Tax Reduction Research Articles

Tax Incidence and Distribution in a Sraffian Conflict Inflation Framework

ABSTRACT This paper discusses the distributive effects of indirect taxes on produced commodities in a Sraffian conflict inflation framework, in which we make use of a simple ‘Corn Model’ to generalize some results from Okishio ([1958]1977) and apply them to the question of real tax incidence. We show that real tax incidence depends on whether the tax rate is levied on basic or non-basic goods and that in the case of a tax imposed on basic goods, different results in terms of real tax incidence depend on different assumptions about how firms increase prices and workers increase bargained money wages. Within this framework, income distribution, real tax incidence and cost-push inflation are jointly determined by the distributive conflict and the relative bargaining power of workers and firms, expressed objectively in terms of the size and frequency of price and money wage increases. From these results, we argue that a reduction in indirect taxes on basic goods could be a desirable anti-inflation policy, as such reduction, even if accompanied by revenue compensating increases in the taxation of non-basics, would increase both the real wage and the real rate of profits, while permanently lowering the rate of inflation.

Foreign Investments and Market Capitalization in Nigeria: A VECM Analysis

A healthy capital market promotes the overall economic wellbeing of a country. However, Nigeria’s capital market has witnessed both internal and external pressures leading to high rate of volatility. This study examines the impact of foreign investments on market capitalization in Nigeria’s capital market for the period 1981 to 2022. The study is anchored on the theoretical framework of capital movement across regions and seeks to explain why investors invest in foreign countries and the impacts of such investments on the host country’s capital market. We adopted a vector error correction model (VECM) as our analytical tool. The ontrol variables: exchange rate, infrastructure, interest rate, and the target variables: foreign direct investment (FDI) and foreign portfolio investment (FPI) were regressed on market capitalization. Results indicate that FDI and FPI had positive and significant impact on market capitalization in Nigeria’s capital market and that FDI and market capitalization are the major contributors to the variations in market capitalization in Nigeria’s capital market. We conclude that FDI and FPI play important roles in Nigeria’s capital market performance and recommend incentives such as tax reduction and fee waivers which are capable of encouraging foreign enterprises listing. These will make Nigeria’s capital market globally attractive to foreign investors and hence ensure a continuous and impactful inflow.

Integrated Renewable Energy Systems for Buildings: An Assessment of the Environmental and Socio-Economic Sustainability

Developing a green energy strategy for municipalities requires creating a framework to support the local production, storage, and use of renewable energy and green hydrogen. This framework should cover essential components for small-scale applications, including energy sources, infrastructure, potential uses, policy backing, and collaborative partnerships. It is deployed as a small-scale renewable and green hydrogen unit in a municipality or building demands meticulous planning and considering multiple elements. Municipality can promote renewable energy and green hydrogen by adopting policies such as providing financial incentives like property tax reductions, grants, and subsidies for solar, wind, and hydrogen initiatives. They can also streamline approval processes for renewable energy installations, invest in hydrogen refueling stations and community energy projects, and collaborate with provinces and neighboring municipalities to develop hydrogen corridors and large-scale renewable projects. Renewable energy and clean hydrogen have significant potential to enhance sustainability in the transportation, building, and mining sectors by replacing fossil fuels. In Canada, where heating accounts for 80% of building energy use, blending hydrogen with LPG can reduce emissions. This study proposes a comprehensive approach integrating renewable energy and green hydrogen to support small-scale applications. The study examines many scenarios in a building as a case study, focusing on economic and greenhouse gas (GHG) emission impacts. The optimum scenario uses a hybrid renewable energy system to meet two distinct electrical needs, with 53% designated for lighting and 10% for equipment with annual saving CAD$ 87,026.33. The second scenario explores utilizing a hydrogen-LPG blend as fuel for thermal loads, covering 40% and 60% of the total demand, respectively. This approach reduces greenhouse gas emissions from 540 to 324 tCO2/year, resulting in an annual savings of CAD$ 251,406. This innovative approach demonstrates the transformative potential of renewable energy and green hydrogen in enhancing energy efficiency and sustainability across sectors, including transportation, buildings, and mining.

