Tax Brackets Research Articles

The Effect of Law Number 7 of 2021 on Harmonization of Tax Regulations on Fiscal Justice in Indonesia

Law No. 7 of 2021 on Harmonisation of Tax Regulations is a landmark reform in Indonesia aimed at enhancing tax compliance, promoting fiscal justice, and aligning the country’s tax framework with international standards. This study provides a jurisdictional analysis of the law, examining its key provisions, impact on tax compliance, revenue collection, and socio-economic implications. The results show that the law has significantly broadened the tax base, improved tax transparency, and introduced progressive measures to promote equity, including a carbon tax and revised income tax brackets. However, challenges remain in ensuring that the benefits are distributed equitably across all income groups and sectors. The study concludes that while Law No. 7 of 2021 represents a significant step toward achieving fiscal justice, further refinement and support for smaller enterprises are required to fully realize its potential.

Can revenue collection for public funding in health care be progressive? An assessment of 29 Countries

Most research on health care equity focuses on accessing services, with less attention given to how revenue is collected to pay for a country's health care bill. This article examines the progressivity of revenue collection among publicly funded sources: income taxes, social insurance (often in the form of payroll) taxes, and consumption taxes (e.g., value-added taxes). We develop methodology to derive a qualitative index that rates each of 29 high-income countries as to its progressivity or regressivity for each of the three sources of revenue. A variety of data sources are employed, some from secondary data sources and other from country representatives of the Health Systems and Policy Monitor of the European Observatory on Health Systems and Policies. We found that countries with more progressive income tax systems used more income-based tax brackets and had larger differences in marginal tax rates between the brackets. The more progressive social insurance revenue collection systems did not have an upper income cap and exempted poorer persons or reduced their contributions. The only pattern regarding consumption taxes was that countries that exhibited the fewest overall income inequalities tended to have least regressive consumption tax policies. The article also provides several examples from the sample of countries on ways to make public revenue financing of health care more progressive.

The Pivotal Role of Capital Gains in Efficient and Progressive Tax Reform

Increased, targeted taxation of capital gains is key to making the personal income tax more progressive, and it can also contribute to a more efficient system. This article assesses a two-tier capital gains tax that would apply a second, higher inclusion rate for gains above a specified threshold. Relative to a general increase in the inclusion rate—widely promoted by tax analysts—a two-tier scheme would focus on high-income, high-wealth taxpayers, forgo limited revenue, and be more publicly acceptable and politically viable. Relative to reforms to the alternative minimum tax (AMT), the two-tier scheme would be simpler, cover more taxpayers, capture more revenue, and conform more closely to the notion that "the rich pay their fair share." The article explains how capital gains are an amalgam of capital and labour inputs, often containing supernormal returns that are an efficient target for increased taxation. The article further details the high concentration of recurrent large capital gains at top income levels and critically assesses arguments commonly made against raising the gains inclusion rate. It also identifies desirable companion measures for a two-tier gains tax—including restoration of income averaging and abolition of the federal 33 percent top tax bracket and the AMT itself. In short, the current 50 percent capital gains deduction serves as a gateway for endless tax-minimizing and economy-distorting stratagems. Closing that gate even partway for those most prone to enter into such planning would be pivotal in making Canada's tax system both more efficient and more progressive.

A fistful of dollars: Rent seeking behaviour and local tax manipulation

The aim of this paper is to study whether politicians manipulate tax policy to extract private rents. We focus on the local personal income tax in the setting of Italian cities, which is a progressive instrument that allows mayors to set different rates to distinct wage groups. We exploit discontinuities in mayors' salaries, that are based on population thresholds, to study whether mayors apply lower rates to their own tax bracket, thereby distorting tax policy. The main results document large rent-seeking activity in tax policy. First, we show that when mayors's salary is exogenously located in the following tax bracket it receives a significantly lower tax rate than the previous one, compared to the control group. Second, we show that this rent-seeking activity is highly detrimental for the public treasury, with a considerable reduction in fiscal revenues. And finally, we document that the individual gain for rent-seeker politicians is rather limited and that there is no evidence of voters' punishment in the next elections. These results suggest that when tax policy is prone to be manipulated politicians do not hesitate to engage in rent-seeking activities even in case of little returns.

Supporting punishment via taxation in a structured population

Taxes are an essential and uniformly applied institution for maintaining modern societies. However, the levels of taxation remain an intensive debate topic among citizens. If each citizen contributes to common goals, a minimal tax would be sufficient to cover common expenses. However, this is only achievable at high cooperation level; hence, a larger tax bracket is required. A recent study demonstrated that if an appropriate tax partially covers the punishment of defectors, cooperation can be maintained above a critical level of the multiplication factor, characterizing the synergistic effect of common ventures. Motivated by real-life experiences, we revisited this model by assuming an interactive structure among competitors. All other model elements, including the key parameters characterizing the cost of punishment, fines, and tax level, remain unchanged. The aim was to determine how the spatiality of a population influences the competition of strategies when punishment is partly based on a uniform tax paid by all participants. This extension results in a more subtle system behavior in which different ways of coexistence can be observed, including dynamic pattern formation owing to cyclic dominance among competing strategies.

