Presumptive Tax Research Articles

A Qualitative Diagnosis of Factors Influencing Presumptive Tax Collection in Zimbabwe

This study aimed to examine the factors influencing presumptive tax collection in Zimbabwe. An interpretivist paradigm was adopted in this study using a qualitative research approach. Primary data were collected through virtual (online) in-depth interviews with 20 participants drawn from the Zimbabwe Revenue Authority, Civic Societies, Parliament of Zimbabwe, Informal Sector Associations and academics. Qualitative data were analysed using thematic analysis. The results of a qualitative analysis of the factors influencing presumptive tax collection in Zimbabwe show that institutional, legal and regulatory frameworks as well as governance and political factors significantly contribute to presumptive tax collection in Zimbabwe. The findings of this study will help ZIMRA and policymakers formulate policy strategies to promote presumptive tax collection and voluntary tax compliance in Zimbabwe.

Effective Tax Rates and Firm Size under Turnover Tax: Evidence from a Natural Experiment on SMEs

Abstract Taking advantage of Romania’s compulsory and unique presumptive tax system (turnover tax) for the smallest of the small- and medium-sized enterprises (SMEs), which unequivocally allows grouping the companies into two subsamples according to their tax status (the smallest of the SMEs, i.e. micro-companies for tax purposes, subject to alternative turnover tax vs larger SMEs subject to regular profit tax), the papers compute and compare three versions of firm-specific effective tax rates and brings first-time empirical evidence on the effects of turnover taxation on corporate tax burden. The results show not only that in Romania, the turnover tax is now the prevailing tax system, massively displacing the profit tax, but also it is more burdensome in terms of taxes actually paid relative to the firm size. Moreover, turnover taxation means that taxes are due irrespective of the profitability of a company, making the share of companies who paid taxes despite having losses much higher for micro-companies than for larger SMEs, which translates into higher public finance receipts, at the cost of lower tax equity. Since the corporate tax burden triggered by turnover taxation remains under the radar of even the most qualified policy reports, the results offer relevant lessons for other jurisdictions and have valuable policy implications.

Examining Factors Affecting Presumptive Tax Voluntary Compliance (A Case Study in Gedeo Zone)

This research study aimed to analyze the factors influencing presumptive tax voluntary compliance in Gedeo Zone. The dependent variable, presumptive tax voluntary compliance, was examined in relation to various independent variables including collection enforcement, tax evasion, taxpayers' awareness, existence of corruption, tax incentives, transparency and fairness, and a supportive tax environment. A positivism research philosophy was adopted, utilizing a quantitative research approach and a cross-sectional research design. Primary data was collected through a Likert scale questionnaire from 318 targeted category "C" taxpayers. The findings of the ordered logistic regression indicated that collection enforcement, taxpayers' awareness, tax incentives, transparency and fairness, and a supportive tax environment have a statistically significant and positive influence on presumptive tax voluntary compliance in Gedeo Zone. Conversely, tax evasion and the existence of corruption were found to have a negative and statistically significant impact on taxpayers' compliance with presumptive tax. In conclusion, this study highlights the importance of implementing effective collection enforcement mechanisms, enhancing taxpayers' awareness programs, tax incentives, promoting transparency and fairness, and creating a supportive tax environment to enhance presumptive tax voluntary compliance. Furthermore, efforts should be made to tackle tax evasion and address issues related to corruption in order to improve compliance rates. The results of this study will aid policymakers and tax administrators in formulating strategies to enhance presumptive tax compliance in Gedeo Zone and potentially inform similar tax systems in other regions.

