Tax Reform Agenda Research Articles

Russia in Global Digital Tax Reform: Together or Apart?

The goal of this research is to develop policy proposals for a reform of Russian corporate income tax legislation. The paper reviews and analyses international and Russian tax policy context and ongoing reforms that aim to address the challenges of the digital economy. It is shown that different states have been implementing unilateral measures in their respective tax legislation due to the absence of global consensus about coordinated reform. This leads to increasing complexity and uncertainty for digital businesses and tax administrations. Considering that the digital tax reform agenda is highly relevant for Russia for fiscal reasons, several ideas for developing Russian tax rules in this context are proposed, including amendments to the concept of corporate residence, introducing a digital services tax as an interim measure, amending the mechanism of withholding tax on royalties and clarifying the tax characterisation of supplies in digital form. This article was prepared as part of research by state assignment at the Russian Academy of National Economy and Public Administration

International Tax Reform Agenda post COVID-19

The pandemic has imposed severe economic costs which includes lower tax revenues. Many countries are now examining measures to recoup the costs while they also work to reform the international tax system. This paper discusses the success achieved so far in BEPS program and the remaining work that will complete the tax reform agenda. In addition the paper discusses plausibility of other revenue raising measures as well as raises questions that must be addressed by tax policy in the years to come.

Taxation Untapped: The Potential of the UN Sustainable Development Goals to Promote Progressive International Tax Reform

Taxation is a unique and valuable method to create a significant and sustainable source of domestic and international public finance for the public goods essential to the realisation of the UN’s Sustainable Development Goals (SDGs). However, current proposals for reform of the international tax regime to address tax avoidance by high-profit multinational corporations (MNCs) are deeply flawed. This contribution explores the potential of Goal 17 of the SDGs to mandate and articulate a progressive international tax reform agenda based on two pillars. The first makes recognition of the real harms done by massive tax evasion by MNCs central to any reform agenda, and proposes that taxation be reconceptualised as an institution representing a public compact between a government, its people and MNCs in a public-oriented state. The second pillar proposes the concept of Global Wealth Chains (GWCs) as the basis for exploring a more effective, transnational tax governance regime. In the following paragraphs I highlight the estimated funding gap to meet the SDGs, and describe the size and harmful effects of the ‘tax gap’ from tax evasion and avoidance, in particular for poorer countries. I then show how the flagship international tax reform agenda led by the Organisation for Economic Co-operation and Development (OECD) and G20 - the Base-Erosion and Profit-Shifting (BEPS) project - is based on a flawed understanding of the governance of MNCs’ profit-generation activities. I conclude with a proposal for the need to think systematically, historically and strategically about international tax governance, in order to articulate and promote an equitable and effective international tax reform agenda.

Designing Malaysia’s Tax Structure to Achieve Higher Income Country

After four decades of rapid, inclusive growth averaging 6.4% pa since 1970, due to successful transformation of the economy from agriculture to a modern and open economy, Malaysia needs to embark on painstaking reforms to launch its trajectory to a higher growth path. Malaysia has a lower tax burden when compared to most G8 and BRIC economies. It collects about 16.9% of GDP in tax revenues, compared with the OECD average of 34.3% in 2016 (OECD, 2015). Among the urgent reforms are taxes which need a restructuring from direct and commodity taxes with overdependence on oil and gas to a more diversified tax base. Its tax dependence on the oil and gas sectors for revenue reached a 41% high of GDP in 2009, before settling to 14% with the introduction of GST/SST. The long-run elasticity of tax burden is -0.25, which implies that GDP growth will be reduced by 0.25% for every 1% increase in tax burden, compared with -0.27 for OECD countries (Arnold, 2012). In general, taxes are negatively correlated with economic growth, even after taking into account the different types of taxes. The structure of taxation showed that GST is most sensitive to economic growth and has the highest impact. Among taxes, GST, PIT and CIT are negatively correlated to growth whereby for every 1% increase in taxes, economic growth will be reduced by 0.17%, 0.06% and 0.06% respectively. PROTAX and OTHTAX are positively related to GDP growth. Tax reforms are needed to broaden the overall tax base, resize the sources to uncover additional resources to fund needed programs for inclusive growth. Over the medium time-span, it is important that the government focus on strengthening its tax collection administration to cut off leakage and in reducing the number of tax exempt items, inevitably looking into indirect taxes and a broader tax base to contribute to a progressive income tax system in its tax reform agenda.

