect of international trade activities, namely imports, on VAT revenues with a moderation of the regulatory quality index. The results show that the imported variable and the added value of the industrial and service sectors, both before and after interaction with the moderating variable of the regulatory quality index, significantly influence VAT acceptance. For the partial results, before moderation with the regulatory quality index, imports don't significantly affect VAT revenue. In contrast, the industrial and service sectors have significant negative effects on VAT revenue. Furthermore, after interacting with regulatory quality variables, imports, value added in the industrial and service sectors have a significant positive influence on VAT revenue. This shows that the moderating variable of the regulatory quality index plays a role in strengthening the relationship between the independent and dependent variables.

Impact of Different Tax Variables on The Economic Growth of Nepal

This study examines the impact of different tax variables on GDP growth. Timeseries secondary data were gathered from the Economic Survey issued across several fiscal years to meet the study's objectives. The acquired data was analyzed using the log-linear regression model. The research hypotheses were tested using SPSS 20 software. The regression model included independent variables (tax) and the dependent variable GDP. The findings show that direct tax has an adverse association with GDP, whereas indirect tax has a positive link. Notably, overall revenue has a significant beneficial impact on GDP. Despite positive trends in tax revenue, they need to meet the government expenditure in Nepal. Across all regression models, the R2 coefficient exceeds 95%, indicating a high degree of determination among variables.

The VAT Treatment of Cryptocurrencies

Since their creation in 2009, crypto-assets have evolved from niche products into assets held and used much more widely. These assets pose challenges for policymakers and tax administrations, because, as pointed out by the OECD, they can be transferred and held without the participation of traditional financial intermediaries and without central administrators being aware of the transactions carried out or the location of crypto-assets holdings.
 On the indirect taxation side, the VAT Committee discussed the issues relating to the VAT treatment of crypto-assets and, in particular, of cryptocurrencies, on several occasions. The discussion on the most recent of the working papers on this subject, No. 1037 on the VAT treatment of crypto-assets, resulted in the adoption of the Guidelines which aim at harmonising tax administrations’ practice regarding the VAT implications of the different transactions linked to crypto-assets.
 The article highlights the main challenges posed by cryptocurrencies in terms of VAT while focusing on the main supplies with the use of cryptocurrencies and their qualification for the VAT purposes. Those transactions range from the creation, verification, validation, and supply of cryptocurrencies through their modification, storage, transfer, to exchange. The article explains in this context the position of the VAT Committee reflected in the Guidelines.

Luxembourg tax updates

Abstract This article aims at providing a holistic overview of Luxembourg’s tax framework applicable for individuals. Specifically, this article is divided into four sections. In the ‘Overview of the tax framework for individuals’ section, an overview of the Luxembourg income tax rules for each category of income will be given, after having defined the tax residency concept under Luxembourg tax law. We will also cover in the ‘Overview of the tax framework for individuals’ section other indirect taxes, such as gift and inheritance taxes. In the ‘Impatriate tax regime’ section, we will address the conditions required to benefit from the specific tax regime for qualifying international employees that have been introduced into Luxembourg tax lax. The ‘Profit-sharing premium’ section will address the profit-sharing bonus mechanism for employees, introduced to enhance the country’s attractiveness. Finally, the specific tax regime for carried interest, which has been implemented by the Law of 12 July 2013 in Luxembourg, will be covered.

Exploration of financial tax system in the context of big data

Abstract The financial tax system is related to the actual effectiveness of a country’s modernized economic development and has a close relationship with the country’s economic enhancement. To examine the causal effects between potential variables in the tax system, this paper constructs a measurement model of financial tax system variables using Bayesian structural equations. Parameter estimation for SEM is completed by adding prior information to the sample data and calculating the posterior distribution of relevant parameters using Bayes’ theorem. The correlation between financial taxation and economic development is calculated to indicate whether there is consistency in financial taxation on economic efficiency. Cronbach’s coefficient is used to measure the degree of consistency and stability of each part of the financial tax index system. The results show that the impact value of personal tax is 0.71, 0.37 and 4.18 in provinces C, A and B. Promoting economic development in provinces and municipalities with a better degree of economic development is aided by the current personal income tax sharing ratio. Reducing the proportion of indirect taxes while keeping the macro tax burden unchanged results in a gradual increase of the proportion of personal income tax in total tax revenue from 8.7% to 18.7%. The research in this paper further improves the financial tax system and provides an effective method to improve economic efficiency.

