Net Tax Research Articles

Methods for estimating entropy and analyzing sectoral development of the economy

Aim. To substantiate the method of estimating the entropy of the sectoral structure of the economy and on this basis to develop methods of analyzing its sectoral development.Objectives. To define the essence of sectoral entropy of socio-economic systems; to consider the approaches to its assessment and the relationship between the entropy of industries and average per capita gross domestic product (GDP) with the structure of value added of industries of the economy.Methods. To achieve the set goals, the general scientific methods of analysis, synthesis, comparison, generalization, as well as methods of statistical data processing were applied.Results. The expediency of using a probabilistic approach to the estimation of entropy of homogeneous economic structures, which with their development changes according to the exponential law, is substantiated. The position that it is reasonable to estimate the entropy of a homogeneous structure by the averaged sum of entropies of its elements has been argued. The boundary values of the entropy of a homogeneous structure are established. The exponential relationship between the entropy of industries and average GDP per capita and the structure of value added of industries, industry entropy and the share of net taxes on production and imports in the GDP structure has been determined.Conclusions. The identified features of sectoral development of the economy constitute a theoretical and methodological basis, which allows us to establish the significance of influencing factors. This is necessary for sectoral regulation of the economy.

New Zealand’s lauded fiscal legislation: has it reduced fiscal uncertainty?

The principles-based legislation governing New Zealand’s fiscal policy, introduced in 1994, is praised for delivering sustainable public debt outcomes. Based on the provisions of the legislation, we argue that the legislation’s success in delivering an alternative outcome – reduced fiscal policy uncertainty – also needs to be assessed. We estimate the legislation has reduced net tax (government spending) uncertainty by between 32 and 46 per cent (31 and 40 per cent). We also show that fiscal uncertainty’s effect on output is regime dependent, and net tax uncertainty is more detrimental to output under the present regime than government spending uncertainty.

The Ricardian Equivalence under Collateral Constraints

Abstract This paper investigates the Ricardian Equivalence (RE) under collateralized debt, default, transaction costs and incomplete markets. The public debt is neutral and the RE holds only if the collateral-transfer cost depends linearly on the lump-sum tax and is fully offset. Lenders and borrowers should enter in a voluntary agreement to compensate for any transfer cost under default. However, any perturbation in the assumed affine relation undermines the debt neutrality. It is not the transaction cost per se that invalidates the RE, but rather how this cost affects the households’ indebtedness and budget constraint. The underlying mechanism is the credit channel of the fiscal policy. Whenever the transfer cost is not fully offset, there is a net tax balance leftover that affects the budget set and real allocations. This is fundamentally different from a liquidity constrained economy because the credit channel of the fiscal policy is binding and uncompensated transaction costs lead to the RE failure.

National debt management and business sustainability in Africa's largest economy: A focus on the private sector.

In many developing economies, high and increasing public debt profile constitutes an essential means of financial risk. An appropriate debt management is germane for survival of business and good international reputation though its effect on private sector credit mobilization had been seldomly investigated. This study seeks to know whether strategic debt management approach exacts a significant effect on the Nigerian private sector and Africa at large resulting to higher credit availability for sustainable enterprise establishment. The study used a time-series observation spanning from 1981-2021. The method of data analysis employed the unit root test for stationarity. Johansen cointegration and vector error correction approach. The result of the unit root test indicates the series were all stationary after first difference and thus were integrated of order1. The Johansen cointegration test support the existence of a cointegrating series between the private credit and its determinants. More empirical evidence from the study shows that proper debt management and increase revenue generation through net taxes on products accounted for 0.93 and 1.32% increase in private sector credit mobilization, while total external debt stock was responsible for a significant negative influence of 0.60% on private sector credit mobilization. The study recommends that the government should always be proactive in their strategic and innovative approach to debt management, revenue generation and sources of funds. This will help not only to avoid crowding out of the private sector but will enhance adequate credit mobilization for effective operations of the private sector.

Taxing reproduction: the full transfer cost of rearing children in Europe.