Green Supply Chains and High-Quality Development of Enterprises under Tax Reduction and Fee Decrease: Based on Empirical Data from Listed Companies

Green Supply Chains and High-Quality Development of Enterprises under Tax Reduction and Fee Decrease: Based on Empirical Data from Listed Companies

Rule of Law and Tax Evasion in Nigeria: Moderating Role of Public Trust in Government

Tax evasion problems impact on revenue generation by the government of Bayelsa State, Nigeria. This study explores empirically the moderating role of public trust in government on the relationship between rule of law and tax evasion in Bayelsa State, Nigeria. The specific objectives were to investigate the relationship between legal certainty and tax evasion in Bayelsa State, Nigeria; the relationship between equity before the law and tax evasion in Bayelsa State, Nigeria; the relationship between fairness and tax evasion in Bayelsa State, Nigeria and the moderating influence of public trust on the link between rule of law and tax evasion in Bayelsa State, Nigeria. The study anchored on the theories of economic deterrence and reasoned action and cross-sectional research design with data collected from primary and secondary sources. The Primary data comprised of structured questionnaires from a sample of 218 respondents (taxpayers) in Bayelsa State, Nigeria after validity and reliability tests while the data obtained from the respective taxpayers were analysed by using structural equation model. The finding indicated is a negative and significant link between legal certainty and tax evasion in Bayelsa State, Nigeria; a negative and significant link between equity before the law and tax evasion in Bayelsa State, Nigeria; a negative and significant link between tax fairness and tax evasion in Bayelsa State, Nigeria; and public trust in government negatively and significantly impact on the relationship between rule of law and tax evasion in Bayelsa State, Nigeria. From the findings of this study, we concluded that pubic trusts in government negatively and significantly impact on the relationship between rule of law and tax evasion in Bayelsa State, Nigeria. We recommended amongst others that public trust in government is observed to be a key driver of tax compliance and reduction in tax evasion, consequently the government needs to authentically fight against corruption and also ensure that the deployment of the country’s resources is transparent and there is accountability. When Nigerians have an optimistic perception of the government, citizens and taxpayers are more likely to comply with government rules in general and taxes in particular.

Can tax reduction incentive policy promote corporate digital and intelligent transformation?

Can tax reduction incentive policy promote corporate digital and intelligent transformation?

Economic policies assessment and judgement during the pandemic with semantic and social network joint analysis

This paper delves into the economic policies of China during the pandemic and investigates the relationships between policy-issuing institutions. Firstly, we conduct keyword extraction and statistical analysis based on policy texts to understand policy contents and distribution. Then, we calculate the co-occurrence matrix of policy keywords and publishers from social networks and visualise the relationships with UCINET6 and Gephi software. Through a combination of semantic analysis and social network analysis, we examine the content of relevant economic policies, laws, regulations, and the relationships between their publishers. Our findings reveal three stages of China’s economic policies during the crisis, i.e. the shock, stable, and boost periods, which align with the crisis’s impact on China’s economy. Initial policies supported small-sized enterprises (SMEs), followed by a focus on industries like tourism. During the boost phase, policies underscored various support measures, including tax and fee reductions. We also identified a “local agglomeration” characteristic among policy-issuing entities, suggesting potential improvements in cooperation, especially at the provincial level. Our findings provide valuable insights for future policy design in response to public security events.

Study on the Impact of Textile Trade between China and Japan under the RCEP Framework

Sino-Japanese textile trade is one of the first industries to enjoy tax reduction dividends under the Regional Comprehensive Economic Partnership (RCEP) agreement. This article aims to understand whether the signing of the RECP agreement is an opportunity or a challenge for the Sino-Japanese textile trade. Based on the revealed comparative advantage index analysis of the current situation of the Sino-Japanese textile trade, it was found that Chinese textiles have comparative advantages in the import and export trade of HS61 - HS63. At the same time, a WITS-SMART model was used to simulate tax reduction in the near and long term to analyze the static and dynamic effects of RCEP agreement on Chinese and Japanese textiles. In the short term, China will benefit more from Japan’s tax reduction; in the long run, both China and Japan can benefit from the other’s tax reduction and the total effect of trade will be doubled, with good trade potential and prospects. According to the research findings, the Chinese textile industry should seize the opportunities brought by the RCEP agreement to achieve better and faster development.