Trends in Tax Regulation of Circulation of Digital Currencies in Russia

Over the past years, the position of Russian regulatory authorities regarding the legitimacy of the circulation of digital currencies in Russia has changed more than once. At the same time, taxation plays an important role in the system of state regulation of the use of modern financial technologies. The purpose of the article is to characterize the trend in the tax regulation of digital currencies in Russia. In parallel with the consideration of issues of the legal status of digital financial assets, the Ministry of Finance and the Federal Tax Service of Russia are making attempts to describe the tax consequences of transactions with these types of assets and their financial results. Explanations regarding the tax consequences of transactions involving the circulation of digital currencies and the financial results of their implementation are presented in chronological order. The stages of tax regulation of digital currencies in Russia are highlighted. Approaches to indirect taxation of digital currencies are summarized and their consequences for the prospects for the development of digital financial assets on the Russian market are assessed.

Influence of personal income tax on budget income formation of Ukraine

The paper defines the characteristics of population income taxation as the main component of tax revenues of the budget. The impact and fiscal significance of the personal income tax in the structure of tax revenues of the budgets of Ukraine is substantiated. When writing the paper, the method of comparison, synthesis, analysis, tabular and graphical presentation of research results was used, analyzing the dynamics of personal income tax receipts for 2018-2022. The necessity of today's realities regarding the creation of conditions in the tax system for the development of the country's economy and the formation of a stable budget is stated at the current stage. Taxes are an important part of the economic system and affect the formation of the revenue part of the state budget. During the analysis, the impact of the personal income tax on tax revenues to the state budget was revealed. It is outlined that usually indirect taxes prevail in the formation of the revenue part of the state's financial plan, because evasion of their payment is almost impossible. And in modern conditions, when Ukraine needs to restore territories, enterprises, it is the tax system that needs to create conditions for the development of the country's economy and the formation of a stable budget. Changes to the Tax Code and the loss of economic potential in some territories due to the closure or complete destruction of enterprises, the reduction of working personnel led to a decrease in tax revenues. In recent years, the contribution of personal income tax to the state budget has been - 21%; to regional budgets – 15%; to the budgets of territorial communities - 64%, which gives territorial communities the opportunity to increase their own financial resources. In order to achieve this goal, it is necessary to carry out a comprehensive reform of the tax system aimed at increasing the fiscal role of direct taxes by reducing the tax burden on business and the population, increasing the efficiency of tax collection, reducing the level of corruption and supporting small and medium-sized enterprises. And the proposed results of the research will help territorial communities to form their own incomes at the expense of income tax on the incomes of individuals and to perform the functions assigned to them.

Fiscal Policy and Child Poverty in Ethiopia

This study investigates the effects of public transfers and taxes on the wellbeing of children in Ethiopia. It applies the Commitment to Equity for Children (CEQ4C) methodology to examine the burdens of taxation and the benefits from government transfers and spending, and their differential wellbeing impacts on children. The study integrates data from the Ethiopia Socioeconomic Survey 2018/19, which also collected data on taxes and transfers, with administrative data. Measuring its distribution by child monetary and multidimensional wellbeing, the study finds, on average, a progressive, poverty-reducing and equalizing fiscal system. However, there are important differences in the distribution of some of its elements. Indirect taxes, comprising of VAT and excise taxes, are regressive. Similarly, primary education spending, the largest of in-kind transfers, is only progressive in urban areas. With regards to poverty and inequality, the fiscal system reduced the monetary child poverty headcount by 21% and the poverty gap by 33%. The effect is stronger for girls and children in rural areas than for boys and children in urban areas, therefore reducing inequalities in poverty rates. However, this is only the case when in-kind transfers for education and health are considered. Without the inclusion of in-kind transfers, the study finds that the fiscal system is not well calibrated to reduce poverty. This highlights the essential role of public services, not only in delivering fundamental child rights, but also in reducing poverty amongst children.