What are the intergenerational resource transfer contributions of parents and non-parents in Europe? Using National Transfer Accounts and National Time Transfer Accounts for 12 countries around 2010, we go beyond public transfers (net taxes) to also value two statistically much less visible transfers in the family realm: of market goods and of unpaid household labour (time). Non-parents contribute almost exclusively to public transfers. But parents additionally provide still larger private transfers: mothers mainly time, fathers mainly market goods. Estimating transfer stocks over the working life, the average parental/non-parental contribution ratio in Europe flips from 0.73 (public transfers alone) to 2.66 (all three transfers combined). The highest combined parental/non-parental contribution ratios are in Sweden and Finland. The metaphorical tax rates implicitly imposed thereby on rearing children in Europe are multiples of the value-added tax rates in place on consumption goods. Unveiling the sheer magnitude of these invisible transfer asymmetries carries multiple implications for policy debates. For instance, it raises the question whether ageing European societies unwittingly tax, rather than subsidise, their own reproduction. Family friendly policy models, such as the Nordic welfare states, do not mitigate this effect. They help parents work, but do not lower the implicit tax parents pay.

Case Law Trend: Withholding Taxation Under the Fundamental Freedoms

This paper critically analyses recent developments in the CJEU’s case law regarding withholding taxes (WHT) and the constraints that fundamental freedoms impose on Member States in this area. It argues that both resident and non-resident taxpayers are universally comparable from a source state perspective, regardless of whether a double tax treaty (DTT) precludes a specific form of domestic taxation in the source state. Furthermore, it asserts that the net taxation obligation should be accessible not only as an ex-post refund but also as an ex-ante option for nonresident taxpayers to file a tax return under the same conditions as resident taxpayers. EU direct tax law, withholding taxes, restriction, net taxation, refund mechanism, impact of double tax treaties

US Inequality and Fiscal Progressivity: An Intragenerational Accounting

This study measures inequality and fiscal progressivity. It differs from prior such analyses by measuring inequality based on remaining lifetime spending rather than particular resources, like wealth and current income, that only partially determine lifetime spending, and by considering inequality and progressivity within generations. To estimate the distribution of remaining lifetime spending, we run the 2016 Federal Reserve Survey of Consumer Finances (after imputing missing data from other surveys) through The Fiscal Analyzer (TFA), a life-cycle consumption-smoothing program that incorporates remaining life-time resources, borrowing constraints and all major federal and state tax and transfer programs. We find that inequality in wealth and income dramatically overstate inequality in remaining lifetime spending. For example, the richest 1 percent of forty year olds, where resources are measured as the sum of human plus non-human wealth, have 34.1 percent of the cohort’s total non-human wealth, but account for only 14.5 percent of the cohort’s total remaining lifetime spending. The poorest quintile of forty year olds own just 0.6 percent of the cohort’s wealth, but account for 7.3 percent of its remaining lifetime spending. We also find that within-cohort inequality differs considerably from inequality across the entire population, regardless of age, and that, for particular age cohorts, current-year net tax rates substantially understate the degree of progressivity. Finally, as we illustrate by for the 2017 Tax Cuts and Jobs Act, the progressivity of tax reform may be significantly misstated using conventional current-year analysis.

Tax burden and the growth of shadow economy in Nigeria: A focus on the corporate tax rate and net taxes on products

The purpose of taxation is to raise revenue to pay for public goods. The question of how tax mix affects the size of the underground economy is one of the most important issues for its application to tax policy. However, the empirical evidence on this subject is limited and also somewhat ambiguous. Empirically, this study specifically aims to evaluate the effect of corporate tax rate and net taxes on the product on shadow economy growth in Nigeria during the period 1996–2020. It employed augmented Dickey–Fuller (ADF) and Phillips and Perron tests to check for unit roots. Thereafter, the Autoregressive Distributed Lag model was employed to determine the short- and long-run effects. The findings of this study show that corporate tax rates and net taxes on products induced much less shadow economy in the long-run while corporate tax rates have a positive impact on shadow economy in the short-run. Keywords: Autoregressive-distributed lag model, corporate tax rate, net taxes, products, shadow economy;

Appropriation of economic values in a rights-based fishery

This study integrates resource-based and stakeholder theories to explore how values are generated and appropriated in a rights-based fishery. We argue that in the fish harvesting industry, a firm's ability to create values is critically dependent on stakeholders outside the firm's boundaries, such as society in general (the principal owner of the natural resource) and the fisheries management of the government. The latter protects the resource from being overfished, and it decides who will get the rights to fish. The empirical context is the seagoing Norwegian purse seine fleet, which has gradually created significant values relative to revenues through the 32-year study period (1985–2016). Specifically, the value appropriation between key stakeholders under a stepwise, more liberalized individual transferable quota system is described and analyzed. The findings show that the vessel owners' share of added values increased gradually from approximately 7% in 1985 to 45% in 2016. Conversely, the labor share dropped from 75% to 42% during the study period. The society's share of the values added (corporate taxes) increased from −5% (net subsidies) to +9% (net tax income). The present study concludes by discussing the findings and their policy implications.

