Personal Income Tax Revenue Research Articles

Evaluation of the Impacts of Selected Tax Reforms Influencing the Income of Individuals in the Czech Republic

Ability to predict the impacts of proposed tax changes is crucial for effective and transparent tax policy. The ex-ante impact evaluation of proposed changes is in the Czech Republic part of the Regulatory Impact Assessment process and assumed effects are published within the reasoning reports to the amendment laws. We use the top-down approach to calculate ex-post the impacts of the most significant changes in personal income tax and contribution on obligatory insurance on public revenues and compare the results with forecasted effects from reasoning reports. We use data for the period of 1994 to 2014 and create three models to quantify the impact on personal income tax revenue, social security contribution and health insurance contribution. The results show the tendency to underestimate real effects about a third to a half when calculating the projected impact on public revenues. For more accurate estimations we recommend higher transparency in presented methodology within the Regulatory Impact Assessment process and evaluation by independent institution for changes with significant impact.

Impact of Infrastructure Investment on Tax: Estimating Spillover Effects of the Kyushu High-Speed Rail Line in Japan on Regional Tax Revenue

This paper analyzes the impact of infrastructure investment on tax revenues and on the regional economy by studying the effect of the Kyushu high-speed rail line (shinkansen train) in Japan. The effects of the Kyushu high-speed rail line on the economy has often been debated. We estimated its impact in the Kyushu region by using the difference-in-difference method, and compared the tax revenues of regions along the railway line with other regions that were not affected by it. Our findings show a positive impact on the region’s tax revenue following the connection of the Kyushu rapid train with large cities such as Hiroshima and Osaka. Tax revenue in the region significantly increased during the construction in 1991–2003, and dropped after the start of operations in 2004–2010. The rapid train’s impact on the neighboring prefectures of Kyushu is positive. The difference-in-difference coefficient methods reveal that corporate tax revenue was lower than personal income tax revenue during construction. However, the difference in corporate tax revenues rose after connectivity with large cities was completed. The railway’s connectivity to large cities has a significant economic impact not only in the case of Japan but also in other cases such as Uzbekistan.

How to Focus Corporate Income Tax Competition on Mobile Business Activities?

The logic of international tax competition requires that European countries reduce their corporate income tax rates for mobile business activities. It does not require them to reduce their tax rates on business profits overall. Yet, that is what has happened in many countries. The spill-over effects of corporate income tax competition on personal income tax revenues are considerable. The reason is obvious: smaller firms tend to incorporate, to enjoy the benefits of a lower tax rate. And wherever the policy response is to reduce the personal income tax burden on profits, labour tends to assume the legal form of business profits. And when the tax treatment of independent vs. dependent labour gets out of balance, the wage income tax base suffers from the forces of corporate income tax competition.The policy problem to be discussed in this paper is how international tax competition can be reduced in scope, to limit the spill-over effect on domestic tax bases. What is the best way to reduce the (effective) tax rate on mobile business activities while maintaining the tax burden on immobile activities? We will discuss four approaches:- mandatory transparency of corporations below a certain size threshold for personal income tax purposes;- a dual income tax with a split between labour and capital income for all smaller firms;- corporate income tax measures aimed at specific – mobile – business activities;- a general reduction of the effective tax rate for large corporations.Alternatives will be compared on four criteria: effectiveness, administrative feasibility, compatibility with EU legal framework, and political stability.

PENGARUH TINGKAT KEPATUHAN WAJIB PAJAK ORANG PRIBADI TERHADAP PENERIMAAN PAJAK PENGHASILAN ORANG PRIBADI PADA KPP PRATAMA CIBINONG

ABSTRACTTax is one source of state revenue is used to finance the household of the State and individual taxpayerswho have responsible as a taxpayer who will increase the number of admissions personal income tax, butit does not increase the acceptance of personal income tax, when in reality the level of complianceindividual taxpayers still perceived remains low during this time. The goals to be achieved is to determinethe Effect of Individual Taxpayer Compliance on the Personal Income Tax Revenue on KPP PratamaCibinong. The method I use is descriptive analysis method which defines Effect of Individual TaxpayerCompliance to the Personal Income Tax Revenue on KPP Pratama Cibinong. Based on the research thathas been done, the writer can conclude that the level of the individual taxpayer Kepatuihan effect onPersonal Income Tax Revenue In KPP Pratama Cibinong.Keywords: Level of Compliance, TIN Registered, submission of tax returns, Payment of Tax, Tax ReceiptsOP.

