Tax Policymakers Research Articles

Economic burden of tobacco use in Pakistan

BackgroundThe lack of reliable tobacco healthcare and economic cost estimates leaves the tobacco industry undertaxed and thriving in Pakistan and makes the country as one of the top tobacco-consuming nations....

International investment agreements and the global minimum tax: of treaty troubles and investment incentives

Abstract Statutory and effective tax rates have witnessed a marked decline over the past decades, prompting international tax policymakers to grapple with the challenge of tax competition. The latest tool in this struggle is the global minimum tax (GMT). This paper examines the intersection between the GMT and International Investment Agreements (IIAs). It first briefly explains the operation of the GMT and reviews how IIAs address domestic tax measures. It goes on to argue that multinational enterprises (MNEs) affected by the GMT are unlikely to file large numbers of investor-State dispute settlement cases to challenge its implementation. Instead, MNEs will leverage IIAs in seeking to replace corporate income tax incentives captured by the minimum tax with alternative economic benefits. Given how income-tax-based investment incentives are administered in practice, many MNEs could plausibly argue that the withdrawal or undermining of these incentives through top-up taxes violates IIA protection standards. The paper concludes by outlining the potential motivations and options for MNEs seeking to replace tax incentives and the implications for the ongoing global effort to address tax challenges. Ultimately, the GMT’s design means that the race to the bottom is likely to shift elsewhere.

How Does Tax Timing Affect Spending in Retirement?

ABSTRACT This study investigates how the timing of taxes on retirement savings affects spending. Our findings are based on an experiment where participants spend funds from either a deferred-tax account, where taxes are paid upon withdrawal, or a currently taxed account, which represents after-tax savings withdrawn tax-free. We find that deferred-tax account holders consume savings faster than currently taxed account holders with equal after-tax spending power. Further, given equivalent nominal balances, deferred-tax and currently taxed account holders spend nominally equivalent amounts on goods, despite deferred-tax account holders needing to pay taxes on withdrawals. This finding suggests deferred-tax account holders under-adjust for taxes and, therefore, consume their wealth faster. These findings have important implications for financial advisors and tax policy makers. They also add to a growing body of research showing that tax timing affects individual decision making and that currently taxed accounts often encourage individuals to make better retirement planning decisions. Data Availability: Data are available from the third author, upon request. JEL Classifications: H24; K34.

Self-Assessment Regime, Tax Compliance, And Tax Administration: Evidence From Emerging Economy

Purpose: This study examined the effect of self-assessment regime and tax compliance on tax administration in Nigeria. The specific objective was to find out the effect fiscal governance quality tax-payers knowledge (TKW), filling of tax returns (FTR), financial constraints (FCT), ability to pay tax without being compelled (PAC).
 Methodology/approach: The study adopted the survey research design This is because the objective of the study is to systematically obtain information to describe how self-assessment endues tax compliance and tax administration. The population of this study is the 96 conventional Federal Inland Revenue Tax offices and all corporate taxpayers in Nigeria. The study utilized the purposive sampling technique considering responses from our respondents, fifteen conventional federal inland revenue tax offices and twenty-five corporate taxpayers were chosen for the study. One hundred and two respondents out of which forty-five were from conventional Federal Inland revenue tax office and fifty-seven responses from corporate taxpayers. The source of data is primary and five-point Likert scale questionnaires were designed to generate responses from respondents. Out of a total number of 750 questionnaires sent out through Google, only 252 were returned. The study made use of inferential and descriptive statistics to analyze the responses with the aid of SPSS.
 Findings: The finding indicated that there is a significant association between tax knowledge and ability to pay tax without being forced and governance quality, but filling of tax return and financial constraint have negative effect on governance quality. The study concluded that the association between self-assessment regime and tax compliance and tax administration in Nigeria is significant and the study recommended that loopholes from where tax revenue is lost should be covered to increase tax revenue in Nigeria.
 Practical Implication: The research finding has an effect on tax policy makers and taxpayers in Nigeria
 Originality/Value: this study is having modified the existing variables used by previous and introduced new ones as it introduced financial constraint and ability to pay tax as a measure of tax compliance.