“You get the money after waiting for long and you get less than you anticipated”: Experiences of persons with disabilities in accessing the district special grant in Uganda

In 2010, Uganda scrapped an ambitious tax incentive provision in the Persons with Disabilities Act, 2006 that had allowed employers to claim up to 15% tax reduction in annual income provided that they hired at least 10 persons with disabilities at any job level. As though it were a trade-off, the 15% tax incentive was replaced with the special grant, a grant intended for persons with disabilities organized in small groups to generate income. The special grant started off as a pilot in 48 districts before it was rolled out nationally. Since 2019, the responsible ministry has been implementing two models of the special grant: the district special grant and the national special grant. This study focused on the district special grant, and primarily explored the experiences of persons with disabilities in accessing and utilizing the district special grant, and the difference the grant is making. The study adopted a qualitative research approach using interviews and focus group discussions to collect data from 10 beneficiary groups drawn from 6 districts. Focus group discussions were conducted with special grant beneficiary groups while district officials responsible for the special grant and disability union representatives were individually interviewed. Data were analyzed using template coding and thematic analysis. Study findings revealed limited access to the district grant, dismal grant amounts, significant deviations from implementation guidelines, operational dilemmas and overlooking disability related expenses like the costs for moving with a personal assistant. Nonetheless, participants commended the special grant for enabling them to build social networks, gain self-confidence and start small income generating activities. The small grant amount disbursed to big group size groups that lack business start-up skills did not support impactful business initiatives. The study revealed a strong evidence from individual grants as opposed to a group grants for starting income generating activities. The ministry of gender should consider remodeling the special grant into a social protection scheme that awards small grants to individual income generating activities.

Залучення іноземних інвестицій для повоєнної відбудови: досвід країн Західних Балкан

The article is dedicated to summarizing and comparing the experience of attracting foreign direct investment (FDI) for post-war reconstruction in the Western Balkans and its significance for Ukraine amid ongoing military aggression and the need for post-war rebuilding. It characterizes the experiences of Croatia, Serbia, Bosnia and Herzegovina, Albania, Montenegro, North Macedonia, and Kosovo, which suffered destruction during the Yugoslav wars in the Balkans and used FDI as a key tool for economic recovery. The paper examines legislative, tax, institutional, and infrastructural measures aimed at attracting foreign capital, including the establishment of free economic zones, support for small and medium-sized enterprises, tax reductions, and subsidies. The importance of legal protection, political stability, and anti-corruption measures for creating a favorable investment environment is argued. Additionally, the article highlights the critical role of international organizations such as the World Bank, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and the United Nations Development Programme (UNDP), which provided funding for infrastructure projects and institutional reform. Their involvement contributed to the reconstruction of key economic sectors and prepared the countries for European integration. The Balkan experience is valuable for Ukraine, as the current challenges and reconstruction needs after the war share similar features. Ukraine can leverage the tools and approaches of the Western Balkan countries to develop its strategy for attracting FDI, including European integration processes, legal system improvements, anti-corruption reforms, and the stimulation of domestic investment.

SMALL AND MEDIUM-SIZED ENTERPRISES IN PRC UNDER CRISIS

The research examines the effects of the ongoing global crisis on small and medium-sized enterprises (SMEs) in the People’s Republic of China (PRC). It emphasizes the underlying causes and the resultant challenges stemming from the contraction of export markets, which include diminished export orders, escalating operational costs, reduced productivity, an increase in business closures, a significant rise in unemployment, eroded investment confidence, disrupted funding channels, and limited resources. Furthermore, the paper provides an initial evaluation of the countermeasures implemented by the PRC government, particularly its support initiatives for SMEs, while also addressing the challenges encountered in the execution of these policies. The research offers policy recommendations aimed at enhancing the growth of SMEs, proposing relevant strategies such as tax reductions for SMEs, the enhancement of service frameworks, and the fortification of self-development mechanisms within these enterprises.

Equilibrium effects of payroll tax reductions and optimal policy design

We quantify the unintended effects of a low-wage payroll tax reduction using an equilibrium search model featuring bargaining, worker and firm productivity heterogeneity, labor taxes, and a minimum wage. The decentralized economy is inefficient due to search externalities and labor market policies. We estimate the model using French data and find that a significant reduction in low-wage payroll taxes in 1995 leads to an overall improvement in economic efficiency by increasing employment and correcting existing policy distortions that disincentivize labor force participation. However, the tax reduction, by increasing labor force participation among low-productivity workers and vacancy postings by low-productivity firms, results in negative but minor spillover and reallocation effects due to congestion. We find that the optimal policy mix is a lower minimum wage and lower payroll taxes compared to the policies in place in the early 1990s.