Impact of Lump Sum Expense Rates on Public Revenue

Lump sum expense has special role within the Czech tax system. As the percentages of the lump sum expense used in the Czech Republic are high compared to other EU countries, they are often criticized as distortive and government searches for ways to limit their use. On the other side, the long-standing role of the lump sum expense in the Czech tax system hinders its decrease. Based on the data from the personal income tax returns of self-employed we analyze the use of the lump sum expense in the Czech Republic over the years 2004 to 2012. Using the same data and controlling for other variables, we estimate the impact of the lump sum expenses’ rates on public revenue (personal income tax, social security and health insurance revenue). According to the results, the higher number of taxpayers using the lump sum expense does not influence the public revenue, but there is negative effect of the average portion of lump sum expense to taxable income on the public revenue.

Fiscal Impact of EU Migrants in Austria, Germany, the Netherlands and the United Kingdom

The recent decade marked two quite important trends in the economic landscape of the European Union. The first one was the expansion of the Union to include former Soviet bloc countries, including the big enlargement of 2004 followed by the accession of Bulgaria and Romania in 2007. This was a huge challenge for the EU, as the impact of opening the economic space to markets so divergent in terms of economic development was largely unknown.The economic impact of the EU enlargement started to unravel, to a great extent, amidst the global financial crisis and the ensuing recession in Europe. This was a period of significant strain for public finances. Weak economic activity, increased unemployment combined with the relatively wide social welfare protection in most EU countries resulted in a sharp worsening of the fiscal balance. In fact, social expenditure (including old-age pensions) currently takes more than half of all government spending in most EU countries. As a share of GDP, its share has gradually grown to exceed 30%. In some countries, the last five years saw an increase in social expenditure of 5 percent (of GDP).At the same time, in recent years the free movement of people in the EU has gained speed. It has been facilitated by the gradual removal of all barriers to the employment of workers from the new Member States which were applied to a different extent by some of the old Member States. As a result, the number of EU migrants increased substantially between 2005 and 2013. By 2013, there were 13.7 million EU citizens living in another EU country, which is 2.7% of the entire population of the Union.This raises the valid question about the impact of the free movement of people on the economy of the destination country. Migrants change the demographic profile of cities and regions, they affect the labour market, they pay taxes and they claim benefits. The evaluation of the net fiscal impact of non-native EU-citizens residing in other EU countries is a complex task, requiring a number of credible key assumptions, detailed data on various items of public spending and revenues, in addition to precise information on migration flows and population, and this information is not always available. Most of the recent studies suggest that immigrants have a rather small impact on the host country’s public finances. Notwithstanding the methodologies used, coverage or assumptions, the bulk of academic research estimates the net fiscal impact of immigrants to vary in the range of ± 1% of GDP.The fiscal impact of migrants depends, to a great extent, on the way social security systems are financed; there is a different mix of social security contributions and general taxation in each EU country. The reliance on these contributions has been gradually eroding, as less than half of the social expenditure can be covered by the contribution. This is a result of both the introduction and enlargement of non-contributory benefit schemes and the demographic challenges faced by the health and pension systems in most countries. Moreover, even supplementing social contributions with personal income tax revenues cannot cover the entire cost of the welfare systems. The revenues from social contributions together with the taxes on individual or household income were 21.7% of GDP in EU-27 in 2005, and remained relatively stable throughout the years until 2012 when they reached 22.5% of GDP, according to Eurostat. At the same time, total social expenditure stood at 27% of GDP in the EU-27 in 2004, while in 2010 it exceeded 29%. The transfer from other government revenue (i.e. other taxes and levies) grew from 5.3% to 7.1% between 2005 and 2011. If direct taxes and contributions alone are taken into account, a typical employee in the EU is a net beneficiary of the social security system.This study was undertaken to estimate some aspects of the net fiscal impact of EU migrants in four EU countries – Austria, Germany, the Netherlands and the United Kingdom. The report outlines the role of migrants from EU countries as participants in the labour market, as taxpayers and as benefit recipients also.