Transfer Pricing Regime under the Indian Income Tax Act 1961 and Income Tax Rules 1962 – Inadequacies, Deficiencies, Problems and Proposed Solutions

The author makes a case for the inclusion of the OECD Guidelines into the Indian transfer pricing regime. The article takes a bird’s eye view of the Indian transfer pricing regime and therefore undertakes a high-level analysis. In doing so, it brings to the fore the shortcomings in the Indian regime for consideration by the tax policymakers – ministry and revenue officials who frame India’s international tax and transfer pricing policies. For this purpose, the author adopts the perspective of the revenue/tax authorities.

Factors influencing tax evasion in the developing country: A regulatory policy contexts

Albania is a country that emerged 30 years ago from a centralized and closed economy, where the state controlled the entire economy. During these 30 years, it has experienced a strong transition and has gone through economic and political crises, which have influenced the strengthening or weakening of the role of the state and its economy. One of the problems that remains worrying for Albania is the high level of tax evasion, a phenomenon that weakens the role of the state in the development of stimulating regulatory policies (Tanzi & Shome, 1993), as well as in maintaining financial and economic stability. Economic crime or financial fraud is always the biggest challenge to the local economy (Sutherland, 1940). Through this study, we aim to analyze the main factors influencing tax evasion in Albania, the factors that affect the ability of taxpayers to fulfil their tax obligations, as well as the factors that affect the level of tax income declared by tax-paying entities. We have used primary data taken from a questionnaire with taxpayers and from an interview with tax administration employees. Data have been analyzed through statistical methods, and conclusions were reached to make this research important to tax policymakers.

شناسایی و درجه‌بندی عوامل مؤثر بر فرار مالیاتی در افغانستان

This research is titled "Priority Ranking of Factors Affecting Tax Evasion" in order to identify which factor has a more significant impact on tax evasion. The study population consists of four groups: 35 experts and university professors, 35 tax payers and merchants, 35 tax office employees, and 35 managers of private organizations. The opinions of each group were separately examined and studied, and the overall results are presented in this research. The findings of this research, obtained through the Analytic Hierarchy Process (AHP) method, indicate that the economic-technical factors have a weight value of 0.616, the political-security-administrative factors have a weight value of 0/231, and the legal-social-cultural factors have a weight value of 0.153 in terms of their impact. The highest impact is related to the following four factors: economic instability, increased unemployment, inflation, and changes in the income of taxpayers, with a weight value of 0.202. The existence of fake jobs and underground activities with a weight value of 0.106, the absence of an electronic system and weaknesses in the use of electronic tools with a weight value of 0/106, and the improper collection and allocation of budget with a weight value of 0.076 are also influential factors. The first three factors belong to the economic-technical factors, while the fourth factor belongs to the political-security-administrative factors. Therefore, it is necessary for tax policymakers, tax administrators, and managers of tax organizations to pay attention to these factors and take more effective measures to address the issue of tax evasion. This can be done through electronicization of the tax system, providing training on the use of technological tools, eliminating fake markets and businesses, and ensuring proper utilization of collected tax revenues.

Understanding Tax Compliance among Sole Proprietors: A Theory of Planned Behaviour Analysis

Issues related to tax compliance represent a significant challenge for tax administrations worldwide. Addressing these concerns is crucial, as non-compliance can lead to substantial losses in government revenue. Drawing on the Theory of Planned Behavior (TPB) as the foundational theoretical framework, this study investigates the determinants of compliance behavior among sole proprietors. Questionnaires were sent to a sample of sole proprietors in Malaysia and were completed by 225 respondents. The results showed that the TPB variables were able to explain 44.7 percent variance in behavioural intention to comply with the tax laws. The sole proprietors' intention to comply with tax regulations was significantly influenced by their attitude toward compliance and their perceived behavioral control. However, it was observed that subjective norms do not exert any influence on the decision of whether to comply with tax laws or not. The findings imply that tax authorities should prioritize addressing attitudes, as favourable attitudes toward the tax system appear to be a key driver of increased tax compliance among sole proprietors. By fostering positive perceptions and attitudes regarding the tax system, tax authorities may enhance overall compliance levels within this specific taxpayer group. In conclusion, this study contributes to the existing body of tax literature and offers initial insights for Malaysian tax policy makers seeking to comprehend the determinants of behavioral intentions regarding tax compliance

An Inquiry into the Use and Reform of the New Zealand Foreign Trust Regime

This article describes how and to what extent New Zealand foreign trusts are used in international tax planning. It highlights the substantive tax policy concerns that remain outstanding despite the recent reform, and evaluates the political backdrop to reform process, concluding that greater transparency in tax policymaking is desirable.

