Optimal Tax Research Articles

Optimal Taxation of Multinational Enterprises: A Ramsey Approach

Optimal Taxation of Multinational Enterprises: A Ramsey Approach

The Optimal Taxation of Couples

The Optimal Taxation of Couples

Casting Doubts on the Approach of Mirrlees to Optimal Taxation - a Technical Critique and Substantive Points: A Call for a Universal Second Order Approach

Casting Doubts on the Approach of Mirrlees to Optimal Taxation - a Technical Critique and Substantive Points: A Call for a Universal Second Order Approach

Управління оподаткуванням : формування підходів щодо визначення основоположних категорій

The article is devoted to the study of existing approaches to the definition of fundamental categories and concepts in the taxation management system, which are based on a critical analysis of scientific opinion regarding the understanding, interpretation and characterization of processes related to the organization of the state's activities and the implementation of its powers in the field of taxation and regulation of tax relations. It is proved that the categories "taxation management", "tax management" and "tax administration" are close in terms of content and etymological perception. Along with this, it is substantiated that taxation management is a broader and more complex phenomenon and functionally includes both the organization of tax process management (tax management) and the organizational and administrative activities of authorized state bodies in the field of taxation process management (tax administration). It was determined that taxation management is a dynamic scientific and practical process, multifaceted in its content, target institutions and organizational conditions, which is based on general principles and fundamental provisions of economic management, a systematic approach and analysis, and which is formed in accordance with the prevailing economic conditions at a certain point in time and is transformed under the influence of changes in the external environment and is aimed at ensuring the sustainable development of the economy, society and the state. It has been established that the organization of taxation management is impossible without clear coordination of actions between management subjects, which is provided by the mechanism of taxation management. It is suggested that the mechanism of taxation management should be understood as a set of management actions of state authorities, economic management and control, public supervision bodies and professional organizations, which are implemented by them together with taxpayers in the process of paying taxes and fees and are aimed at ensuring the stimulating effect of the tax system on the socio-economic development of the state, implementation of regulatory and fiscal functions by taxes, elimination of shortcomings of current methods of tax administration, formation of an optimal taxation system. The levers for ensuring the effectiveness of the functioning of the elements of the taxation management mechanism are substantiated.

Dynamic optimal taxation Mirrlees’ approach: A Review

Dynamic optimal taxation Mirrlees’ approach: A Review

ОСОБЛИВОСТІ БЮДЖЕТНО-ПОДАТКОВОЇ ПОЛІТИКИ В КОНТЕКСТІ ГЛОБАЛІЗАЦІЙНИХ ПРОЦЕСІВ

Current issues of defining the types and principles of budget and tax policy in the conditions of globalization processes during the period of martial law are studied. The necessity of fiscal, regulatory, and stimulating functions of the high level of the organization's fiscal, regulatory, and stimulatory functions was established by the budget and tax policy, ensuring at the same time the economic capacity of the state to perform the functions assigned to it, and the regulation of economic processes in the state and the direction of the development of the economic system. The dependence of the application of types of budget and tax policy on the conditions of the country's economic system and the goals set for the government, which makes decisions in the conditions of modern globalization processes, is determined. It is argued that the peculiarities of the budget and tax policy in the context of globalization processes lead to the need to find new ways to respond to modern challenges, implement measures to equalize and mitigate negative consequences and ensure economic recovery. A comprehensive and coordinated approach to the constant vector of recovery in war conditions and prompt response to the current economic situation through the application of optimal taxation conditions and high-quality administration of the budget and tax policy is analyzed. Scientific approaches in the context of globalization processes are summarized, which made it possible to clarify the interpretation of the types of the concept of "budget and tax policy" and to determine the principles of purposeful state activity using the tax and budget systems to implement specific directions of their use exclusively in the interests of citizens, society and the state. The main feature of the formation of budget and tax policy in the context of globalization processes is the tendency to reorient the priorities of state finances to ensure the conduct of armed struggle on the scale that the physical resources of the country allow. Tax revenues for such purposes, even allowing for increased tax rates and broadening of the tax base, are not sufficient to cover wartime needs. The characteristics of the principles of budget and tax policy aimed at ensuring support of macroeconomic stability and the production of non-inflationary GDP by changing approaches to budget formation and diversifying sources of budget and tax policy have been confirmed. Features of the emergence of new trends in the functioning of the budget and tax policy in the context of globalization processes are related to changes in the macroeconomic environment and have a direct impact on the country's financial policy.

