Optimal Tax Research Articles

The Optimal Tax Structure from GDP-growth Perspective

The tax multiplier in macroeconomics assumes a negative relationship between the volume of tax revenue in a country and its GDP. However, it may also be relevant to GDP growth whether the same volume of tax burden is levied in a different structure. Can the fiscal government stimulate the GDP growth by restructuring the tax revenues? The following study analyses the linkage between GDP growth rate and the structure of tax revenues. A database contains data from 25 EU countries which are open economies in the European single market. The period starts in 1996 and lasts until 2018. The Eurostat classification is used for tax types. Dynamic GMM tests are applied for GDP equations based on expenditure and output approach and extended with taxation category determinants. The conclusions are that tax structure based on consumer taxes on production and income tax can support the economic growth, meanwhile higher weight of social contribution is a destructive factor for income expansion. The policy recommendation is to reweight the tax structure toward indirect taxes from direct taxes if economic growth is a preference in the tax system in a trade-oriented open economy. Novelty of the research: Application of Arellano-Bond version of Dynamic GMM test, comparable results for Solow-Swan and augmented Cobb-Douglas approaches, the composition of database, the falsification and verification of statements of the existing literature.

The Real-Time Dynamic Prediction of Optimal Taxi Cruising Area Based on Deep Learning

A real-time, effective, and dynamic taxi cruising recommendation strategy is essential to solving the problem of taxi cruising passenger difficulty and urban road traffic congestion. This study focuses on two aspects of the real-time accessible range and pick-up ratio (PR) and proposes a real-time dynamic identification method for taxi optimal cruise-seeking area. Firstly, based on the cumulative opportunity method, a univariate temporal convolutional network (UTCN) accessible range dynamic prediction model is proposed to predict the real-time accessible range of taxis. Secondly, based on the gradient boosting decision tree (GBDT) model, the influencing factors with a high correlation with the PR are selected from the four dimensions of traffic characteristics, environmental meteorology, and time and space variables. Then, a multivariate univariate temporal convolutional network (MTCN) global grid PR prediction model is constructed, and the optimal taxi cruising area is identified based on the maximum PR. The results show that the taxi accessible range and PR of the same grid in different periods change with time, and based on the model comparison, the accessible range and PR prediction results of UTCN and MTCN algorithms in different periods are the best to identify the optimal cruising area of taxis in different periods. The main contribution of this study is that the proposed optimal cruising area prediction model has timeliness, accessibility, and dynamics. It can not only improve the probability of taxis receiving passengers and avoid taxis cruising aimlessly, but also solve the shortage of taxis in hotspots, thus shortening the waiting time of passengers. This provides a scientific basis for improving taxi cruising efficiency and the government’s formulation of taxi operation management policies, which can effectively promote the sustainable development of urban traffic.

Dynamic Job Market Signaling and Optimal Taxation

Dynamic Job Market Signaling and Optimal Taxation

Optimal Taxation under Status Consumption and Preferences for Equality 1

Optimal Taxation under Status Consumption and Preferences for Equality 1

Understanding the Optimal Tax Rate: Balancing Work Incentives and Revenue Needs

Understanding the Optimal Tax Rate: Balancing Work Incentives and Revenue Needs

Development of the methodology of taxation of agricultural enterprises in the context of digitalization

According to the norms of Russian legislation taxpayers by default fall under the general system of taxation. Developing financial and economic activities, enterprises, including agricultural enterprises can apply different tax regimes: the transition, for example, to a simplified taxation system, unified agricultural tax, patent system, etc., is carried out at the initiative of the payer, i.e. is of notification nature. Since for the business owner the decisive moment is the total tax payments (tax burden), the issues of its optimization are of particular relevance. In the course of work we analyzed and systematized the norms of tax legislation of the Russian Federation and the Republic of Tatarstan, processed data on taxes and fees posted on the official website of the Federal Tax Service of Russia, using the economic and statistical method. The result of the research is the choice of optimal tax burden for agricultural enterprises of small business including the use of information technologies in order to increase the efficiency of their activities.