Mapping alcohol and tobacco tax policy interventions to inform health and economic impact analyses: A United Kingdom based qualitative framework analysis

BackgroundAlcohol and tobacco have different policy regimes and there is little understanding of how changes to policy on each commodity might combine to affect the same outcomes or to affect people who both drink and smoke. The aim of this study was to deepen understanding of the policy objectives of UK alcohol and tobacco tax options being considered at the time of the interviews with a set of UK policy participants in 2018, and the factors affecting the implementation and outcomes of the policy options discussed. MethodsTen tax policy experts were recruited from government arms-length organisations and advocacy groups in England and Scotland (4 alcohol, 4 tobacco, 2 alcohol and tobacco). Alcohol and tobacco experts were interviewed together in pairs and asked to discuss alcohol and tobacco tax policy objectives, options, and the mechanisms of effect. Interviews were semi-structured, supported by a briefing document and topic guide, audio-recorded, transcribed and then analysed deductively using framework analysis. ResultsAlcohol and tobacco tax policy share objectives of health improvement and there is a common set of policy options: increasing duty rates, duty escalators, multi-rate tax structures, industry levies and the hypothecation of tax revenue for investment in societal benefits. However, participants agreed that the harms caused by alcohol and tobacco and their industries are viewed differently, and that this influences the impacts that are prioritised in tax policymaking. Working-out how alcohol and tobacco taxes could work synergistically to reduce health inequalities was seen as desirable. Participants also highlighted the importance of avoiding the combined effects of price increases on alcohol and tobacco widening economic inequalities. ConclusionsImpact analyses should consider the combined effects of alcohol and tobacco tax policies on health and economic inequalities, and how the effects of changes to the tax on each commodity might trade-off.

Monetary Incentives of Tax Whistleblower Programs: On Their Design and Implementation

The instant contribution discusses the monetary incentives established in tax whistleblower programs. The latter have been already designed and implemented in some developed OECD countries. Tax policy makers in Bulgaria are also considering mandatory awards for whistleblowers from proceeds collected from evaded taxes and/or social security contributions. However, the monetary incentives built-in to a possible tax whistleblower program have sparked controversy in Bulgaria, a country with past experience in whistleblowing due mainly to political and/or ideological reasons. Nevertheless, tax evasion is widespread in this country with a tax gap of BGN 2,0 -2,2 billion. Therefore, in order to improve tax compliance and collection, a tax whistleblowing program in Bulgaria should be considered and designed with regard to the public-private partnership framework. It has been also suggested in this paper that the awards paid by the tax authority to the whistleblowers in Bulgaria should be exempt from personal income taxation. The whistleblower program in this country may become a productive, although non-conventional tool for tax policy, given that its monetary incentives are aligned with the recommendations of the international good practice.

The impact of negative gearing on the investment decisions of housing investors: the case of Greater Sydney

AbstractTo date, no empirical study has examined the impact of negative gearing and other factors on residential investors’ decisions using quantitative analysis. We applied a structural vector autoregression framework to trace the response of residential investors in Greater Sydney to shocks in its key drivers over the period 1991–2018. We discovered a residential investors’ profile in which negative gearing is being used to cushion any net rental loss during periods of low yield while expecting capital growth over their holding period. This supports the hypotheses of the study which posit that capital gains and negative gearing have a positive and negative relationship, respectively, with the number of residential investors. Additionally, a negative relationship between mortgage lending rate and number of investors is found, indicating a rising lending rate will increase expenses and contribute to low yield. We also found population growth and increased housing supply could increase the number of residential investors. These results could be used by tax and housing policy makers to recalibrate tax laws relating to negative gearing, especially for residential investment. Residential investors could potentially use this information for more informed decision making, particularly during periods of low yields.

Does taxation of digital financial services adversely affect the financial inclusion agenda? Lessons from a developing country

Despite strong evidence of the critical role of mobile money technology in deepening financial inclusion, the impact of taxing mobile money transactions on digital and financial inclusion remains an unexplored area of research. By drawing on the Unified Theory of Acceptance and Use of Technology model, this research presents a rich insight into the determinants of mobile money adoption and the moderating effect of taxation (e-levy) on mobile money adoption. The purposive data sampling technique was employed to collect data from 287 mobile money users. The structural equation modeling – partial least square method was applied to test the hypotheses of this study. The findings show that performance expectancy, effort expectancy, social influence, and facilitating conditions significantly influence behavioral intention. Consequently, behavioral intention shows a significant relationship with the actual use of mobile money. Furthermore, regarding the moderating effect of taxation, the findings show that taxation negatively and significantly influences the actual use of mobile money. Finally, the implications of the results to tax policymakers (government) and mobile money operators have been discussed.