Comparative analysis of the tax wedge in Croatia and Slovenia from 2005 to 2020

Purpose: Personal income tax (PIT) and social security contributions (SSC) play a significant role in tax systems. Since both of them affect employers and employees, it is important to analyse the labour costs paid by the employer (gross wage) and the net wage received by the employee, i.e., the tax wedge. Methodology: Following OECD’s Taxing Wages methodology, this paper analyses the characteristics of the tax wedge and the tax wedge policy in the Republic of Croatia and the Republic of Slovenia in the period from 2005 to 2020. Results: The conducted analysis has shown that a Slovenian taxpayer faces the highest average net tax wedge for each observed family type, and that the Croatian tax wedge is lower in all hypothetical units observed. The taxpayer with the highest average gross wage also faces the highest tax burden. The problem of a relatively high tax wedge in Croatia and Slovenia does not lie with the personal income tax, which is relatively low, but with social contributions. Conclusion: The tax wedge primarily depends on the level of income, it decreases if the taxpayer has (more) children, and its amount depends on various levels of tax, deductions and social security contributions. In the future, the focus will be on alleviating the labour tax burden. However, this begs the question of how to further alleviate the burden on labour without implementing major structural reforms in the pension and healthcare system and/or introducing new tax forms.

The optimal sales threshold separating taxpayers by size in China

This study optimizes the existing sales threshold that separates taxpaying firms by size in China. In the Chinese value-added tax (VAT) system, small-scale taxpayers, whose annual sales are low and who pay a lower tax rate, are distinguished from general taxpayers by a sales threshold. To qualify as small-scale taxpayers and pay less VAT, several general taxpayers who would otherwise exceed the sales threshold tend to reduce production and bunch below the threshold. This bunching pattern is theoretically explained in this study and used to help derive the optimal sales threshold. Furthermore, this study analyzes how the optimal sales threshold varies with changes in administrative and compliance costs and in tax rates. Simulations reveal that optimal sales thresholds are lower than the actual thresholds, indicating that the trade-off between production efficiency and net tax revenue should be considered when determining the sales threshold for VAT in China. • The model explains bunching pattern among Chinese taxpaying firms. • The model determines optimal sales threshold that separates firms by size. • Firms bunch below sales threshold to qualify as small-scale taxpayers and avail a lower VAT rate. • Change in optimal sales threshold with that in administrative and compliance costs and in tax rates are analyzed. • Simulations reveal optimal sales thresholds are lower than actual thresholds in China.

Universal Basic Income, Taxes, and the Poor

A Universal Basic Income (UBI) is often seen as an attractive policy option to replace existing targeted transfer and subsidy programs. However, in a budget-neutral switch to a UBI there is a trade-off between the generosity of the universal transfer, and hence its poverty impact, and the implied increase in tax burden. We summarize our results for fourteen low- and middle-income countries. We find that, with the exception of Russia, a poverty reducing, budget-neutral UBI would entail a significant increase in the net tax burden of top deciles. The efficiency cost and political resistance for such a policy would likely be too high. <strong>JEL Codes:</strong> D31, D63, H22, I32, I38.

Public financial resources: The role of territories (The case of Russia)

The article aims to identify the role of individual territories in the formation of gross and net tax revenues to the federal budget. The peculiarity of the approach will allow, to a certain extent, to assess the nature of spatial (horizontal) redistribution of the federal part of tax transfers administered by the Federal Tax Service. During 2006—2020, the values of net revenues to the federal budget turned out to be negative only in the North Caucasian and Far Eastern districts. In the context of the proposed approach, they are recipients of the federal budget; some of the federal support is, under certain assumptions, financed by tax revenues from other territories. As a rule, 40—50% of all subjects of the Russian Federation have negative net revenues. However, in most cases their values are insignificant, sometimes changing sign. The number of recipients of the federal budget, indicating a change in government priorities in the distribution of tax resources along the budget vertical, consistently increased until the crisis of 2008—2009 and decreased after it (with the exception of 2018—2020).