The Influence of Tax Service Quality on Presumptive Taxpayers’ Compliance in Tanzania: A Case of Ilala Tax Region

This study was conducted to examine the influence of tax service quality on presumptive taxpayers’ compliance in Tanzania: a case of Ilala Tax Region. The study was guided by three specific objectives as indicated by independent variables namely Tax Service Reliability, Tax Service Responsiveness and Tax Service Tangibility. The study adopted a positivist philosophy, employed a deductive approach, and utilized survey strategy. The study was conducted in Ilala Municipal with a sample of 384 respondents. Probability sampling procedure was applied through simple random sampling technique. The study used both primary and secondary data. Primary data was collected through questionnaires. Peer reviewed journal articles relevant for the subject matter, national tax and trade statistics reports from Tanzania Revenue Authority (TRA) and National Bureau of Statistics (NBS) were reviewed for secondary data. Data was analyzed using the OLS regression model. This study has found that Tax Service Reliability and responsiveness has no significant influence on presumptive tax payer’s compliance in Ilala Tax Region. Also the study revealed Tax Service Tangibility to have a significant positive influence on presumptive taxpayers’ compliance in the Ilala tax region. From the results, this study recommends Tanzania Revenue Authority (TRA) to focus on enhancing the perceived reliability of their tax services, including measures to ensure consistent interpretation and application of tax regulations, improving the accuracy of tax assessments, expediting the issuance of tax-related documents, enhancing the transparency of tax procedures and policies, and maintaining reliable online tax filing systems. Additionally, they should prioritize improving responsiveness to taxpayers’ needs by enhancing the promptness of addressing inquiries and concerns, making tax authority representatives more accessible through various communication channels, offering comprehensive assistance and guidance, and ensuring clarity in tax-related communication materials to enhance taxpayers’ understanding and compliance.

The Metaverse: Problem of Adapting Tax and Legal Structures

The article is devoted to the analysis of theoretical and legal aspects of income taxation and transactions in the metaverse. The scientific interest of the author is connected with the problems of adapting tax and legal structures to economic relations, which are generated by unique technologies of the virtual world. Purpose: to reveal the legal nature of the metaverse economy for tax purposes; to identify the most common problems associated with the application of tax legislation. Methods: the study is based on the methods of comparison, analysis, synthesis, generalization, and formal-logical method. Results: analysis of the bases and principles of taxation of income and transactions in the metaverse (income tax, value added tax), analysis of the tax consequences of specific situations, formulation of basic principles of taxation. Conclusions: the conducted scientific analysis confirms that national regulators and tax authorities are only at the stage of understanding the problems that arise in the metaverse, including issues related to determining the moment of income, evaluating transactions for the exchange of virtual goods for virtual or fiat currencies. The author comes to the conclusion that the technical impossibility of flawlessly accurate calculation of the tax base and determination of the source of income in a space of which anonymity is an integral component should not serve as a basis for non-taxation. The solution to the problem of creating tax and legal structures focused on the metaverse consists in taking into account the specifics of legal situations (a hybrid approach), using presumptive taxation in segments of high risk of losses for the national tax base, introducing a special regime for cases when income is received outside of entrepreneurial activity, is insignificant, and is of a one-time nature. The article points out the need for tax rules to comply with the basic principles of legislation on taxes and the inadmissibility of excessive tax burden.

CONTEXTUALIZING INDIVIDUAL TAXPAYERS’ READINESS TO MOVE ON (FROM USING PRESUMPTIVE TAX FACILITY)

Abstract— The tax mechanism known as turnover-based presumptive tax is provided to taxpayers operating within the micro, small, and medium sectors. Presumptive tax, in principle, is exclusively imposed for a specific duration. Individual taxpayers will transition back to the conventional taxation method in 2025. This study aims to explore the factors that influence the willingness of individual taxpayers to transition from utilizing the presumptive tax facility to adopting the conventional taxation scheme. The present study used a qualitative methodology, explicitly employing a case study framework within the context of South Tangerang. We collected primary data through interviews and obtained secondary data from literature documentation. We analyzed the gathered data using thematic and triangulation analysis methods. This research found six factors that influence the willingness of individual taxpayers to adopt changes in the taxation system. This paper makes a valuable contribution to the government by offering an overview of the critical factors that require attention to enhance individual taxpayers' readiness for the shift in their taxation mechanism.
 Keywords: Determinant; MSME; Presumptive; Readiness; Tax

