Total Tax Burden Research Articles

"Tax optimization" and its difference from "tax planning"

The article clarifies the content and relationship between the concepts of «tax optimization» and «tax planning». The criteria for distinguishing these concepts are determined. It is established that tax planning is a multi­stage process which includes both strategic forecasting and careful organization of tax liabilities at each level of business. The main goal of this process is to be able to shape the structure and form of the business in such a way that they are optimal from the taxation point of view. Tax planning primarily determines the choice of a business entity’s strategy. Tax planning is defined as an important element of a company’s strategic management aimed at long-term and comprehensive management of tax liabilities. Tax optimization is an important process aimed at adapting the taxpayer to the peculiarities of the current tax system in order to choose the most profitable and efficient taxation regime. This process is not limited to the passive application of tax rules, but involves the active management of tax liabilities within the limits of legally permissible techniques, means and methods. Tax optimization is not only the ability to choose the most favorable conditions from those offered by the legislator, but also the ability to predict and adapt to changes that may affect the tax burden in the future. Tax optimization as a legal tool for reducing the total tax burden is considered exclusively within the framework of legal actions of the taxpayer. A distinctive feature of tax optimization as compared to tax planning is its focus on achieving short- and medium-term goals of a business entity by directly using the opportunities provided by tax legislation. Tax planning, on the other hand, is an element of strategic management aimed at achieving the long-term strategic goals of a business entity. Tax optimization is aimed at developing the most favorable model for fulfilling tax obligations by a business entity without changing the economic substance of business transactions. This approach allows the taxpayer to flexibly adapt to changes in the tax environment, while maintaining the sustainability of financial results and reducing tax costs. Tax optimization is not just a tool for reducing the tax burden, but also an important element of tax planning.

TAX BURDEN: APPROACHES TO DETERMINATION AND THEIR INFORMATION SUPPORT

Analysis of tax burden is importantfor assessing the effectiveness of tax policy of the state, tax management of enterprises, is an indicator of the level of tax security of all economic entities and the indicator by which tax authorities carry out tax control of taxpayers. Tax burden scientists consider on the macro-(level of tax burden on the economy in general) and micro-level (the level of the load on the enterprise). At the macro level, it is advisable to determine the level of the total tax burden as the ratio of the amount of tax revenues to the consolidated budget of Ukraine and the revenues of the single social contribution to GDP, as well as the share of tax payments of the integrated budget in GDP, the proportion of social payments in GDP and the rate of growth of these indicators. Analysis of the level of tax burden in Ukraine showed that in 2022 in the conditions of Russia’s full-scale war, GDP at market prices decreased by 4.92%, and the amount of tax payments of the reduced budget increased by 9.89%. In 2020, due to the introduction of quarantine in order to prevent the spread of acute respiratory disease COVID-19 in Ukraine, the GDP growth rate was low (5,53%), and the rate of growth of tax payments was high (15,71%). At the enterprise level, the analysis can be carried out according to the indicators of the total tax burden, tax burdens on income, expenditure, on cash flows, as well as tax on all taxes paid and SSC separately. The source of information for determining the indicators is the Financial Results Report (the aggregate income report and the Cash Flow Report (by direct method). In the system of electronic administration of taxes and duties by the tax authorities, monitoring of indicators-criteria of high-risk tax burden is carried out, according to which the payers canbe included in the plan-chart of checks: the level of payment of income tax and VAT. If the indicators are below 50 and more percent of the level of payment of the relevant tax for the industry, the enterprise falls into the plan-chart of inspections. Theinformation source for determining the level of payment of taxes is the Income Tax Declaration and the VAT tax declaration. Indicators of the level of tax payments by industries are published on the website of the State Tax Service of Ukraine. Also, the tax service determines indicators-indicators of unconditional registration of taxpayers, among which is the indicator of tax burden D, which is automatically formed in the Monitoring System of risk assessment criteria (MSRAC) of the Electronic Cabinet of Taxpayers or can be calculated from the data of the turnover and balance of enterprises. Monitoring of indicators of tax burden on the part of tax authorities is of paramount importance for monitoring compliance of taxpayers with tax legislation and implementation of the tax policy of the state to fill the budget with tax revenues.In the tax management of enterprises, the analysis of tax burden indicators is intended to find out the degree of their compliance with the established limits, industry indicators in order to take timely optimization decisions and avoid checks, penalties and the need to pass the procedure of unlocking tax charges.

Multijurisdictional Taxes: A Tax Research and Planning Case Using Major League Baseball (MLB) Players

ABSTRACT This case examines the tax implications of working in multiple tax jurisdictions. Students are presented with a case that considers the allocation of taxable income for a player in the MLB based on state income tax laws. This allows students to gain a more complete understanding of the impact of state and local taxes on total individual tax burden. It also challenges students to think critically about tax planning strategies that can be implemented to minimize tax liabilities when dealing with multiple tax jurisdictions. Finally, the case provides an opportunity for an instructor to engage students in tax research at an appropriate level for the course. The case can be adapted to use in undergraduate and graduate courses for individual taxation, state and local taxation, or tax research. Student responses indicate that they find the case interesting and beneficial in improving their understanding of state tax issues.