TAX REFORM IN QUÉBEC: AN ALTERNATIVE VISION

Recent evidence indicates that income and wealth inequality have been increasing, while the tax-transfer system has not responded. If anything, progressivity has decreased and capital income has become increasingly sheltered. Arguably, a significant amount of the increase in inequality reflects windfall gains or rents to various taxpayers, both individuals and firms. Recent proposals by the Mirrlees Review, drawing on lessons from optimal tax analysis, include some ways that the tax system can be reformed to tax windfall gains, albeit in a context limited by distribution-neutrality. We propose a tax reform agenda for Québec and Canada that can both improve efficiency and fairness. Our proposals contrast with those of the Québec Taxation Review Committee.In our view, there is a strong case for taxing capital income as part of redistribution policy, in part because capital income includes unexpected gains, or rents, that accrue disproportionately to high-income persons. Our preferred treatment of capital income at the personal level would include the following. First, strict limits on tax sheltering should be maintained to ensure that some capital income is taxable for high-income persons. Contribution limits should be more generous for RRSPs than for TFSAs given that unexpected returns are taxed under the former but exempted under the latter. Second, capital gains on housing, above some lifetime exemption level, should be taxed. Third, a tax on large inheritances should be introduced to reduce the intergenerational transmission of wealth inequality and promote equality of opportunity.At the corporate level, we recommend a fundamental change in the role that the system is meant to play. The current system, which is designed to serve as a withholding device for the personal tax by taxing shareholder income at source, should be replaced by a cash-flow tax system, or equivalently a rent-based corporate tax. This recommendation is motivated by the fact that the corporate tax on normal risk-adjusted return is largely shifted to labour given the high degree of international capital mobility. Moreover, the withholding role of the corporate tax has become unnecessary given that most capital income is now sheltered from the personal tax. Among the different cash-flow equivalent taxes available, the allowance for corporate equity tax would be the easiest to implement. It would simply involve adding a deduction for the cost of equity finance at the risk-free interest rate in addition to the deductions for interest and depreciation that currently exist. The adoption of a cash-flow equivalent tax would mitigate the disincentives for investment, innovation and growth that the current system imposes. As well, it would eliminate the incentive to finance investment by debt.In addition, we argue that the integration of the personal and corporate income taxes has become largely unnecessary. Therefore, we recommend eliminating the dividend tax credit and the preferential treatment of capital gains. Doing so would also offset the revenue cost of adopting a rent-based corporate tax.The same tax base should apply to incorporated and unincorporated businesses. The small business deduction should be maintained, given that it compensates for the imperfect refundability of tax losses for bankrupt firms. However, cumulative lifetime limits should be adopted so firms are not rewarded for staying small.Increased income inequality calls for more progressivity of the tax system both at the top and bottom of the income distribution. This could be achieved by adding a new tax bracket for the top decile of taxpayers and making all tax credits refundable.To maintain some harmonization, these reforms should ideally be adopted by both orders of government. However, several proposals could be adopted unilaterally by the Québec government with relatively little difficulty.

The tax reform agenda

High tax rates that distort incentives and create large deadweight losses have been reduced, but there is still much more to be done to improve the tax system. It is useful to distinguish between tax rules that represent tax expenditures relative to a pure income tax from rules that represent tax expenditures relative to a consumption tax. I think it is important to focus on tax expenditures relative to a consumption tax base. It is possible that if there were no estate tax, the present value of the taxes paid by future heirs would exceed the revenue lost by abolishing the estate tax. On the corporate side, a shift to a territorial system of taxation would have very substantial favorable effects, while pass-through entities have a very weak case for a significantly lower tax rate. The net effect of such tax changes would be an increase in the budget deficit, though that increase is likely to be only temporary due to legislative rules. I am optimistic that there will be tax reforms enacted in the next twelve months holding great promise for improving our tax system and our economy.

The Significance of Business Interest Associations in Economic Policy Reform: The Case of Australian Taxation Policy

Taxation reform has dominated Australian politics over the past twenty-five years. Despite this prominence on the political agenda, until recently Australian governments have lacked the capacity to consolidate key elements of this tax reform agenda. While the problematic nature of Australian tax reform can be explained in part by macro-level variables, this protracted policy deadlock has also influenced historical patterns of business-government intermediation. The article argues that the evolution of the Australian tax policy network over the study period was prompted by both associational and state actors reassessing their strategies in the context of the political failure of tax reform proposals. These developments provide empirical insights into the ongoing debate relating to the factors which lead to the formation and evolution of sectoral level policy networks. The article concludes that while the increasing levels of business mobilization experienced over the study period enhanced the electoral via...