Analysis of the effects of fiscal policy shocks in the Baltic region

The study aims to compare the effects of fiscal policy shocks in three Baltic countries – Estonia, Latvia, and Lithuania - within SVAR framework, using the identification scheme proposed by Blanchard and Perotti (2002). The time sample covers quarterly data over the period of 2002q1-2019q4. The main idea of the study is to identify the effects of fiscal policy shocks in three euro area member states under a single monetary policy of the European Central Bank, but with country-specific fiscal policy shaped by the European fiscal framework. The results show that, generally, in the short term (up to four quarters), output reacts consistently with the Keynesian view, emphasizing the importance of using discretionary fiscal policy tools in stimulating economic activity in the Baltic region. However, in Estonia and Latvia, the calculated impact multipliers for net taxes are larger than spending multipliers. Although each country reacts differently to its country-specific fiscal shock, the response to the euro area money market interest rate innovation is quite similar with respect to the direction of the effect, which may indicate the robustness of the Baltic region in terms of the euro area shocks. Thus, the results emphasize the importance of conducting domestic fiscal policy adapted to the conditions of each of the analysed economies. Based on the assumptions and the methodology used in this study, the obtained findings show the limited effects of spending on Baltic economies in comparison with the effects caused by the shocks in net taxes. Moreover, due to the lack of large-scale analysis regarding the effectiveness of fiscal policy in Baltic states, the obtained results are a valuable contribution to the debate about the ‘appropriate’ size of the fiscal multipliers for the Baltic region.

Which States Support Which Ones? Predicting Federal Flow Through From the Feds to the States

While politicians in Washington, who have already authorized trillions of funds for businesses in the past 3 years, have been arguing over allocating funds for state and local governments, there have been a number of suggestions that stimulus packages potentially benefit certain states at the expense to others. The arguments primarily appear to come down to politics – “red,” Republican-led states versus “blue,” Democratically-led states. The insinuation is that that the “blue” states are more poorly run than the red states and that the better run “red” states should not be “bailing out” poorly run “blue” states. A linear regression model was developed that perfectly predicted both federal fund recipients and “red” or “blue” designations. Correlation and principal component analysis was run to determine the factors that were the best predictors. The truth appears to be as Governor Cuomo states, “blue” states are better run, better funded and are more productive than “red” states when measuring gross domestic product, income and net tax revenue per person. Educational funding was a major reason “blue” states were ahead of their “red” neighbors.

Теория отложенного налогообложения: концептуальные основы и доказательства применимости

The paper attempts to disclose the conceptual foundations of the theory of deferred taxation, based on the provisions of the concepts of temporary and term (temporal) differences secured by modern accounting standards. The study summarizes the key aspects of the corporate tax distribution procedure (intra-period and inter-period) and tax effects (pass-through, partial, and full). The methods of accounting for deferred taxes: liability, deferral, and net taxation are characterized. The financial nature of deferred taxes is described, including the legal side in terms of their correlation with the categories of assets and liabilities. The criteria for recognition of tax effects depending on the concept of deferred tax accounting are given. The applicability of deferred taxation theory is substantiated using formalization techniques: the derived equations explain the importance of deferred tax accounting, which corrects the financial assessment of assets and liabilities in the direction of the accurate reflection of economic reality. Other unresolved controversial issues in the field of research are considered, and the author’s position in determining the directions of their solutions is offered. The results of the work are useful for further theoretical elaboration, the aim of which is the development of accounting methodology, including the issue of tax effects accounting. Many provisions can be used in the preparation of national accounting standards. Perspective directions of research are the disclosure of economic content of deferred taxes, the conduct of empirical tests with the specified object of accounting observation in order to identify statistical dependencies, which can be used in practical activities, for example, to assess the tax behavior of companies.

ПОДАТКОВИЙ РОЗРИВ З ПОДАТКУ НА ПРИБУТОК ПІДПРИЄМСТВ: ЧИННИКИ ТА ОЦІНКА

Control over compliance with tax legislation is mainly entrusted to the governments of countries, which can use various instruments to monitor payment of main budget-forming taxes, including corporate income tax. There are many uncertainties and threats to corporate tax revenue, given recent technological advances and current abilities of international companies to do business around the world.Therefore, it is within countries that there are the greatest opportunities for mobilizing tax resources by increasing the level of compliance with tax legislation and eliminating or reducing the tax gap. Based on the results of the analysis of tax gaps in the income tax, it is possible to develop new relevant directions for improving tax policy and tax administration within the country. The article examines the prerequisites and factors that lead to the emergence of a tax gap, substantiates the importance of control and assessment of tax gaps. The meaning and difference between gross and net tax gap is specified. The main approaches to assessing tax gaps are considered - bottom-up approach and top-down approach. The main approaches to assessing tax gaps are considered - bottom-up approach and top-down approach. The differences, features of application and shortcomings of these methods, necessary conditions and elements for applying the chosen approach and sources of information, such as requests, information about taxpayers, data comparison, data of tax audits, are analyzed. The two main goals of the tax gap assessment were considered, namely, the improvement of tax policy, which is related to the "top-down" method, and the improvement of administration of the corporate income tax. At the same time, the use of the results of the assessment of the tax gap depends on the approach used to calculate the corporate income tax. International experience in assessing the size and structure of the tax gap from the corporate income tax is summarized based on the examples of such countries as Great Britain, Canada and the USA, which conduct tax gap analysis to improve fiscal legislation and reduce the level of the tax gap.