Behavioral cross-influence of a shadow tax bracket: Evidence from bunching where income tax liabilities start

Prediction of tax revenue must account for earnings responses with respect to all perceived incentives, whether they are effective or not. This paper explores the extent to which tax filers respond to irrelevant incentives and develops an identification procedure for the behavioral cross-influence (BCI), a behavioral elasticity created by Farhi and Gabaix (2020) to capture such responses. Relying on French income tax returns from 2008 to 2014, the BCI is identified from earnings responses to a shadow tax bracket located just below the threshold where French income tax liabilities start. Even tax filers who used to correctly optimize their taxable income react to an increase in irrelevant tax incentives. Far from being zero, the BCI represents between 56 % and 78 % of the elasticity of taxable income with respect to perceived incentives. Standard analysis restricted to effective incentives would underestimate this elasticity of taxable income by 60 %. Tax filers who face higher stakes are less likely to be misled by irrelevant incentives.

Analysis of regional sustainable development: aspect of taxation mechanism

The main suggestion of our study on development - taxation is that the objectives of taxation are similar in both developed and developing countries. This means that the financial resources required by public expenditures are created in the most possible, fair and effective way. The main differences between developing and developed countries are caused by the constraints faced by governments, not by differences in goals. Administrative inadequacies, insufficient accounting in taxation, insufficient monetization rate in the economy, the high level of importance of agriculture, the limited number of tax brackets compared to developed countries cause taxation in developing countries to differ from those in developed countries. In general, although the models used in accordance with these differences differ, similar methods and techniques are used for tax analysis in both developed and developing countries.

Tax reliefs for young families and for children

The article examines the tax reliefs related to families and parents in the Bulgarian national legal system as the only tax policy measures for rising the birth rate, stimulating people to get married and for a more equal income distribution within this group of taxpayers. As a comparison the article presents the German family income tax system with the tax brackets.

Die kalte Progression in Österreich

Abstract In Austria, bracket creep has so far only been partially returned to the taxpayer within periodic tax reforms. As of 2022, the federal government has decided to fully compensate for the bracket creep, albeit not automatically for every taxpayer, but within the framework of compensation differentiated by income tax brackets with a discretionary component accounting for around one-third of the annual bracket creep burden. A full adjustment along the lines of the Swiss model would have been desirable. If lower income tax brackets continue to be adjusted stronger like upper income tax brackets in upcoming years, full-time employment will be further discouraged.

Property Tax, Levy Expectations and Housing Asset Allocation: Evidence from Chinese Households

Property tax reform in China has long been discussed regarding the reform agenda. However, nationwide implementation remains stalled, with no clarity regarding when and how property taxes will be levied. Uncertain expectations affect household housing assets, the most important assets of Chinese residents. To explore the impact of property tax levy expectations on the allocation of such assets, we construct a theoretical model and use four waves of China Household Finance Survey and Baidu index data for estimation. Property tax levy expectations significantly reduce the proportion of household housing assets to total assets, especially for high-income groups, nonrural hukou households, young-headed households, and households in first-tier cities. For multi-home households, the absolute housing asset quantity drops even more. Moreover, house purchase intentions mediate the impact of property tax levy expectations on household housing asset allocation. The findings provide new insights into upcoming property tax reform and highlight the need to develop differentiated property tax brackets and rates.

Impact of Goods and Services Tax on Indian Economy – Logistic Sector

Important new legislation in India is the Goods and Services Tax (GST). The GST Act bill was first adopted by the Rajya Sabha on August 6, 2016, and then by the Lok Sabha on August 8, 2016. On July 1, 2017, the legislation will go into force. All value creation is subject to the Goods and Services Tax (GST), which is a multi-stage, destination-based tax. Products and services are subject to this kind of tax based on the location of the final consumer. It is proposed that all steps, from manufacturing to consumption, be taxed, with the potential to reclaim taxes already paid. In a nutshell, the final customer is liable for all taxes, and value added to a product or service is subject to taxation. Input Tax Credit (ITC) was made accessible across the whole value chain, and the government benefited greatly from this since GST consolidated a broad range of national and state taxes on most goods and services. The number of tax brackets has decreased to a historic low. The creation of a consolidated digital platform for use by taxpayers is also well underway. More than 26 months and many policy changes later, it seems that not everything has gone as planned. This, however, was not completely out of the question, and the government was prepared to suffer short-term losses in exchange for long-term gains. The tax rates and number of tax bands under India's Goods and Services Tax (GST) are among the highest and most extensive in the world. The rising technical and regulatory obstacles only make life more difficult. The government has enhanced the GST collection goal to Rs. 1.10 crore per month commencing in December 2019 to guarantee revenue collection according to objectives. It is the duty of GST officers to ensure that the appropriate GSTR-1 and 3B returns are filed if penalties or fines were waived at a recent GSTC meeting. Taxpayers who want to avoid penalties must come forward and file their returns by January 10, 2019. The existing GST cannot be considered flawless since it does not apply to all products and services, there are difficulties to collecting input tax credits, and GST rates are often skewed.