Tax Policy, Corruption and Poverty in WAEMU

The aim of this paper is to demonstrate that a tax policy designed for taxes for social purposes reduces poverty in the West African Economic and Monetary Union. Poverty reduction requires optimal taxation, reduction of corruption, and improvement of the final consumption level per inhabitant. In order to reach this conclusion, we used panel data from the period 1996 to 2019. We used a method based on ‘panel-corrected standard errors corrected’ (PCSE). The paper suggests that public officials should establish proper tax policies and effective social protection programmes, and ensure good tax governance. Mainly, authorities can establish tax exemption thresholds for the poor, increase tax rates on the highest incomes, and ensure good tax governance.

Monopolistic Competition, Rising Markups, and Optimal Taxation of Participation

Monopolistic Competition, Rising Markups, and Optimal Taxation of Participation

Does Social Capital Accelerate Firms’ Adjustment Speeds Towards Optimal Tax Levels?

Does Social Capital Accelerate Firms’ Adjustment Speeds Towards Optimal Tax Levels?

Налоги солидарности как инструмент межрегионального перераспределения рентных доходов в России

Increase in rent relations contributes to the strengthening of interregional income inequality, since business entities appropriate the territorial rent in economically developed regions. Traditional income taxation instruments do not deal with the redistribution of territorial rent. On the contrary, such instruments, as the progressive personal income tax in Russia, can increase interregional inequality. Therefore, the presents study aims to substantiate the possibility of using a solidarity tax for interregional redistribution of rent income and develop the optimal tax model for current conditions. The article describes the solidarity tax from the perspective of rent taxation, determines its key features and methods of levying. To examine interregional income inequality, constituent entities of the Russian Federation were clustered using Ward’s method according to average monthly wages and the share of personal income tax in the regional budget. Each cluster is characterised by similar personal income and tax revenue. The solidarity tax burden will be on the regions of the first four clusters. It is proposed to levy the solidarity tax as a personal income surtax on a progressive scale, depending on the ratio of accrued wage of a taxpayer and the average monthly wage in Russia for the previous year. This approach will contribute to a smooth change in the effective personal income tax rate, as well as to at least 74% increase in subsidies to budgets to compensate for raising the wages of public sector employees. The developed proposals can be applied to improve the tax mechanism of redistribution of rent income. Future research may focus on developing alternative models of solidarity taxes, including for entrepreneurial and corporate income, in the context of the Covid-19 pandemic.

Сутність податкового планування та фактори, що здійснюють вплив на якість податкових планів

The article examines the approaches of scientists to the interpretation of the concept of tax planning and found that in most publications the attention of scientists is focused on the study of the essence, types, and methods of tax planning, but due attention is not paid to the study of factors influencing the quality of tax plans. The author's definition of the essence of tax planning is proposed, taking into account its implementation at the level of business entities, as well as relevant state and territorial management bodies. At the same time, tax planning is considered as a system of measures formed within the framework of current tax legislation, aimed at the level of economic entities to optimize the tax burden and reduce tax risks, and at the level of the state and territories - to determine the optimal tax parameters and rational decisions of the relevant state and territorial management bodies, aimed at providing a justified (within the tax potential) volume of tax revenues to the budgets of different levels. Attention is focused on the fact that the tax planning process should be based on taking into account both the national approach and the activities of business entities, that the field of tax planning involves the use of exclusively legal, legally permissible approaches when developing ways to reduce the level of the tax burden on the business entity, and tax planning serves as the basis for the development of decisions in the field of taxation management and must be carried out taking into account the requirements of current tax legislation. External, internal, objective, subjective, main, secondary, permanent, variable, intensive, extensive, general, specific, direct, indirect, complex and simple factors that exert a significant influence on the quality of tax plans are characterized. It is proposed to distribute the factors according to the established groups, which in the future will ensure the assessment of the influence of such factors on the results of the formation and quality of tax plans.