Fairness of Land Value Taxation: A Derivation of Optimal Tax from behind a Veil of Ignorance

Fairness of Land Value Taxation: A Derivation of Optimal Tax from behind a Veil of Ignorance

Absorption of Rural and Urban Land and Building Tax (PBB-P2) Through the Tax Object Management Information System

his research aims to determine the implementation of the Policy on the Absorption of Rural and Urban Land and Building Taxes (PBB-P2) through the Taxpayer Information Management System and analyze the factors that support the implementation of the Policy on the Absorption of Rural and Urban Land and Building Taxes (PBB-P2) Through the Taxpayer Information Management System. This research is a type of qualitative research with a descriptive approach. In qualitative data analysis there are three streams of activities that occur simultaneously, namely data condensation, data presentation, conclusions.The regional government of East Kutai Regency is trying to increase Original Regional Income (PAD) by optimizing the management of Regional Tax collection. This is done through the implementation of an online and integrated information and technology-based Tax Object Information Management System. The research focus includes taxpayers in East Kutai Regency which has a total number of tax objects reaching 146,248, with around 70% more tax arrears compared to other districts. The policy implementation process for the absorption of Rural and Urban Land and Building Tax (PBB-P2) is carried out based on the East Kutai Regent's regulation Number 44 of 2013. Implementation steps include policy formulation by the Regional Government, including determining tax rates, regulations, tax exemptions, and related provisions. The Tax Object Management Information System (SISMIOP) is used to manage tax data, monitor policy implementation, and report results. Supporting factors for policy implementation through SISMIOP include efficiency in managing tax object data, support for tax outreach and education activities, as well as providing better access to taxpayers regarding tax information. The East Kutai Regency Government uses SISMIOP for monitoring, supervision and decision making regarding taxes to ensure taxpayer compliance and optimal tax collection

The Optimal Tax Rate: An Empirical Assessment in Congo

The Optimal Tax Rate: An Empirical Assessment in Congo

Tax Strategy and International Financial Management of Multinational Companies

Abstract In the context of intensifying global competition, the exploration of corporate tax strategy is emerging as a pivotal area within financial management. This paper develops a flowchart for a tax planning scheme tailored to the economic strategy of multinational corporations. It examines the tax planning approaches related to enterprise financing strategy and capital operation strategy, identifying the optimal tax planning scheme based on two primary service objectives outlined in the flowchart. An empirical analysis is conducted using the case of H Communication Company to investigate the tangible benefits of its tax strategy on international financial management during its multinational operations. The results demonstrate that following tax planning, the coefficient for the cross-term of the multinational company’s earnings per share stands at 0.8340, suggesting that the market has positively received the company’s effective tax avoidance measures. This study not only advances practical research on tax planning for multinational projects but also serves as a dual theoretical and practical reference for the operations of multinational enterprises.

Big Data Simulation Analysis of the Impact of China’s Carbon Tax Levy on Carbon Emission Behavior under the Background of “Dual Carbon”

Abstract This study focuses on the impact of China’s carbon tax on carbon emission behavior under the background of “double carbon”, using big data simulation analysis. The study utilizes the DICE model, combined with general equilibrium theory, to conduct in-depth theoretical analysis and numerical simulation of the carbon tax policy. It is found that the optimal carbon tax rate should be flexibly adjusted in combination with social and economic development and technological progress, and the optimal tax rate gradually rises from RMB 2.83/tonne of carbon dioxide to RMB 17.62/tonne from 1997 to 2023. Simulation results show that increasing the carbon tax rate can effectively promote the low-carbon emission reduction behavior of enterprises and thus achieve the emission reduction target. Under the fixed carbon tax policy, a 50% tax rate can significantly improve environmental quality and economic output. In contrast, steady-state values of output and carbon emissions decrease with the increase of tax rates. At the same time, the combination of carbon trading and carbon tax can more effectively incentivize enterprises to reduce carbon emissions. The results of the study show that a flexible and reasonable carbon tax policy can significantly affect carbon emission behavior, which is of great significance for realizing China’s “double carbon” goal.