Free Agency, Hard Work, and the Justification of Economic Inequality in the Church of Jesus Christ of Latter-day Saints

Free Agency, Hard Work, and the Justification of Economic Inequality in the Church of Jesus Christ of Latter-day Saints

PERSONAL INCOME TAX POLICY TOWARD SUSTAINABILITY AND FAIRNESS

Tax-benefit microsimulation models can be utilized to address a range of policy questions. In Vietnam, the personal income tax system has seven tax brackets, but its current progressive taxation has been deemed unreasonable due to its numerous steps with narrow intervals, resulting in abrupt tax step jumps. To improve the competitiveness of the economy in attracting foreign experts and skilled workers and incentivize labor efforts, we have proposed three scenarios for personal income tax brackets in Vietnam. The results indicate that a change in tax brackets, which involves increasing tax revenue and reducing inequality, is the more favorable option. However, changing the base tax deduction and additional tax deduction per dependent did not lead to desirable outcomes. These findings emphasize the importance of designing tax policies that achieve multiple objectives and are tailored to the specific circumstances of the situation.

The impact of tax incentives on investment in small enterprises in Palestine

The study aimed to measure the impact of tax incentives on investment in small enterprises in Palestine. The study identified the tax incentives that affect Palestinian investments which were stipulated in the Palestinian Income Tax Law number (8) of the year 2011 which was amended according to the Decree number (5) for the year (2015), as well as the Investment Promotion Law (1) for the year (1998) and its subsequent amendments, and among these incentives (tax incentives related to family exemptions, incentives related to tax brackets, incentives related to tax deductions, incentives related to expanding the tax base exemptions, incentives related to encouraging payment discounts, incentives related to investment promotion). To achieve the objectives of the study, the analytical descriptive approach was used, and a questionnaire was developed to measure the fields and variables of the study. A sample of 377 small enterprises owners was randomly selected from the northern governorates of the West Bank (Tulkarem, Nablus, Jenin, Tubas, Salfit, Qalqilya). The questionnaires were then distributed and (365) valid responses were retrieved. The study had the following results: There is a significant effect of tax incentives on investment in small enterprises in Palestine. The Income Tax Law and the Palestinian Investment Promotion Law Tax both provided for tax exemptions and benefits that are in line with the economic conditions of individuals, because the introduction of new tax incentives help investors save money, and thus give them the ability to invest their savings and encourage them to invest in small projects. The provided tax brackets are suitable for all individuals and achieve justice in taxation, and tax reductions affect investment and attract Investors. Moreover, the incentives related to encouragement discounts on paid amounts also encourage the taxpayers to pay the tax due on them in installments according to their situation, which encouraged investors to invest. The most important recommendations of the study include: Efforts should be made to increase incentives to encourage investors and direct them to less invested regions, as well as granting full exemptions for investments made in these regions which would help revitalize them and make them attractive for investment. Moreover, there is a need to have a specialized entity through which the investor can complete all the procedures related to his investment project, due to the complexity of current procedures. The researchers also recommend that business owners should be informed on the benefits and exemptions that they can obtain when they expand their investments or start new ones.

A COMPARATIVE STUDY BETWEEN THE OLD INCOME TAX AND THE NEW TAX REGIME ON INDIAN INDIVIDUAL TAX PAYERS

The Indian government has announced a new tax slab in the Union Budget for 2020–21. The government did not abolish the previous tax system; this new tax slab is sometimes referred to as an optional tax regime. The option for the taxpayer is to select the tax regime—either the old or the new. Compared to the previous tax structure, the new tax regime features a lower tax bracket. The option for the taxpayer is to select either the new tax structure with lower tax slabs or the previous tax structure with higher tax slabs but tax benefits. The previous tax system allowed taxpayers to make use of existing tax breaks such as the house rent allowance, leave travel allowance, and other deductions allowed by the Income Tax Act of 1961. The advantages of the current exemptions and deductions that are offered under the old tax regime will not be available to individuals who choose the new tax regime. The new tax system has a lower tax rate and six tax slabs, compared to the old tax system's higher tax rate and three tax slabs. In both tax regimes, the tax rate for individual under 60 is comparable because they are exempt up to 2.5 lakh. Additionally, individuals who are residents of India for income tax purposes are eligible to claim a tax rebate of up to Rs. 12,500 against their tax liabilities under Section 87A, provided taxable income does not exceed Rs. 5, 00,000.