Rising Entrepreneurs' Wealth and Its Implications for the Optimal Tax Policies: Interplay between Investment Risk and Human Capital Risk

Rising Entrepreneurs' Wealth and Its Implications for the Optimal Tax Policies: Interplay between Investment Risk and Human Capital Risk

Economic Growth and Optimal Tax Burden: A Case of Uzbekistan’s Economy

Taxes have always been the largest contributor to the government budget revenue, so it is critical to collect maximum amount of tax revenue to meet policy objectives. The revenue performance of the countries, in turn, depends primarily on optimality of tax burden in an economy and capacity of revenue agencies to levy taxes set by the law. These factors have been major issues for all countries around the world, particularly for transition economies which are on the verge of major economic transformation. Uzbekistan as one of such countries, since 2017 has implemented multiple fiscal reforms to improve the fiscal capacity of the tax system, thereby increasing economic growth. To assess to what extend current tax policies are efficient, we put forward aim of the article as to elaborate the efficiency of Uzbekistan’s tax system using tax effort index to measure collection capability of potential tax revenue and optimal tax burden to maximize economic growth. In this study, we first using mathematical model identified tax effort index for Uzbekistan, which appeared to be approximately 45%. This implies that revenue agencies of Uzbekistan failed to collect on average half of the potential tax revenue over the period 2010–2020. Furthermore, we attempted to determine the optimal tax burden using the Ordinary Least Squares (OLS) method. According to the results of the econometric analysis, the optimal level of tax burden in Uzbekistan for the years 2000–2019 is estimated to be around 19%. Targeting tax burden to this level could reduce GDP gap by 1%.

Modern international trends in taxation of transnational corporations: assessment of efficiency and consequences of applying methodological approaches to the budget

The object of the study is transnational corporations. That is, companies that operate and have legal entities in various jurisdictions, which allows them to transfer the corporate tax base – profit to jurisdictions with minimal corporate tax. The transfer is carried out through the use of intra-group transfer prices. The subject of the study is current trends, ideas and international efforts in the taxation of multinational corporations. Both such trends themselves were investigated, and a computational experiment was conducted to assess the applicability of a possible methodology for calculating the profit tax of a subsidiary of such a corporation in Russia and the possible consequences for the budget from its application. The main conclusions of the study are as follows: at present, an international consensus is gradually being formed that the total profit of a transnational corporation should be distributed in a reasonable and fair way among the countries of its activities, an understanding of the need to consolidate such an order at the international level is being formed; however, no single understanding of approaches to taxation of transnational corporations, nor a single methodology capable of implementing them in practice. The scientific novelty is the author's reduction of the principle of tax neutrality from the classical principle of tax neutrality. In addition, the contribution of the authors is to demonstrate the fundamental efficiency of one of these methods by the example of calculating indicators based on open reporting data of a particular organization, as well as the consequences of using such a methodology for the budget.

When the Celtic Tiger relaxed its corporate tax bite: An analysis of effects on top and upper middle income shares in Ireland

In 1997, the Irish government introduced reforms to revolutionize corporate taxation, with focus on creating opportunities for tax neutrality and on reducing the standard corporate tax rate. Using the synthetic control method, findings suggest that the reforms had large positive effects on the income share of the top 1% and sizeable negative effects on the upper middle 40% of income earners. Such heterogeneous effects indicate increasing income inequality due to targeted corporate tax incentives.