MID-TERM EFFECTS OF THE FLAT RATE PERSONAL INCOME TAX IN HUNGARY

The objective of the paper is to examine whether the advantages and disadvantages mentioned in the literature of the flat rate income tax could be observed in Hungary. Personal income tax data provided by the Hungarian National Tax and Customs Administration was used to check the arguments. It was found that the flat tax indeed favours richer taxpayers, and because of the family tax credits, it heavily favours families with children. Tax revenues declined as tax rates were cut, while the GDP growth rate was close to stagnant. Both of these developments go against the expectations of the flat tax supporters, although it has to be mentioned that the changes were made in the midst of a European- and world-wide depression, which could have distorted the pure effects of the new tax code. Although in many countries the flat rate tax was a positive signal for investors boosting foreign direct investments, the Hungarian government introduced extra taxes on some of the transnational companies in order to balance the budget (and compensate for the lost personal income tax revenues), which meant that there was a decline in the mood of the investors. There is some indication that some illegal activities are shifted to the legal domain: the ratio of those tax reporters who earned an annual income of HUF 2 million or higher has gone from 62.5% to 66.6% in the period of 2010-12.

The financial impact of unrepaired cleft lip and palate in the Philippines

ObjectivesThere are over 96 million people in the Philippines. Close to 77 thousand persons in this country have orofacial clefting. We estimate nearly 64 thousand are unrepaired. Unemployment and underemployment because of the communication disorders associated with unrepaired clefts will affect family income and hence tax revenues. The purpose of this study is to understand the financial impact of unrepaired cleft lip and/or palate on families and identify how that would translate to the Philippine government in tax revenues. MethodsThe incidence of orofacial cleft in the Philippines was estimated to be at least 1 in 750 people, with only 16% anticipated to be repaired under current conditions. Assuming a 21% unemployment rate in subjects with untreated clefts, and a tax rate of 6–12.4%, projected lost personal income and federal tax revenue was calculated. ResultsIn 2012 alone the financial impact on the families may be as much as $US 73–88 million in lost revenue from unemployment and underemployment. This would cost the government between $8.0 and $9.8 million dollars in lost tax revenue. Over a 20 year period at least $US 1.7 billion dollars in family income would be affected costing the government at least $US 194 million in taxes. ConclusionBy appropriately caring for the cleft population tax revenues should increase substantially. The development of the infrastructure for surgical care of this problem would be costly but could be more than offset by revenues. Inattention to surgically correctable causes of communication disorders is not affordable.

THE ROLE OF PERSONAL INCOME TAX IN THE MUNICIPAL BUDGET MEDIUMTERM PLAN DEVELOPMENT

Main source of revenue for municipalities is revenue of personal income tax (PIT). In years 2001 – 2011 it specific weight was in average 46.62% of all municipal revenue. For forecasting PIT revenue in the municipal budget, analysis of correlation must be made, to make regression model. Main factor in this model is gross domestic product. Other factors, affecting revenue of PIT, can be grouped – factors of positive influence, e.g. average wage, and negative influence, e.g. shady economy. Each municipality is required to evaluate impact of factors to its revenue of PIT. Moreover, there can be added some specific factors or information, which is actual for this municipality. Forecasting of PIT income provide implement of medium term planning principles in municipal operation. That can also improve possession of information of municipalities and apply to them greater responsibility for achieved results.DOI: http://dx.doi.org/10.5755/j01.em.17.4.2987

Personal Income Tax (Amendment) Act: Will the Government Achieve Its Objectives?