Demography and Inequality: The Effect of Tax Composition

This paper investigates how aging societies lead to worsen distribution of income through tax composition measured by ratio of direct taxes to indirect taxes. The rationale follows: due to the political power of working age population emanating from majority of their share in the population, in a median voter model, they manage to shift the tax burden on aged population in an aging society through increasing direct taxes more than indirect taxes. This results in elevating income inequality in society. To estimate our hypothesis, we apply panel data using time and country fixed effects. Based on sample covering 110 countries from 1990-2020 and applying different inequality measures and robustness check, the empirical evidence considerably supports this hypothesis. The results hold firmly across the OECD and non-OECD countries together with strong and weak democracies.

Role of ICT, Governance Quality in Indirect Tax Revenue Productivity: A Comparative Analysis of Two Recent Indirect Tax Regimes in Indian States

The study explores the determinants of indirect tax mobilization across various groups of Indian states based on their major, minor categories and more and less industrialized attributes. It observes a strongly positive but differential impact of per capita RGSDP on own tax revenue efforts of various state groups. Information and Communication Technology use is only helping major less and minor more producer states in augmenting their tax revenues, whereas it results in decreased revenues for major more and minor less producing state groups including all the states in a group. This implies use of Information and Communication Technology has been less effective for most Indian states in augmenting their tax revenues. The governance quality results in loss of tax revenues in major and minor less producer states, while it has no effect on major more producer including all minor and all states together. This implies a weak role of governance in taxation. We observe differential impact of tax regimes for different state panels, which has significant policy relevance. JEL Classification: H11, H21, H27, H77

Contribution of Indirect Taxes on Goods to Economic Growth of Pakistan (1972-2022)

PURPOSE Economic growth is influenced by the changes in indirect taxes imposed by the government on the production/consumption of goods. This paper aims to identify the empirical relationship between indirect taxes – i.e., federal sales tax, federal excise duty, and customs duty – and the economic growth of Pakistan. METHODOLOGY For this purpose, annual time series data from 1972 to 2018 are used. The objective of the study is to evidence the long-run and short-run relationships of federal sales tax, federal excise duty, and customs duty with economic growth. The Augmented Dickey-Fuller unit root tests are used to check the stationarity of each variable. The Johansen Cointegration Test is performed to identify the cointegration among variables. The Vector Error Correction Model (VECM) is used to estimate the long-run and short-run relationships among these variables. FINDINGS The results of the study show that there are two cointegrating equations among variables. GDP Lag5, GDP Lag6, ST Lag1, ST Lag5, and FE Lag4 possess a positive impact on the economic growth of Pakistan. However, GDP Lag2, FE Lag6, and CD Lag7 have a negative impact on the economic growth of Pakistan. Previous years’ deviations from long-run equilibrium are corrected in the current year at an adjustment speed of 33% and 18% for GDP and ST, respectively. CONTRIBUTION/IMPLICATIONS Since the sales tax has a positive impact on economic growth, whereas federal excise duty and customs duty have a negative relation, it is advisable to form policies that contribute to economic growth instead of restricting it. As of the published statistical records of 2018, sales tax, federal excise duty, and customs duty contribute 65 per cent, 9 per cent, and 26 per cent, respectively, to the total indirect taxes. This collection structure is required to be rationalised to boost economic growth.