What Is Prospects for Nong Khai Province Through Sino-Thai High-Speed Railway: Lessons Learned from Yunnan

High-speed rail (HSR) has become a significant catalyst for regional economic development and integration, particularly under initiatives such as China’s Belt and Road Initiative (BRI). This research investigates the development prospects of Nong Khai Province, Thailand, in terms of border trade facilitated by the Sino-Thai high-speed railway, drawing lessons from the impact of HSR on Yunnan Province, China. The study employs the Analytic Hierarchy Process (AHP) to prioritize key factors influencing border trade development based on insights from experts and senior executives in relevant public and private sector agencies. The findings reveal that infrastructural connectivity is the most critical factor, specifically emphasizing linking transportation systems through rail and land, improving public transport links, and developing digital infrastructure. Reduction of trade restrictions, mainly through streamlined customs procedures and tax reduction measures, is identified as the second most important factor. Human connectivity, including fast passport issuance and enhanced cultural exchanges, ranks third. Financial support mechanisms and policies promoting regional cooperation are also essential for maximizing the benefits of the high-speed rail project. By addressing these factors, Nong Khai Province can effectively leverage the opportunities presented by the Sino-Thai high-speed railway, fostering sustainable economic growth, and enhancing its role as a key player in regional trade. The study provides actionable insights and strategic recommendations for policymakers and stakeholders to optimize the economic potential of Nong Khai through improved connectivity and integration.

Unravelling the Financial Crisis of Sri Lanka: Exploring Policy Blunders

This study explored the political-economic turmoil in Sri Lanka, with a focus on policy implementation. It delved into the dynamics of autocratic governance and elite control within the country's extractive systems, which had evolved over decades. Employing a case study methodology using data from authenticated published sources, this research unveils how ill-conceived policies, orchestrated by China-backed politicians and naïve administrators, primarily triggered the economic crisis. Mismanagement, policy missteps, and corruption fueled widespread social unrest and protests, culminating in the economic downturn. These policy blunders include tax reductions, bans on fertilizer and agrochemical imports, excessive currency printing, and exchange rate manipulation.

Public Policies for the Energy Efficiency of Buildings in Mexico

In Latin America, the energy crisis has worsened due to the dependence on energy services and fossil fuel imports from highly industrialized countries at prices established by the international market; this is particularly relevant to the construction industry, which presents a significant deficit in optimal energy consumption. Hence, some governments have established public policies to maximize the efficiency of these services and, at the same time, minimize the carbon footprint. In this research study, we reviewed the public policies, strategies, and incentives for energy efficiency (EE) implementation in the residential sector established by the Mexican government. A scoping review methodology was chosen and implemented in the following steps: 1. Research inquiry identification. 2. Determination of the relevant literature and studies. 3. The literature selection. 4. Data graphing. 5. Results collection, overview, and submission. In this systematic review, we identified five mandatory standards (NOM-008-ENER-2001, NOM-009-ENER-2014, NOM-018-ENER-2011, NOM-020-ENER-2011, and NOM-024-ENER-2012), six optional standards, four strategies (Green Mortgage, Integral Sustainable Improvement in Existing Housing, ECOCASA, and NAMA), and three kinds of incentives (green bonds, credit and interest rates (Green Mortgage, FIDE, and Ecocasa), and taxes (Income Tax Reduction)). As a result of the implementation of the above, as of December 2020, NAMA financed 5106 developers of 38 projects in 15 states; contributed to a reduction of 126,779 tons of CO2; and aided 19,913 people. From 2013 to December 2023, EcoCasa subsidized 71,440 households for a total of 224 projects in 25 states; contributed to a reduction of 2.6 million tons of CO2; aided 285,760 Mexicans; and issued EcoCasa certificates for 3,473,556 m2. The results of the EE indicators in residential buildings showed an increase in the housing unit number as well as an increase in household appliances, with those based on power consumption prevailing. The residential sector ranks third in power consumption in Mexico, consuming an estimated 790 pj, of which 76% corresponds to thermal energy and 24% to electric power. Among countries in Latin America and the Caribbean, Mexico has achieved an Energy Transition Index of 62%.

The implementation of tax imposition Micro Small Medium Enterprise (MSME) in the form of limited companies after the expiry period of final income tax

The MSME tax policy has undergone several changes and changed regulations. In 2022, the government again re-regulated MSME taxes, namely PP Number 55 year 2022 regarding Adjustments to Regulations on Income Tax. This research uses a descriptive qualitative approach. With the issuance of PP Number 55 of 2022, this provides an opportunity to increase the taxes owed by MSMEs and researchers also want to illustrate to the government that after this regulation is issued what impact will be felt by MSME Taxpayers, so that this will later be used as an evaluation by the Government. The result of this research is the calculation for the 2023 tax year using the rate of Article 17 of the Income Tax Law with the rate of 22%, and an additional 50% tax reduction as the Income Tax Law Art 31 E, resulting in the tax payable of IDR 4,240,946.16. PT ABC must carry out the bookkeeping obligations in reporting the tax liabilities and create proof of transactions for every business transaction to avoid a high tax burden.