Tax Planning And Financial Constraints With Moderated Effect Of Audit Quality: Evidence From East African Countries

This study aims to provide empirical evidence on the relationship between tax planning and financial constraints with the moderated role of audit quality. This study draws its sample from listed firms operating in developing countries particularly East African Countries, the region where firms are most famous for facing higher financial constraints. We used ordinary least squares (OLS,) fixed effect and feasible generalized least square (FGLS) to estimate the regression on the data spanning 2009 to 2019. The results show a negative relationship between book tax differences and financial constraints, which suggests that companies with larger book tax differences are less likely to experience financial constraints. However, this study found no significant moderated role of audit quality. Nonetheless, the negative relationship between book tax differences and financial constraints has practical and theoretical implications. It highlighted the need for tax authorities and policy makers to reform and enforce their tax regulations to limit aggressive tax planning. It also provides insights into the potential conflicts of interest that can arise between managers and other stakeholders in a company, and highlights the importance of transparency and accurate financial reporting in mitigating these conflicts.

What Do Hungary and the Developing World Have in Common?

Hungary’s 2022 veto (since withdrawn) of the European Union’s proposal to adopt the global minimum tax under Pillar 2 shone a spotlight on the principle of unanimity that guides tax policymaking within the 27-member union. Natalia Pushkareva examines how the system that empowered Hungary’s veto fits within the “winner’s curse”, a theory that explains auction behaviour, and a corollary, the “unilateralist’s curse”. She explains why in an organization like the European Union, requiring unanimity may result in some actors overvaluing the benefits of a proposed policy.

The current situation of the tax system and administration in Albania

Abstract A large part of the world’s economies, but especially countries in transition, face high levels of fiscal evasion and tax avoidance. The tax administration must analyze the factors that influence the level of income declaration by taxpayers, specifically the identification of the problems of this fiscal policy in relation to VAT, Social Security and Health contributions and consolidate the infrastructure in order to improve the situation in a way to achieve a better performance in the realization of tax revenues. Tax control remains one of the most discussed issues in this case. Despite the fact that there are other important structures that affect the performance of the tax administration, tax audit has a significant impact on increasing the awareness of taxpayers. The quality of tax control has been treated as one of the basic performance indicators of the tax administration that has a direct impact on tax revenue collection. Fiscal evasion and tax evasion leads to a low level of revenue realization, which causes low levels of public investment. The object of the study will be the identification of the current problems of the fiscal policy, the identification of influencing factors in the behavior of taxpayers and the impact of tax control on tax performance. There are studies related to the structuring and management of the tax audit and the factors that make a tax audit more qualitative. These studies emphasize that an independent tax control takes on new burdens aiming to guarantee the budgets with the necessary revenues to carry out economic and social programs for the benefit of citizens. The recent global and regional economic crisis has affected fiscal administration, requiring all governments to increase tax performance in support of the minimization of informality and the fight against fiscal evasion and tax avoidance. In a country like Albania, where the informal economy is present (World Bank, 2015), taxpayers try to use all the “ways” they find to avoid paying tax obligations. The difference between the taxes that should be collected and those actually collected 1 is calculated to be somewhere between 16% and 20% for VAT and for profit tax an average of 38%, also if measures for tax controls had not been taken, the potential evasion reaches 66% (World Bank, 2015). Also, the occasional changes in tax legislation and the tax burden creates difficulties for business until finding abusive ways. Under these conditions, for the tax administration in Albania, maintaining an efficient and effective tax administration is a difficult challenge. In all countries, the tax audit plays an important role in the performance of the tax administration. The main purpose of the tax administration is to make taxpayers aware of their tax obligations. An important tool for improving efficiency and effectiveness of an administration is the implementation of an appropriate tax control system in relation to the conditions in which the country is located. This study constitutes a scientific effort to present the problems of the current fiscal policy and the influencing factors in the performance of the tax administration in Albania. Through this study it will be possible to prove the relationship that exists between the various factors that have been studied (which are thought to affect efficiency) and the efficiency of the tax administration. At the same time it will be analyzed what part of the income is realized from the tax control from the total collected income. This study is a novelty in this field, since there are no studies in Albania that have dealt with these issues before, but it will also serve the senior managers of the tax administration and policy makers to take the appropriate measures.