Evolution of the law on income taxation of small businesses in Uganda

PurposeThis paper aims to analyse how the law on income taxation of small businesses in Uganda has evolved from the pre-colonial to the present day.Design/methodology/approachThe study used doctrinal legal research based on existing documentation on empirical research from Ugandan laws, institutional writings, books and journal articles.FindingsThe study established that there has been various promulgations and amendment of the law on income taxation of small businesses geared at simplifying the law, expanding the tax base and improving the tax yield from this sector. However, the law still bears limitations, some of which have existed from way back before the current legal regime on presumptive tax. Thus, the income tax yield from small businesses continues to be low over the years. It posits that it is not clear whether small business owners understand the legislations on presumptive income tax to enable us to determine with certainty that further amendments have the potential of enhancing an increased tax yield, which has not been attained over the years.Originality/valueLimited work has been undertaken on the historical development of the income taxation of small businesses in a developing country like Uganda. This study provides an initial synthesis of the literature on the evolution of income tax laws for small businesses in an economy that had been earlier neglected by scholars.

Audit, presumptive taxation and efficiency: An integrated approach for tax compliance analysis

Audit cut-off rules are policy tools widely adopted by fiscal authorities with the aim to improve voluntary tax compliance. Despite their usefulness, audits are costly for the fiscal authority, so determining how best to allocate controls is a key policy issue. In the audit framework presumptive taxation could be used to identify the cut-off rule, allowing fiscal authorities to uncover firms’ under-reporting. However, an audit rule based on presumptions does not allow distinguishing whether the presence of under-reporting is due to voluntary non-compliance or to a lack of managerial skills. Therefore, this paper proposes to combine an audit rule based on a presumptive cut-off with a measure of efficiency, with the aim to solve the main weakness of the presumptive methods. In particular, we develop an integrated approach that is able to support the audit activities of fiscal authorities. For illustrative purposes we support our approach with an empirical application based on a sample of Italian firms.

Gross turnover assessment and tax compliance in Uganda’s small businesses: a deep inquiry on the certainty of presumptive tax law

PurposeThis study aims to investigate the certainty of small business (SB) taxpayers about the presumptive tax law concerning the assessment of income tax based on gross turnover and how this impacts their income tax compliance.Design/methodology/approachThe study adopted the exploratory research design. The saturation point was attained upon interviewing nine owners of SB enterprises, eight tax officers from the Uganda Revenue Authority and eight tax consultants. Themes were identified and explained using verbatim texts from the various interviews. Data were analyzed using the content analysis technique.FindingsThe findings indicate that SB taxpayers are uncertain about the nature of the presumptive tax, that it is assessed based on annual sales, indicators used to determine gross turnover and their actual tax liability. This has occasioned resistance to the tax system and inhibited voluntary compliance. SB taxpayers thus opt to wait for the tax officers to make tax assessments. However, they have used this opportunity to bribe or bargain with tax officers to pay low amounts in tax or no tax at all. Thus, policymakers and revenue authorities ought to concentrate on creating massive sensitization of the law on presumptive tax, in this case, the existing tax base on which the tax is imposed and its elements to improve income tax compliance of SBs.Research limitations/implicationsThese results are relevant to policymakers and Revenue authorities in developing countries, especially in Africa, in improving income tax compliance of SBs.Originality/valueThis study examines the contribution of certainty of the income tax law on the tax base (gross turnover) on which presumptive tax is imposed to income tax compliance of SBs, which has hardly been covered in previous studies.