부가가치세법상 용역의 공급장소와 과세권에 관한 연구

The value-added tax (VAT) of each country has been levied according to the policies of each individual country based on tax neutrality to protect the competitiveness of domestic industries, under the two principles of destination principle and origin principle without adjustment through separate tax treaties between countries. As these two principles suggest, in order to apply these principles, consumption and production of taxable services must be clearly distinguished in terms of their behavior and place. However, with the changes in the industrial environment, IT-enabled services have emerged, making it difficult to distinguish between the production (provision) and consumption (use) of services, and it is sometimes difficult to specify the production (provision) and consumption (use) places.
 In the supreme court decision 2018du39621 dated July 29, 2022(hereinafter “the Decision”), the Supreme Court judged the place of supply of service based on the place where the important and essential part of the service was performed, not on the VAT tax principle or the VAT Act, for IT-enabled services supplied across borders. However, it was found that this judgment was problematic and began this study.
 In this paper, it was reviewed the taxing right and the place of supply of service under the VAT Act from an academic and legal perspective, analyzed the precedents in which the controversy over the place of supply of service was an issue, and confirmed that the Supreme Court's position has generally been to judge the place of supply of service as the place where it is consumed. It was also suggested that the Korean VAT Act be amended in the direction of specifying the general principle of the place of supply of services in the law text, and establishing exceptions for each type of service in subordinate legislation, as in the VAT Acts of Germany, the United Kingdom, and the Consumption Tax Act of Japan.
 This study will be an opportunity to establish new criteria for the place of supply by considering the characteristics of IT-enabled services, and that it will be helpful for the future improvement of the VAT Act.

Optimal Tax Theory for Investment in Human Capital and the Role of Family

Purpose: Parents spend more than half of all education expenditures on children’s education, thus the role of the family cannot be omitted in determining the optimal educational policy. The main aim of the article is to present economic literature on optimal taxation with human capital, focusing on studies concerning the impact of the family (parents) on the investment in children’s human capital. Design/Methodology/Approach: Insights from two workhorses are reviewed: the RAMSEY approach and the MIRRLEES approach. The literature in the field considers two instruments: Income-Contingent Loans (ICL) and Education Subsidies (ES). Results from theoretical and simulation studies are summarized. Findings: Income-contingent repayment loans can improve welfare, whereas the effects of education subsidies may be positive only under some assumptions. Research limitations/Implications: The MIRRLEES approach is a relatively new strand of literature and due to numerically complexity all researches analyze only partial-equilibrium models with simple set-up (without altruistic families/ fertility decisions/ pension systems). Originality/value: The article provides guidance for policymaker and decision-makers regarding optimal higher education systems and financial support systems for students.

ОПТИМИЗАЦИОННАЯ МОДЕЛЬ ВЫБОРА НАЛОГОВОЙ СИСТЕМЫ

The problem of choosing different taxation systems for small businesses is considered, an opti-mization model of choosing the optimal taxation system from the point of view of minimizing the tax burden is proposed

Optimal Taxation of Cigarettes and E-Cigarettes: Principles for Taxing Reduced-Harm Tobacco Products.

As the tax base for traditional tobacco excise taxes continues to erode, policymakers have growing interest to expand taxation to novel and reduced-risk tobacco products. Chief among the latter are electronic nicotine delivery systems (ENDS; commonly known as e-cigarettes), although other reduced-risk tobacco products such as heated tobacco and smokeless tobacco products are also being considered for taxation. There are many possible rationales for taxing such products: to raise revenue, to correct for health externalities, to improve public health, to correct for internalities caused by irrationality or misinformation, and to redistribute income. Although each rationale leads to a different objective function, the conclusions regarding relative tax rates are largely the same. The relatively higher price elasticity of demand for e-cigarettes (compared to cigarettes) and the lower marginal harms from use imply in each case that taxes on e-cigarettes and other harm-reduced products should be relatively lower, and likely much lower, than those on cigarettes. Additional considerations concerning the policy goal of discouraging use of any tobacco product by youth are discussed as well.