In this article, the author assesses the extent to which, for Nigeria, the recently enacted Personal Income Tax (Amendment) Act realizes the desired objectives. Based on a comparison of VAT tax revenues with company and personal income tax revenues, the indications are that the government will not achieve its goals.

Personal income tax sharing among the central government, counties, cities and municipalities

There has been a lot of discussion and writing lately about the sharing of personal income tax revenues among the central government and the City of Zagreb. The purpose of this article is not to comment on the situation in the City of Zagreb (a solution to this problem should be worked out jointly by the Ministry of Finance and the City of Zagreb), but to provide a brief and as simple as possible clarification of the statutory sharing of the personal income tax revenues.

Modelling aggregate personal income tax revenue in multi-schedular and multi-regional structures

This paper derives analytical expressions for aggregate personal income tax revenue obtained from a multi-schedular and multi-regional personal income tax system, with revenue divided among central and regional governments. Aggregate income tax revenue is expressed as a function of characteristics of the distribution of taxable income, making it possible to identify the sources of revenue differences among regions. The approach is applied to the tax structure in Spain, and the effects of income distribution differences among the Spanish regions are examined.

The housing crisis and state and local government tax revenue: Five channels

State and local government tax revenues dropped steeply following the most severe housing market contraction since the Great Depression. We identify five main channels through which the housing market affects state and local tax revenues: property tax revenues, transfer tax revenues, sales tax revenues (including a direct effect through construction materials and an indirect effect through the link between housing wealth and consumption), and personal income tax revenues. We find that property tax revenues do not tend to decrease following house price declines. We conclude that the resilience of property tax receipts is due to significant lags between market values and assessed values of housing and the tendency of policy makers to offset declines in the tax base with higher tax rates. The other four channels have had a relatively modest effect on state tax revenues. We calculate that these channels jointly reduced tax revenues by $22 billion from 2006 to 2009, which is about 3% of total state own-source revenues in 2006. We conclude that the recent contraction in state and local tax revenues has been driven primarily by the general economic recession, rather than the housing market per-se.

The Housing Crisis and State and Local Government Tax Revenue: Five Channels

State and local government tax revenues dropped steeply following the most severe housing market contraction since the Great Depression. We identify five main channels through which the housing market affects state and local tax revenues: property tax revenues, transfer tax revenues, sales tax revenues (including a direct effect through construction materials and an indirect effect through the link between housing wealth and consumption), and personal income tax revenues. We find that property tax revenues do not tend to decrease following house price declines. We conclude that the resilience of property tax receipts is due to significant lags between market values and assessed values of housing and the tendency of policy makers to offset declines in the tax base with higher tax rates. The other four channels have had a relatively modest effect on state tax revenues. We calculate that these channels jointly reduced tax revenues by $15 billion from 2005 to 2009, which is about 2 percent of total state own-source revenues in 2005. We conclude that the recent contraction in state and local tax revenues has been driven primarily by the general economic recession, rather than the housing market per-se. This paper was reposted in October 2010 to update values in table 3.

Distributional Effects of a Flat Tax, An Empirical Analysis for the Netherlands

In this paper, we construct a flat rate/broad base personal income tax system and we compare the distribution of the current personal income tax (including social contributions) in the Netherlands to the distribution of the simulated flate rate tax. Using extended data (personal income panel survey), the effects are simulated of eliminating deductions in exchange for a reduction in tax rates, sufficient to keep personal income tax revenue constant at the iniitial level and distribution of pre-tax incomes. Our simulations indicate that: - The redistributive effect of the current rate structure of the Dutch tax system – whith marginal rates of 37,5%, 50% and 60% - is substantially diminished by tax deductions. Deductions appear to be very income-elastic. - After the simulated base broadening, a proportional rate of 33,2% balances the budget (ex ante). Such a flat rate causes only relatively small changes in average tax ratios. For a clear majority of taxpayers, effect on after-tax income lie within a range of minus/plus 5%. - Tax progressivity is mainly caused by the fixed personale exemption, which was maintained in the simulated flat rate tax. We calculated only a 7 percent lower income elasticity ia a flat rate system. We conclude that the income effects of the introduction of a broad base/flat personal income tax would be relatively small and cannot be considered as prohibitive.