Hidden in Plain Sight: IRS Publications and a New Path to Tax Reform

Internal Revenue Service (IRS) publications are everywhere in tax practice and almost nowhere in tax scholarship. These publications seek to explain substantive tax law to the general public in a simple, comprehensible, and accurate manner. IRS publications are not only the primary source of information about tax law for taxpayers who file their own returns, but such publications are also essential for online tax preparation platforms, like TurboTax, and for third-party tax return preparers, who rely on this information when selling their services to millions of taxpayers each year. From the perspective of these stakeholders, IRS publications are not simply explanations of substantive tax law; they are substantive tax law. Yet IRS publications are scarcely mentioned in legal scholarship or tax policy debates. Considering their influence and ubiquity in tax practice, the broad inattention of scholars and policymakers to IRS publications is enormously surprising. This Article suggests that IRS publications can do more than help non-expert stakeholders navigate their annual tax filing obligations; these publications can also offer significant and unexpected value for experts in their world of legal scholarship and tax policy debates. Studying IRS publications can yield important lessons about one of the greatest challenges facing the federal income tax system—complexity. Virtually all stakeholders agree that tax law is too complicated, but we seldom make meaningful progress toward simplifying the law. This Article proposes that the study of IRS publications can help experts identify and prioritize complexity problems in federal tax law. By using IRS publications to recognize high-risk/high-value problems with complexity, experts can formulate a tax research and reform agenda that will bypass many theoretical and epistemological roadblocks to tax simplification. The key is that IRS publications offer experts a new starting point in the long road toward tax reform, one that has been hidden in plain sight for decades.

Tax and Expenditure Reforms in Africa: An Overview

Taxation is recognised as being able to affect economic growth, poverty and inequality. In Africa, taxation is an instrument that can be used to promote development. Like other countries, African governments have undertaken tax reforms aimed at increasing tax revenues, but at the same time reducing trade taxes and high marginal tax rates. Reforms include introducing broad-based consumption taxes, simplified tax design and improved tax administration. Emerging ideas include the ‘optimal tax policy’, which states that all taxation distorts market incentives, and reforms should be driven by the aim of minimising these distortions. A challenging aspect of a ‘growth friendly’ tax reform agenda would be how to ensure that increasing taxation does not erode the small existing tax base by inducing further distortions. The three papers in this special edition look at tax reform in relation to investment, to tax evasion and economic growth and also to the equity and efficiency trade-offs. Tax reforms are found to be successful in modestly increasing GDP growth, while reducing poverty and inequality. These outcomes are driven by the positive impacts that expenditures on infrastructure, operations and maintenance have on total factor productivity. Improved legal and regulatory frameworks, coupled with transparent and accountable institutions in Africa, and well-developed social welfare expenditure architecture capable of recycling revenues back to poor individuals will help improve tax collection and development. Without these features, the tax reform agenda would likely have almost no impact on the African economies.

The 2014 Global Tax Competitiveness Report: A Proposed Business Tax Reform Agenda

The 2014 Global Tax Competitiveness Report: A Proposed Business Tax Reform Agenda

The Tax Reform Agenda in Australia

This paper applies concepts developed in the Policy Agendas Project (PAP) literature to an analysis of Australian tax policy over the post war period. It argues that a major turning point in the Australian tax policy agenda occurred during the second term of the Hawke Government (1984‐87). Beyond this turning point, and despite the fierce partisan conflict concerning tax policy over the past two decades, there has been remarkaly little difference between Australia's two major parties at the level of substantive policy content. The Australian tax policy agenda over the post war period can be characterised by remarkable policy continuity punctuated by a period of change in the mid 1980s when structural change in the international political economy precipitated unprecedented domestic liberalisation.

Australia's Non Commercial Loss Restrictions for Small Business

As a result of the Commonwealth Government’s massive tax reform agenda flowing from the 1999 Ralph Report the non-commercial loss provisions [NCL] applied from the income tax year ended 30 June 2001 to tighten the extent to which individuals can offset losses from non-commercial activities against other income. Subsequently, in 2003 the Board of Taxation commenced a post-implementation review of the quality and effectiveness of the non-commercial losses legislation, and in 2004 submitted a confidential report to Treasury. This paper examines the bedding down process for the NCL legislation and seeks to critically review the legislation and find whether the reform will improve the tax system, or simply hinder entrepreneurship, existing and new small businesses. The paper finds that the NCL provisions greatly enhance tax equity and improve economic efficiency, albeit at the cost of increased complexity.

The National Tax Forum: The Evolving Tax Reform Agenda

The Federal Government hosted the National Tax Forum on 4th and 5th of October 2011 at Parliament House in Canberra. Although there was a great deal of skepticism among media commentators in the weeks leading up to the Forum, many participants expressed the view that it was a worthwhile exercise. It was the first attempt to establish a national conversation based on the tax reform agenda put forward in the Australia’s Future Tax System (AFTS) Report and its 138 recommendations. Tax reform is always a long and winding road and as such provides plenty of opportunity for academics to make meaningful and lasting contributions. It is hoped that this selection of papers on the National Tax Forum will provide an initial vehicle that engages the academic community in Australia in the tax reform process.