Covid-19 Lockdown Measures and Presumptive Taxation in Zimbabwe

This desktop study evaluated the effects of lockdown measures on Zimbabwe's presumed taxation. As a result of the COVID-19-induced health-care crisis, the Zimbabwean government, like many countries around the world, imposed a lockdown. This has diverse effects on various tax systems. This article examined the literature regarding the effects of lockdown measures on Zimbabwe's presumptive taxation. The study’s methodology differed from the traditional approach to research as it focused more on literature review and the findings, conclusions and recommendations were based on the reviewed literature. The results showed that COVID-19-induced lockdown restrictions affected ZIMRA's presumptive tax collection and the livelihood of informal merchants. One of the factors that aggravated the harm was the short notice in declaring lockdown enforcement. According to the findings, it will take some time for presumptive tax collections to recover. To hasten this process, the Zimbabwean government must provide aid to small business owners to enable them resume operations. In addition, there is an urgent need to educate informal merchants about health risks such as COVID-19, and support from the formal sector and international donors should ensure that informal traders such as vegetable vendors, cobblers, and transport operators have protective equipment as recommended by medical experts so that they can continue to conduct business safely and pay their presumptive taxes in time.

Tax Policy for SMEs, Corruption Perception, and Firm Productivity in Indonesia: A Firm-Level Analysis

This study aims to assess the impact of a policy change in presumptive tax schemes and corruption on firm performance in Indonesia. The central government has enacted a new presumptive tax regulation targeting small and medium enterprises (SMEs) started in 2013. The policy intends to attract small businesses to pay income tax and promote formalization. Additionally, we also assess the impact of corruption compared to the effect of taxation, on firm productivity. Taking advantage of the reliable panel data from the World Bank Enterprise Survey Indonesia in the years 2009 and 2015, along with fixed-effect regression models, we find that the presumptive tax scheme does not significantly have an impact on firm productivity. This result may be explained by the formalization approach. In addition, it is confirmed that corruption is negatively and significantly affects firm productivity. This study also affirms several studies that corruption has a greater impact, compared to taxation, on firm productivity.

An Empirical Study of the Impact of Lockdown Measures on the Presumptive Taxation of Zimbabwe: A Case Study of ZIMRA

Following the health-care crisis caused by COVID-19, the Zimbabwean government, like many others across the world, imposed a lockdown. This had varying degrees of impact on various tax systems. This research paper examined the effects of lockdown measures on Zimbabwe's presumptive taxation. The study adopted a quantitative research approach, and semi-structured questionnaires were used to obtain detailed data. The results showed that COVID-19-induced lockdown restrictions impacted Zimbabwe Revenue Authority's (ZIMRA’s) presumptive tax collection and the livelihood of informal merchants. Many factors exacerbated the situation, one of which was the short notice in declaring lockdown enforcement. The informal traders indicated that the COVID-19 lockdown measures had a negative impact on their revenue generation and demand for their goods and services. The COVID-19-induced lockdown measures resulted in a drastic fall in presumptive tax collections in 2020. The study recommends that the Zimbabwean government assist small company owners, empower them and enable them to restart their operations. Furthermore, there is an urgent need to educate informal merchants about health hazards such as COVID-19, and support from the formal sector and international donors should ensure that informal traders such as vegetable vendors, cobblers, and transport operators have protective equipment as recommended by medical experts so that they can safely continue to be in business for them to be able to pay their presumptive taxes in time without fail.

ISSUES IN PAKISTAN’S DIRECT TAXES: AN EXAMINATION OF THE RECENT PROBLEMS IN THE INCOME TAX ORDINANCE, 2001

Pakistan is amongst the countries with reliance on indirect taxes more than the direct taxes, as far as the revenue collection from tax is concerned. Being a law dynamic in nature, income tax law in Pakistan undergoes several changes in a tax year; some proving to be useful while others problematic. In either case, there are some flaws exposed due to reliance of each statutory provision over the others. As of the tax year 2022, there are several problems including tax on deemed income, super tax, active taxpayers list, recharacterization of income, withholding taxes, presumptive taxation and some procedural aspects. This paper tends to examine the legal aspects all of these problems with reference to their relevant provisions of law and also aims at providing pragmatic solutions and recommendations that may be adopted for a better system of direct taxes in Pakistan. Keywords: direct taxes, deemed income, active taxpayer, MTR, PTR, audit, amendment of assessments, unexplained income or assets, intra-vires doctrine, tax reforms.