Effects of Tax Incentives and Subsidies on Economic Growth in Developing Economies.

Tax incentives are defined as tax rules that go against the generally accepted principles of tax neutrality and fairness which are aimed at fostering both foreign and local investment since they promote greater investment competitiveness among emerging nations, maximize returns on investments, and reduce costs and inefficiencies in the investment market. Subsidies on the other hand are described as any government aid to private industry producers or consumers, whether financial or in-kind, which requires no commensurate repayment to the government in exchange but prerequisite the benefit on a certain conduct by the receiving firm or industry. This study aims to investigate the potential effectiveness of tax incentives and subsidies in enhancing economic development and growth among developing economies. Most developing economies, if not all, that are members of the UN organization work toward achieving the SDGs by 2030, and this is significantly influenced by the amount of investment they attract to boost economic growth and encourage improvements in citizen welfare. This study uses secondary data from World Bank, IMF, and OECD reports for a target period of 2010 – 2022 to examine how tax incentives affect economic development in emerging economies with a focus on Indonesia, Kenya, Malaysia, and Türkiye. For this study, the researcher used STATA version 15 to investigate the underlying relationship between the variables. The researcher performed a panel data regression analysis using the generalized estimating equations approach. The P-value approach used by the researcher assesses the relevance of the study’s variables, for which the p-value is set at 0.05. This is a comparative study, as such the researcher prefers to use the generalized estimating equation method to perform a panel data regression analysis because it can simulate the population as a whole and because the data may be correlated, which would violate the independence assumptions of other traditional regression procedures. The study obtained positive and significant effects of subsidies on investments and economic growth. Incentives on taxes on production, sales, and transfers and taxes on profits and capital gains registered a non-significant positive effect on investment; however, the effects were insignificant and negative for economic growth.

Theory of Optimal Taxation and Current Tax Policy in Pakistan’s Agriculture

The theory of optimal taxation has tended to recast the existing literature of public finance into the mould of classical welfare economics by emphasising minimisation of dead weight losses resulting from the imposition of a tax or faulty tax structure. As such, these modern theories have much in common with the traditional approach in terms of efficiency and equity. In spite of this, however, the differences remain. For example, the former theories adhere strictly to the norms of classical welfare economics which treats individual consumers as utility maximisers where improvements in welfare involve change that makes one individual better-off without making someone else worse-off [Stern (1987)]. In contrast to the emphasis of traditional theories on lump-sum taxes, the optimum tax literature is concerned with the implication of using non-lump-sum taxes which have a wider range and therefore more useful to the policy-maker. The recent work on normative tax theory looks at the impact of taxation on individual decisions and the trade off between raising revenues or redistributing tax burdens and the efficiency losses [Atkinson (1987)]. Finally, the optimal tax literature may be more pragmatic in its approach than traditional works as it realistically deals with government objectives and constraints and combines them into models that are sufficiently rich to allow for differences between people regarding income and expenditure patterns.

As countries improve their cigarette tax policy, cigarette consumption declines

BackgroundThis study examines the association between the Tobacconomics cigarette tax scores and cigarette consumption in 97 countries during the period of 2014–2020.MethodsData on countries’ retail cigarette sales and overall cigarette...

Optimal taxation of a perfectly competitive firm with Cobb–Douglas production function as a bilevel programming problem

Optimal taxation of a perfectly competitive firm with Cobb–Douglas production function as a bilevel programming problem

Temptation in consumption and optimal taxation

This article aims to integrate temptation preferences into the theory of optimal taxation with heterogenous agents and asymmetric information. Consumers are tempted to over-consume a commodity which may lead to an over-supply of labor. Resisting this temptation implies a utility cost and any policy that reduces this cost is welfare improving. We uncover novel channels for government intervention and the interaction between the welfare improving and redistributive roles of public policy. We also identify a commitment mechanism that works through the endogenous labor choice and affects the design and effectiveness of the optimal tax policy.