The Business Tax Reform Agenda*

During the session on business taxation at the National Tax Forum in 2011, little consensus emerged between business representatives and union leaders on the reformations that should be made to the business taxation system. One proposal that greatly divided opinion was a reduction in the corporate tax rate. In this article, it is argued that changes in the treatment of tax losses and the introduction of a well‐designed allowance for corporate equity represent a better business tax reform strategy than cutting the corporate tax rate.

Value Added Tax in Nepal: An Empirical Assessment

In developing economies, resource gap is critical and widening resulting tohuge fiscal and budgetary deficits. Therefore, revenue mobilization is challenging proposition in an economy like Nepal where majority of the people live in abject poverty. Tax administration lacks innovative mechanism to identify new tax payers and bring them into tax-net. Tax reform agenda was the reform package and program of the government after the restoration of multiparty democracy system. In Nepal, VAT was introduced in 1997 to improve revenue mobilization through broadening the tax base and modernizing the tax system. In this process, the government had to face new problems that came along with the adoption of VAT. Thus, the purpose of this study is to analyze the structure and responsiveness of VAT in Nepal empirically and compare it with that of old system of sales taxes. The old system of sales taxes refers to the combined sales, entertainment, contracts, hotels, and air flight taxes received by the government before 1997/98.

The global context for public health nutrition taxation

To assess critically the scope for public health nutrition taxation within the framework of the global tax reform agenda. Review of the tax policy literature for global policy priorities relevant to public health nutrition taxation; critical analysis of proposals for public health nutrition taxation judged against the global agenda for tax reform. The global tax reform agenda shapes decisions of tax policy makers in all countries. By understanding this agenda, public health nutritionists can make feasible taxation proposals and thus improve the development, uptake and implementation of recommendations for nutrition-related taxation. The priorities of the global tax reform agenda relevant to public health nutrition taxation are streamlining of taxes, adoption of value-added tax (VAT), minimisation of excise taxes (except to correct for externalities) and removal of import taxes in line with trade liberalisation policies. Proposals consistent with the global tax reform agenda have included excise taxes, extension of VAT to currently exempted (unhealthy) foods and tariff reductions for healthy foods. Proposals for public health nutrition taxation should (i) use existing types and rates of taxes where possible, (ii) use excise taxes that specifically address externalities, (iii) avoid differential VAT on foods and (iv) use import taxes in ways that comply with trade liberalisation priorities.

Taxation and State Building: Towards a Governance Focused Tax Reform Agenda

Taxation and State Building: Towards a Governance Focused Tax Reform Agenda

Taxation and State Building: Towards a Governance Focused Tax Reform Agenda

SummaryTaxation is fundamental to sustainable development, as it supports the basic functions of an effective state and sets the context for economic growth. More often overlooked is the role of taxation as a catalyst for the development of responsive and accountable government, and for the expansion of state capacity. Recent research has begun to focus on this broader relationship between taxation and state building, but the analysis has frequently remained relatively theoretical and abstract. This paper seeks to chart new territory by translating the findings of existing research into a practical agenda for action, focusing on the specific measures that governments, with the support of development partners, could be taking to strengthen the state building role of taxation. In short, this paper seeks to outline the core elements of a governance focused tax reform agenda.

The Multiple Dividends of Abolishing Statutory Tax Exemptions

This paper shows that the need to increase tax revenue in Tanzania is obvious and that this can be done through a base - broadening, marginal rate-reduction and simplification of tax reform. It argues that minimizing statutory exemptions shall, not only broaden the tax base, but also simplify the tax system, improve compliance and enhance transparency and good governance. Marginal rate-reduction in personal income tax as well as in the value added tax could be expected also to impact favourably on voluntary compliance and economic efficiency hence resulting into an even broader tax base in the future. The paper also builds a case for a more effective enforcement of the tax regime on employment income and a commitment to a consistent tax reform agenda so as to minimise the uncertainties in the existing tax policy stance. (Af. J. of Finance and Management: 2003 11(2): 26-32)

The Significance of Business Interest Associations in Economic Policy Reform: The Case of Australian Taxation Policy

Taxation reform has dominated Australian politics over the past twenty-five years. Despite this prominence on the political agenda, until recently Australian governments have lacked the capacity to consolidate key elements of this tax reform agenda. While the problematic nature of Australian tax reform can be explained in part by macro-level variables, this protracted policy deadlock has also influenced historical patterns of business-government intermediation. The article argues that the evolution of the Australian tax policy network over the study period was prompted by both associational and state actors reassessing their strategies in the context of the political failure of tax reform proposals. These developments provide empirical insights into the ongoing debate relating to the factors which lead to the formation and evolution of sectoral level policy networks. The article concludes that while the increasing levels of business mobilization experienced over the study period enhanced the electoral viability of reform proposals, these new patterns of sectoral business politics should be regarded as a consequence of the policy deadlock relating to tax reform rather than primary cause of policy change.