Finances of the Nation: Net Income Tax Rates and the Changing Progressivity of the Cash Tax/Transfer System

In this article, using new data released in 2019, Tahsin Mehdi and Brian Murphy examine changes in the progressivity of the federal and provincial income tax system, in conjunction with changes in the progressivity of federal and provincial cash transfers since 1992, by examining effective tax rates. Many of the major components of the system of income taxes and cash transfers have become somewhat more progressive collectively over time. This has resulted in an improved net tax position for lower-income taxfilers as well as the top third of taxfilers. On the other hand, taxfilers in the middle quintile have experienced a drop in their net tax position since 1992.

Statutory, effective, and optimal net tax schedules in Lithuania

Abstract We estimate effective and optimal net income tax schedules and compare them to the estimated statutory rates for the case of Lithuania for the period 2014–2015. Values of effective net tax rates are estimated from the survey of EU Statistics on Income and Living Conditions; the statutory net tax rates are estimated with the European tax-benefit simulator EUROMOD, whereas optimal net taxes are calculated via Saez (2002) methodology. We find that the three net tax schedules are similar for employees in the middle of the income distribution. At the bottom of the income distribution, optimal net tax schedules suggest higher in-work benefits. The net tax schedules diverge substantially for the self-employed. At the top of the income distribution, where the majority of self-employed are concentrated, the self-employed are required to pay 15 cents less net taxes per Euro than employees—and they effectively pay 29 cents less.

КОНВЕНЦИОНАЛЬНОЕ ПРАВОВОЕ РЕГУЛИРОВАНИЕ НАЛОГООБЛОЖЕНИЯ ДОБАВЛЕННОЙ СТОИМОСТИ ГОСУДАРСТВАМИ-УЧАСТНИКАМИ СОВЕТА СОТРУДНИЧЕСТВА СТРАН ПЕРСИДСКОГО ЗАЛИВА

The article discusses the legal aspects of supranational legal regulation of value added taxation in the Persian Gulf countries. The novelty of the research lies in the comparative aspect of the legal study of supranational law on the value-added tax in the Gulf countries, which allows formulating fundamentally new characteristics and interpretations that extend the theoretical and legal views on the legal mechanism of VAT, and analyzing the key provisions of the legal regulation of VAT of the states that are parties to the Common VAT Agreement. The issues of the Agreement for the countries of the Gulf Cooperation Council, as well as acts of national legislation on this tax, were studied. The analysis of the provisions of the Agreement allows concluding that the tax instrument this Agreement regulates can be classified as a type of neutral legal regulation of value-added taxation. Its peculiarity is that the country for one reason or another introduces VAT into the national tax system with minimal tax rates and continues to keep it at a low level that does not have a restraining effect on the development of its own industry. This is the reference point for the Common VAT Agreement for the countries of the Gulf Cooperation Council. The research shows that the supranational legislation of the Persian Gulf countries covers the most complex and fundamentally significant issues of legal regulation of value-added taxation, which developed taking into account the accumulated world experience in the administration of this tax. Conclusions have been obtained that the main direction of the adopted supranational legislation is the creation of a unified legal framework for the development of a coordinated legal regulation of VAT in each of the six Arab states of the Persian Gulf. The definitions of concepts that are crucial for VAT regulation are given, among which the following can be distinguished: reverse VAT accrual, input tax, deductible tax, net tax, mandatory registration threshold, voluntary registration threshold, and tax group. In the final part of the work, it is concluded that the second regional system of legal regulation of value-added taxation after the European one is being created, which begins its development on the basis of supranational legislation. Within its framework, the states that are parties to the Agreement shall organize administrative cooperation in the following areas: (1) exchange of information necessary for determining tax accuracy; (2) coordination of synchronized audit procedures and participation in audits; (3) assistance in tax collection and adoption of necessary procedures related to VAT collection.