R&D subsidies, tax reductions and innovation outsourcing of enterprises

As an important part of the innovation behavior of enterprises, innovation outsourcing is characterized by high technology, high threshold, and industry–university–research integration. Its status in the process of China's scientific and technological development has been continuously improved and it has received increasing attention and support through the government's innovation policies. This paper systematically tests the impact of research and development (R&D) subsidies and tax reductions on enterprises' innovation outsourcing. The results show that R&D subsidies and tax reductions can significantly increase enterprises' total amount and share of innovation outsourcing investment. An internal mechanism test shows that R&D subsidies can promote enterprises' innovation outsourcing by improving the adequacy of R&D funds and the quality of R&D staff. In addition, compared to the eastern region and non-state-owned enterprises, government subsidies have a more significant driving effect on innovation outsourcing in the central and western regions and for state-owned enterprises. The conclusions drawn in this paper provide an important empirical basis and policy reference for Chinese enterprises' internal and external innovation behaviors in the context of government innovation policies.

THE IMPORTANCE OF FREE ECONOMIC ZONES IN ECONOMIC DEVELOPMENT

General Background: Free Economic Zones (FEZs), including Special Economic Zones (SEZs), are established worldwide as strategic initiatives to foster economic development, promote innovation, and attract foreign direct investment (FDI). These zones, typically positioned near key transportation hubs, are distinguished by unique incentives such as tax reductions and regulatory leniency, enhancing their appeal to global enterprises. Specific Background: Over time, SEZs have evolved from traditional trade hubs into sophisticated economic spaces integrating modern technology, sustainable practices, and diverse business models. Despite their recognized benefits, the challenges SEZs face, such as regulatory loopholes, environmental impact, and potential socioeconomic inequality, have yet to be fully understood in terms of their broader implications for sustainable economic growth. Knowledge Gap: While substantial literature discusses the general economic advantages of SEZs, there is limited analysis on balancing these benefits with regulatory and ethical considerations essential for sustainable development. Aims: This study aims to comprehensively examine the role of SEZs in global trade and economic integration, emphasizing their economic advantages while identifying and addressing the inherent risks. Results: Using a descriptive and analytical methodology, this study highlights SEZs’ capacity to attract FDI, stimulate job creation, and foster exports. The findings underscore the complex dynamics within SEZs, identifying key regulatory, environmental, and social challenges that must be addressed to sustain their positive economic impact. Novelty: This research offers a holistic evaluation of SEZs, proposing balanced policy recommendations to bridge economic gains with sustainable and equitable growth. Implications: The findings suggest that the success of SEZs will increasingly rely on adaptive policy frameworks that mitigate risks while maintaining their economic viability. Policymakers and stakeholders are encouraged to prioritize regulatory strength, environmental responsibility, and social equity to ensure SEZs’ role as sustainable engines of economic advancement.

How does vertical fiscal imbalance affect corporate green innovation? Empirical evidence from China

The vertical fiscal imbalance of local governments under the Chinese-style decentralization system affects enterprise decision-making in their jurisdiction. Using the data of A-share listed enterprises in Shanghai and Shenzhen, this paper finds that vertical fiscal imbalance can promote enterprises' green innovation. The analysis of the mechanism of action reveals that the vertical fiscal imbalance positively impacts enterprises' green innovation through tax reduction and government R&D subsidies. In contrast, vertical fiscal imbalance's loss of human capital is a negative channel affecting green innovation of enterprises. Further analysis reveals that the vertical fiscal imbalance has a threshold effect on green innovation; the political and environmental backgrounds of senior executives can significantly strengthen the vertical fiscal imbalance's promoting effect on green innovation activities; in addition, the vertical fiscal imbalance can improve the efficiency and quality of green innovation by enterprises. The research findings are significant for further deepening the fiscal reform and encouraging enterprises to achieve green, high-quality enterprise development.

Tax shocks, firm entry, and productivity in the open economy

We examine the role of endogenous firm entry for the domestic effects and international repercussions of tax policy. We present new evidence from proxy-vector autoregressions that exogenous US tax reductions increase hourly labor productivity and firm creation domestically, and induce higher trade deficits and real depreciation with respect to the other G7 countries, with positive spillovers to foreign consumption and investment. We show that the empirical evidence is compatible with a two-country model with endogenous firm entry. The entry channel provides a strong amplification mechanism for the supply effects of tax shocks at home and leads to persistent spillovers to the foreign economies.