A Holistic Approach to Creating High Income Portfolios That Are Risk–Return Efficient and Tax Aware

Retirees and other investors may prefer to use dividends from equities and interest from fixed income to fund their spending needs. This mental accounting phenomenon of spending the portfolio’s income without drawing down the invested principal makes them seek high income–producing asset classes. These investors, either directly or via advisors, adopt static high income portfolios as an investment strategy, often ignoring risk–return efficiency and tax efficiency principles. In this article, the authors introduce a methodology to systematically construct high income portfolios through an expected utility of wealth maximization approach while allowing for the incorporation of an investor’s income preferences. However, because asset return expectations are conditional on asset valuations, the authors find that popular static high income portfolios that are created on an ad hoc basis—by substituting broad market exposure with high-yielding assets—by design are not optimal. More importantly, the authors find that high income portfolios are tax inefficient when it comes to high tax bracket investors, making their use only appropriate when taxes are not a primary concern—for example, for low- to moderate-income investors or in a tax-deferred account.

Assessing the Legal Regime for the Taxation of E-commerce and Social Media Organizations in Nigeria

E-commerce and social media have emerged because of the Internet’s development. Business transactions are concluded through it between persons from all over the world who may never meet in person throughout their lives. Flowing from modern trends, a significant number of transactions are completed online on digital platforms and social media. As Nigeria continues to grow and transform in the information and computer technology space, its laws are yet to match the pace of this transition fully. While Nigerians continue to benefit from this development, the profits from online commercial transactions have not been fully captured in Nigeria’s tax bracket. There is no doubt that fully harnessing the taxation of e-commerce and social media companies would boost the revenue and contribute to the development of Nigeria. This article examines how e-commerce and social media were taxed before the enactment of the Finance Act 2020 and how the Act has brought e-commerce into the Nigerian tax net. This article will also attempt to highlight the experience from other jurisdictions in the taxation of social media and e-commerce, noting the lessons that Nigeria can gain from them. Finally, this article will recommend steps for achieving a fair implementation of the law on the subject. Taxation, social media, e-commerce, Significant Economic Presence, Revenue, Double Tax Treaty, Digital Services, Non-Resident Companies, Technology, Globalization

Steuertarif nicht der richtige Hebel für gezielte Entlastungen

AbstractWith the current high inflation, bracket creep is back on the agenda. The federal government has introduced a bill to compensate for this effect, among other things, by shifting income tax brackets. In the debate on bracket creep, the point of reference is very important. Results differ greatly depending on the period and the income concept considered. Moreover, the income tax burden must be seen in the context of the overall fiscal policy. The decision on tax rate adjustments is a political issue.

Do couples bunch more? Evidence from partnered and single taxpayers

Recent papers hypothesise that estimates of the elasticity of taxable income (ETI) for individuals may be underestimated where those individuals are taxed separately but are part of a couple. This paper investigates that issue by applying the ‘bunching at tax kinks’ approach to estimate separate ETIs for partnered and single individuals. It shows that there are opportunities for, and constraints on, bunching specific to partnered individuals. Using administrative taxable income data for the New Zealand taxpayer population over the period, 2000 to 2017, taxpayers are matched to their partners using population census data. Results strongly support the hypotheses that ETIs are larger for partnered, than for single, individuals, and where both partners are located in the same income tax bracket. Couples where one (and especially where two) partners are self-employed reveal particularly large elasticities.

Do Determinants Influence the Capital Structure Decision in Bangladesh? A Panel Data Analysis

More than two decades, capital structure decision marked as variation from optimal decisions as determinants are not properly considered due to the collapse of corporate governance. This study examines the impact of determinants on capital structure decisions in Bangladesh using Fixed-Effect Model (FEM) and Panel Corrected Standard Error (PCSE). The study revealed that debt structure is considerably influenced by liquidity, firm size, asset structure, non-debt tax shield, and operational age of companies. The study also indicates that the companies, which are not financially, sound, but used more debt because the owners of such companies are politically empowered in stock market. The firms that hold less fixed assets (as a percentage of total assets, particularly the family-run and politically affiliated firms used more debt regardless of their tax bracket, profitability and growth—showed a greater capacity for increased debt. This study primarily focused on financial framework to make capital structure decision based on related determinants.