Transitioning MSMEs to the Normal Tax System

It is not straightforward to urge and prepare MSMEs to participate in the standard tax system. MSMEs must have adequate tax knowledge and competence to comply with their tax obligations after they enter the standard tax system. The research aims to develop a strategy for transitioning to a normal tax system from the perspective of both the taxpayer and the government, including the barriers encountered. This study used a qualitative approach and an in-depth interview to obtain data. A review of the literature was conducted, as well as in-depth interviews with DGT officials, tax scholars, tax practitioners, and SME taxpayers. The most recent rule on final income tax for MSMEs establishes a time restriction for applying the final income tax rate and recording. The grace period was designed to teach MSMEs how to manage their bookkeeping and other obligations under the conventional tax system while growing their business. According to the study's findings, MSMEs taxpayers do not have a distinct strategy for dealing with the conventional tax system. They do, however, have commercial plans that overlap with the transition strategy. On the other hand, the government, through DGT, launched a plan called Business Development Services. The challenges of human resources and initiative affect both government and MSMEs taxpayers. This article examines the strategic procedures necessary to convert MSME taxpayers from a presumptive tax regime to the implementation of a conventional tax system, as well as the barriers encountered in achieving tax equity. The report proposes a transition strategy from a presumptive, tax regime to the implementation of a conventional tax system on the hard-to-tax sector by the Indonesian tax authorities and MSME taxpayers.

Evaluating Indonesia's Presumptive Tax Policy on Accountant Professional Services

There is no disagreement about accountants' expertise in bookkeeping. Initially, the assumed tax policy was meant to alleviate bookkeeping requirements for small and medium-sized businesses that were unable to do so. However, why does the accounting profession benefit from not performing bookkeeping if it has a specific gross revenue? This issue encourages authors to evaluate Indonesia's presumptive tax regulations for accountants' professional services. The objectives of this research are to ascertain why accountants employ Net Income Calculation Norms to determine their income taxes, to assess presumptive tax policies through the perspective of tax collection principles, and to explore more suitable presumptive tax policies for the accounting profession. This study applies a qualitative method, collecting data through in-depth interviews. The findings indicate that the accounting profession's presumptive tax policy fulfills the concept of ease of administration for taxpayers but not the principle of substance over form or revenue productivity. The government should deregulate the policy of Net Income Calculation Norms for Accountant Professional Services so that it maintains consistency with the policy objective of providing presumptive taxation to taxpayers with a certain gross sale.

‘Presumptive Tax vs. Ability to Pay Principle’: Scrutinising the Equitability of Informal Sector Taxation in Zimbabwe

‘Presumptive Tax vs. Ability to Pay Principle’: Scrutinising the Equitability of Informal Sector Taxation in Zimbabwe

Does Ethiopia is Effective in Implementing a Presumptive Tax System? Evidence from Hawassa City, Sidama Regional State

This study was set out to examine presumptive tax system implementation effectiveness in Hawassa city of Ethiopia. To achieve the objective of this research, the study used a mixed research method. The primary data sources were collected through a structured questionnaire and focus group discussion. The analysis has been done. Then, the result of this study showed that the Hawassa city revenue authority is not effective in presumptive tax system implementation. Also, this study revealed that lack of equity and fairness in presumptive tax assessment, lack of clarity and simplicity of tax procedure, the complexity of tax rules, taxpayers’ poor awareness of the presumptive system, the existence of unethical and corrupt tax officials, and poor social norms between taxpayers and the tax authority were the key challenges faced by the city tax authority. Finally, the findings of the study inform policymakers about presumptive tax system implementation effectiveness in Hawassa, Ethiopia. Keywords: presumptive tax system; implementation; effectiveness, Ethiopia DOI: 10.7176/EJBM/13-17-04 Publication date: September 30 th 2021