Herding, taxpayer's rent seeking and endemic corruption

In an environment with extensive corruption where much of the population evades paying their full taxes due, we tackle the question of optimal taxation when constituencies with conflicting objectives (the poor and the rich) push tax policy in different directions. We think in terms of a government policy maker here called the tax administrator (TA) and rent-seeking lobbying efforts by poor and rich constituencies. We recognize the taxpayers’ inter-dependency as reflected in increased evasion likelihood when others are thought to be evading. Thus our modeling incorporates elements from the theory of information cascades (herding) into a standard model of tax evasion. The poor and rich undergo a rent-seeking contest seeking to influence the TA in setting policy so that their constituency is favored. The TA maximizes an objective function that is a weighted average of expected social welfare, their own interests, and investment in better tax administration. With these building blocks we examine the functioning of the economy. Our results include those that are expected, counterintuitive and surprising. For example, we learn that lower taxes on the rich does not mean the TA cares more about the public interest. Instead, it may result from the TA caring less about the public welfare of others in society, i.e., less about both the poor and the rich. Furthermore, with an increase in perceived inequality society's optimal tax rate rises. On the other hand, high tax levels lead to high herding and greater herding decreases investment by the poor and the rich attempting to affect the tax level set by the TA. Thus, a TA who only cares about their own self will enact lower tax levels than if they cared about others in the society.

Optimal Taxation of Inflation

Optimal Taxation of Inflation

Tax policy or carbon emission quota: A theory on traditional ICEV transportation regulation

This study investigates the environmental consequences of consumers opting for traditional internal combustion engine vehicles (ICEVs), resulting in heightened pollution. Given the critical importance of addressing environmental degradation and its impact on societal welfare, our research aims to provide insights into effective policymaking strategies. In an ideal scenario, a benevolent planner would equitably distribute wealth, forming the first-best policy. Recognizing the impracticality of this ideal, we propose two viable second-best policies: an income-based tax and the implementation of a carbon emission quota. Theoretical analysis highlights the efficacy of the tax policy in pollution reduction, particularly with the growing number of mid-income electric vehicle consumers. The optimal tax policy adeptly navigates the delicate balance between pollution and income effects. Furthermore, we establish that the optimal pollution quota under the carbon emission policy is lower than in both competitive and first-best scenarios. A numerical comparison of the four equilibrium outcomes underscores these findings. In addition, we advocate for a blockchain-based decentralized carbon emission quota trading platform to digitize and optimize allocation and compliance processes, fostering more efficient and transparent environmental management.

A Dynamic Model for an Optimal Consumption Tax Rate

Following Ramsey, the existing literature on optimal taxation only compares the pre and the post-tax market equilibriums in order to account for the efficiency losses. However, when the government imposes an ad valorem tax on the consumer, the buyer's price jumps to the pre-tax equilibrium price plus the amount of the tax, and the supply and the demand of the taxed commodity then adjust over time to bring the new post-tax market equilibrium. The existing literature does not take into account the efficiency losses during the adjustment process while computing the optimal ad valorem taxes. This paper shows how adjustment process influences the optimal ad valorem taxes, minimizing the efficiency losses (output and/ or consumption lost) during the dynamic adjustment process as well as the post-tax market equilibrium. (JEL H20, H21, H22)

Optimal taxation in the life cycle with human capital investment

This paper studies optimal taxes in a lifecycle model with unverifiable human capital investment inseparable from regular consumption. The planner faces asymmetric information regarding agents’ exogenous abilities and endogenous human capital. Agents deviate in two ways: misreporting ability and mis-investing in human capital. We characterize the distortions in a model with i.i.d. shocks and full human capital depreciation. Distortions are characterized by capital wedges that are positive over the life cycle, labor wedges that are negative early and positive later in the life cycle, and net human capital wedges that are positive in the life cycle. These wedges serve as mechanisms to eliminate the distortion to consumption due to inseparability from education expenditure. Calibrate to U.S. data, we show numerically that these results apply in a richer model with persistent shocks and non-full human capital depreciation. Simulation suggests that average capital wedges are positive in all working periods, with progressive capital wedges in contemporary skills, average labor wedges are negative in early and positive in later periods, with hump-shape in skills and nonzero at the top and the bottom of the skill distribution, and net human capital wedges are positive and regressive in skills, indicating that human capital subsidies are in favor of the high skilled.