The value relevance of corporate tax expenses in the presence of partisanship: International evidence

This study examines the value relevance of corporate tax expenses in an international setting and determines whether partisanship plays a role in its informativeness. Our empirical results indicate the greater value relevance of corporate taxes during the administration of right-leaning governments. Moreover, our cross-sectional analysis suggests that corporate tax expense is value-relevant during the administration of right-leaning governments; however, corporate tax expense does not convey information regarding returns when left-leaning parties are in office. These findings highlight the importance of the political orientation of tax policymakers in determining value-related information on corporate tax expenses.

Comparing the Destination Principle and Origin Principle in Sales Tax: Implications for Pakistan's Tax System

This study evaluates the influence of destination and origin principles on the tax system of Pakistan. This study examines destination and origin concepts, terminology, and the VAT system. This report comprehensively examines literature, data, and case studies to evaluate the appropriateness of these approaches for Pakistan's tax system. Sales tax is levied based on the destination principle, whereby it is determined by the location of the eventual user rather than the producer. The origin principle imposes sales tax based on the location where goods or services are produced or rendered. To comprehend the practical implications of these principles, it is essential to compare and contrast the concepts of "sales" and "supply".The legal definition of "business" impacts sales tax in various transactions. Comprehending zero-rated supply is essential due to its influence on the tax liability of different goods and services. The excise tax is a component of the sales tax in Pakistan. Excise duty is levied on domestically produced, imported, and sold goods within the nation. The responsibility for liability lies with either the manufacturer or importer, depending on their manufacturing capacity or the specific items involved. Furthermore, the paper examines the concept of value-added tax (VAT). Producers improve raw materials prior to selling the end product or service. The Value Added Tax (VAT) system effectively captures value addition at every stage of production, thereby improving efficiency and eliminating biases in production choices. This study examines the difficulties encountered by small traders and retailers within Pakistan's tax system, specifically in relation to sales tax. An efficient tax system requires improved tax administration and voluntary compliance. Comparing sales tax principles is beneficial for tax policymakers in Pakistan. It facilitates comprehension of the pros and cons associated with each concept, enabling well-informed choices regarding tax systems to attain economic objectives and generate income. The report encompasses pertinent literature and legal obligations pertaining to the tax policy discourse in Pakistan.

Predicting tax fraud using supervised machine learning approach

With the advancement in technology, the tax base in Rwanda has become broader, and as a result, tax fraud is growing. Depending on the dataset used, fraud detection experts and researchers have used different methods to identify questionable cases. This paper aims to predict features of tax fraud using the most robust supervised machine-learning model. This research provides a context where a fraud expert can use a machine-learning model, and an implemented model offers instant feedback to the fraud expert. We evaluate supervised machine learning models such as Artificial Neural Network, Logistic Regression, Decision Tree, Random Forest, GaussianNB and XGBoost. Based on different evaluation metrics, Artificial Neural Network was the most robust model for predicting tax fraud. Findings reveal that the time of business that indicates the difference in time from when a business started and the time it was audited, the domestic businesses, taxpayers who import and export goods, those with no losses, those whose businesses are located in the eastern province, and those registered on withholding and Value Added Tax types are more susceptible to tax fraud. This study is among the few to evaluate the effectiveness of multiple supervised machine-learning models for identifying tax fraud factors on an accurate data set with numerous tax types. The evidence generated in the current study will serve as a valuable tool for both tax policymakers and auditors, as well as for enhancing awareness of more robust methods for predicting tax fraud.

최저한세 납부 대상 기업의 자기자본비용

This study analyzes effects of alternative minimum tax (AMT) on firm’s cost of equity capital. Investigating a sample of public firms for 2011-2020, we find that firms paying AMT have a higher cost of equity capital. We also find that the cost of equity capital is higher when the firms paying AMT are non-small and medium-sized enterprises (SMEs). This study contributes to expanding the literature by empirically analyzing how tax regulation affects the capital market. Firms’ behavior motivated by tax regulation could affect the cost of equity capital which is the basis of the firms’ real economic decisions. Thus, the results suggest that tax policymakers make tax regulation more sophisticated.