A structural VAR approach on labour taxation policies

This paper presents a Structural VAR analysis on the employment and output effects of labour tax policies in six European countries for the period 1974–1997. By considering impulse response functions, it turns out that, on average, a shock to the total personal income tax revenues is positively correlated to employment, whereas there is mixed evidence on the output effect. Moreover, the quantitative impact of these effects, especially those related to the output, appears to be quite small. However, by introducing explicitly four labour tax parameters (namely the marginal and average tax rates for the personal income tax and the payroll tax), it turns out that these effects are not negligible after all: for some countries it is possible to conceive labour taxes as policy instruments favouring more employment and a better economic performance. However, the empirical support on the sign of the output and employment effects is mixed, suggesting that the same domestic fiscal policy does not produce the same impact in all the European countries.

The Russian 'flat tax' reform

In 2001, Russia dramatically reduced its higher rates of personal income tax (PIT), establishing a single marginal rate at the low level of 13%. In the following year, real revenue from the PIT increased by about 26%. This ‘flat tax’ experience has attracted much attention (and emulation), making it perhaps the most important tax reform of recent years. But it has been little studied. This paper asks whether the strong performance of PIT revenue was itself a consequence of this reform, using both macro evidence and, in particular, micro level data on the experiences of individuals and households affected by the reform to varying degrees. It concludes that there is no evidence of a strong supply side effect of the reform. Compliance, however, does appear to have improved quite substantially – by about one third, according to our estimates – though it remains unclear whether this was due to the parametric tax reform or to accompanying changes in enforcement. — Anna Ivanova, Michael Keen and Alexander Klemm

Assesment of the Results of Personal Income Tax Reform in Russia

The paper contains results of the analysis of personal income tax reform in Russia in 2000, including the influence of the reform on tax base, tax revenues and progressivity of income taxation. On the basis of the theoretical model the authors formulate two main hypotheses, concerning the influence of major factors on personal income tax revenues and tax base. The first hypothesis implies that the decrease in marginal income tax rate caused the decrease in personal income tax evasion, increase in tax revenues and tax base. The second hypothesis is that the decrease in tax evasion, especially among taxpayers with high incomes, increased their tax burden and, as a result, the level of vertical equity. The paper also includes the results of empirical tests of the above hypotheses about the change in tax evasion and progressivity using the regional data in 2000 and 2001; a number of measurers in the sphere of economic policy is put forward.

Tax Interdependence in American States

State governments finance their expenditures with multiple tax instruments, so when collections from one source decline, they are typically compensated by greater revenues from other sources. This paper addresses the important question of the extent to which personal and corporate income taxes are used to compensate for sales tax fluctuations within the U.S. states. The results show that one percent increase in the sales tax rate is associated with a half and a third percent decrease in the personal and corporate income tax rates respectively. In terms of tax revenues per capita, the results show that a one percent increase in the sales tax revenue per capita is associated with a 3 percent and 0.9 percent decreased in the corporate and personal income tax revenue per capita respectively.

Tax, ratios in macroeconomics: Do taxes really matter?

In various empirical studies so-called tax ratios (tax revenues expressed as a ratio of some aggregate tax base) are employed as approximations for tax burdens. The most difficult problem in calculating tax ratios is the way in which personal income tax revenues are attributed to labour and capital. We argue that the methodology of Mendoza et al. (1994) is seriously flawed in this respect. Using information from national sources, we calculate more accurate tax ratios for eight OECD countries that differ substantially from those of Mendoza et al. (1997). Still, the results of the empirical analysis of Mendoza et al. (1997) do not change significantly if we use our tax ratios instead of those of Mendoza et al.. However, the results change once country specific effects are taken up in the model. Capital taxes are, e.g., shown to reduce economic growth. We find that the results of Daveri and Tabellini (2000) are neither sensitive to the use of the tax ratios nor to the specification of the model: high labour taxes have increased unemployment in Europe.