Tax collection efficiency and tax revenue generation in Nigeria

When compared to other African countries, Nigeria has one of the lowest tax to GDP ratios among the top ten largest countries in Africa. Hence, this study assessed the effect of tax collection efficiency on the level of tax revenue in Nigeria. The study is built theoretically on the cost-benefit theory of taxation. Secondary data was collected in this study over an eleven-year time period which range over 2011 to 2021. The data were processed analytically using the regression model to measure the effect of the independent variable which is tax cost of collection efficiency on the dependent variables which are direct cost and indirect taxes and moderated by accountability of the collecting agency. The outcome of the study shows the regression result of 74.3% and a calculated p-value of 0.002 which shows that tax collection cost efficiency have a high level of significance effect on direct tax revenue generation in Nigeria. It is concluded from the result that tax collection cost efficiency does have a significant effect on tax revenue generation in Nigeria. Based on the outcome of the study, it is advised that more prudent measures be set up so as to ensure improvement in the tax collection process in order to manage tax collection cost efficiently and improve tax revenue generation in Nigeria.

Performance of Goods and Services Tax System in India in Recent Years

In 21century we pay various taxes including direct and indirect taxes, which are felt as burden on us for which corruption are increasing in every field. So, to reduce from these various taxation system and control increasing corruption, GST was implemented India in 1st July 2017. GST is an indirect tax that merged multiple taxes into a single tax system that will be levied on manufacture, sale and consumption of goods and services. Indian GST followed three GST model like -Central GST, State GST and IGST (Integrated Goods and Services Tax).This paper is designed specifically to provide an in-depth knowledge of GST and comparison of Indian GST taxation system rates with other countries, and also presented in-depth coverage regarding its advantages and disadvantages towards the economy for GST implementation in a developing country like India. The present paper has an attempt to find out the compound annual growth rate (CAGR) and average annual growth rate (AAGR) of total GST collection India during FY 2017-18 to FY 2022- 23.

Impact of indirect taxes on CO2 emissions in the presence of institutional quality: evidence from a global panel data analysis

PurposeDespite the importance of tax policy in reducing energy consumption and carbon emissions, there is a dearth of research on the environmental impact of indirect taxes. This paper examines the impact of indirect taxes on carbon dioxide (CO2) emissions, with an emphasis on institutional quality.Design/methodology/approachThe study uses the Government Revenue Dataset (2021), comprising 143 countries, dividing into 114 developing and 29 developed countries, during the period between 1996 and 2019. The author adopts panel data techniques, with Driscoll–Kraay standard errors to account for the issue of cross-sectional dependence (CSD).FindingsThe results indicate that indirect tax revenues have a negative and significant impact on CO2 emissions for the total sample. The subsample analysis revealed that while indirect taxes reduce carbon emissions in developing countries, opposed results are reported for developed countries. This finding implies that most of the advanced countries have already reached a high level of taxes, at which carbon emissions increase as indirect tax increases further. Interestingly, the results revealed that institutional quality enhances the role of indirect taxes in mitigating carbon emissions for both developing and developed countries.Originality/valueTo the best of the authors' knowledge, this is the sole study using the newly developed tax data by the United Nations University, World Institute for Development Research (UNU-WIDER) to investigate the impact of indirect taxes on carbon emissions, with an emphasis on institutional quality. The existing literature focuses on specific taxes, like carbon taxes, with no comprehensive research on the link between indirect taxes and carbon emissions.

VAT as a Policy Instrument in the European Union A legal framework for pursuing policy objectives in VAT law

The desire to raise revenue efficiently, and in some cases, change behaviour and economic activity are at the heart of a shift towards the use and incidence of consumption taxes’. Although VAT is mainly a source of state and EU revenue, VAT law is increasingly used as an instrument to pursue various policy objectives. Due to its design as an indirect tax, however, VAT is subject to limitations regarding its ability to achieve both distributional and behavioural effects. The aim of this paper is to identify the legal framework for pursuing policy objectives in VAT law from a European Union law perspective. Since the actual effects of policy instruments within VAT law depend on extra-legal circumstances, such as economic and behavioural factors, this paper contributes to the discussion on evidence-based legislative processes. It concludes with suggestions for the legislator regarding both a suitability assessment ex ante as well as an evaluation ex post. VAT, policy instrument, VAT exemptions, reduced VAT rate, behavioural effects, distributional effects, ability-to-pay, indirect tax, principle of equal treatment, policy goals