English

Domestic revenue generation occupies a central domain in most countries, leading to continuous mapping of strategies towards its enhancement. Taxation is a dependable and foreseeable avenue to generate revenue for governments to fulfil their key obligations of employment creation, economic growth and infrastructural development, poverty reduction and state security. Despite these plausible arguments, tax revenues are minimal and tax bases narrow in developing countries. Contemporary tax debates point out that informal sector represents a lucrative fountain of tax revenue for governments, yet opponents of taxing the sector suggest that taxation might cripple small firms. Zimbabwe introduced presumptive tax in 2005, further enforcing to expand the tax base by including the sector into the tax basket in 2011. Researchers have focused on tax evasion and non-tax compliance when studying this sector, this paper focuses on the stakeholders perceptions on the impact of informal sector taxation on revenue generation and growth. This study adopted a sequential exploratory mixed method approach, argued to be ideal for under-researched areas such as this one. Key findings were that the current one size fit all tax framework suffocates small firms. Governments have to strike a balance between revenue mobilisation and the sector’s key economic contributions, without crippling informal firms.   Key words: Informal sector, taxation, growth, stifling, revenue mobilisation.

An Analysis of the Aspects Hampering Informal Sector Tax Administration: Case of the Zimbabwe Revenue Authority

The main focus of the study was to ascertain the potential of the informal sector to provide much-needed revenue for the government. It also focused on the challenges faced in informal sector revenue taxation and possible solutions thereof. The Zimbabwe revenue authority has maintained presumptive tax for the sector and subcontracting to the city of Harare for the collection of revenue from the informal sector. Despite all this, the industry still underperformed in terms of revenue raised. The study sought to find out challenges of taxing the informal sector, the potential of the informal sector, the effectiveness of the Zimbabwe revenue authority in taxing the informal sector, and possible ways of improving the taxing of this rampant sector. The study found out that there is great potential from the informal sector, but turning it into tangible gains has been elusive due to political interference, lack of proper infrastructure, unfair application of tax laws and general mistrust of the government. The study recommended that the government ought to play an active role by making sure there is the political will to make sure that players in the informal sector contribute to the focus in line with Adam Smith’s general principles which include fairness and equity. There is a need for staffing levels to be commensurate with the workloads and also the motivation of the employees. The research also recommended the adaptation of Information Communication Technology to ensure accountability and traceability of transactions in the informal sector as they move away from a cash-based system recommendation.

The Informal Sector, the “implicit” Social Contract, the Willingness to Pay Taxes and Tax Compliance in Zimbabwe

Abstract The growth of the informal sector in African countries has largely been viewed as an escape from regulation and deliberate intention to avoid paying taxes and these views have been widely popularised, ignoring significant details to the disadvantage of realistic tax policy design. Zimbabwe adopted a presumptive tax system for various informal sector categories to enlarge the tax base and increase tax revenues mobilised. However, presumptive taxes have not generated significant revenue. Tax compliance in the informal sector has often been studied from the tax structure design, the deterrence model perspective and capacity limitations without paying adequate attention to tax morale. Tax morale can be denoted through the peer effect of the compliance behaviour of other taxpayers, the fulfilment of the psychological social contract, transparency and accountability in the use of tax revenues as well as stakeholder communication, built on mutual trust and respect. In light of these tax morale dimensions, it is evident that tax compliance can never be divorced from the intrinsic motivation to pay taxes. The inextricable link, between tax evasion, tax compliance and tax morale, motivates this study. While previous studies on tax morale have applied single method research approaches, this study adopted a sequential exploratory mixed method research design, combining both qualitative and quantitative (through the use of document reviews, semi-structured interviews and questionnaires) in order to bring a balanced view. The study found out that tax morale was a strong driver of tax evasion and non-tax compliance in the informal sector.