Optimal threshold taxation: An empirical investigation for developing economies

In this study, we empirically assess both linear and nonlinear relationships between the total tax burden and various tax items with real per capita GDP growth rates for 41 developing countries between 1990 and 2019. We use panel data techniques to evaluate the impact of taxation, as a percentage of GDP, on economic growth in both the short and long run perspectives, and to identify threshold values for different types of taxes. In addition to contributing to previous evidence on the linear effects, our results support the existence of nonlinearities and motivate policies aimed at raising certain tax revenues without hindering economic growth.

DETERMINANTS OF ENTREPRENEURIAL DYNAMICS: THE CASE OF THE EUROPEAN UNION

Since economic theory identifies new enterprises as one of the basic drivers of economic growth, it brings to the forefront the need to understand the existing dynamics of entrepreneurship. Consequently, the identification of the basic entrepreneurship’s determinants is a central issue from both a theoretical and a practical point of view in contemporary literature. A better understanding of the factors influencing the dynamics of entrepreneurship is a basic precondition for creating effective policies aimed at encouraging the creation of new companies, and consequently, the creation of new jobs. Therefore, this paper addresses several important issues. From the theoretical standpoint, the role of entrepreneurial determinants in creating a new business is examined. From a practical standpoint, the basic formal institutional factors influencing the birth rate of new companies are analyzed. The analysis was conducted on a sample of European Union countries for the period from 2010 to 2019 using data from the World Bank’s Doing Business database, as well as data on business dynamics from the Eurostat database. A panel data regression analysis using the fixed-effects estimation procedure with Driscoll-Kraay standard errors was conducted, and the results indicate that the dynamics of new enterprises’ foundation are negatively affected by the total tax burden, as well as the cost of property registration, while the amount of initial capital required to open a business has a positive impact. The results of the research can serve as a basis for fine-tuning policies that will facilitate and encourage the creation of new enterprises.

Value-Added Tax and Corporate Tax Burden: Evidence from China’s Value-Added Tax Rate Reform

China introduced the value-added tax (VAT) rate reform in 2017 to reduce the burden on firms and stimulate the economy. This study builds a simple theoretical framework and employs the 2017 VAT rate reform as a quasi-natural experiment to evaluate the effects of the VAT rate reform on the corporate tax burden. We find that the VAT rate reform significantly reduces the corporate total tax burden by 9.1% (an effect mainly driven by the decrease in the VAT burden), while the reform has no significant impact on enterprise income tax burden. Furthermore, the effects of VAT reduction on the corporate tax burden are primarily significant in firms with lower intermediate input ratios, firms facing lower market monopolies, firms from eastern China and firms with high-fixed assets.

The Role of Fiscal Mechanism in Regulation of Households’ Investment Activity in EU Countries and in Ukraine

The fiscal mechanism, which serves as a means of implementing fiscal policy, thanks to the organisation of fiscal relations by changing the mechanisms for the formation of budget revenues and expenditures, directs the established fiscal interrelationships, manages the channels of passage and directions of fiscal flows, specifies the proportions of the distribution of financial resources and, thus, ensures regulation investment activity of households. For Ukraine, in the context of its European integration aspirations, the study of the impact of the components of the fiscal mechanism, namely taxes, on the implementation of household investments in the EU countries becomes particularly relevant. Therefore, the purpose of this study was to form a holistic view of the elements of the fiscal mechanism that cause changes in investment processes at the micro level in the EU countries and in Ukraine, as well as to perform correlation and regression analysis to identify the quantitative impact of the fiscal mechanism on the investment activity of households. During the study, the Ukrainian and European practices of taxation of the population is considered and the total tax burden on individuals in the EU countries and in Ukraine is calculated. A correlation and regression analysis of the impact of elements of the fiscal mechanism on household investments in the EU and Ukraine was carried out, which showed that the scale of their taxation had the greatest impact on the implementation of citizens' investments, while the overall tax burden played a secondary role in regulating investment processes at the micro level. As a result of the study, it was proved that in Ukraine, to increase the investment activity of households, it is necessary to consider the practices of EU countries and improve those elements of the fiscal mechanism that have the greatest regulatory impact on investment. Such a part of the fiscal mechanism is taxes, especially in terms of effective provision of tax benefits.

Voluntary vs. mandatory: the role of auditing in constraining corporate tax avoidance in small private firms

This paper examines whether the status of the financial statement audit, as either voluntary or mandatory, is related to the corporate tax avoidance behaviour of private firms. Using the Swedish audit regime shift in 2010 which removed mandatory audit requirements for small private companies, we find that voluntarily audited firms exhibit a 19% decrease in total income tax burden relative to firms subject to mandatory audit following the regulatory change. This decrease corresponds to an average SEK 15,000 (approximately 1,500 euros) lower tax payment and is driven primarily by increasing conforming tax avoidance. We also find that increasing tax avoidance in voluntarily audited firms occurs, at least partly, due to impaired auditor independence under the voluntary audit regime. Finally, we show that the non-tax costs of tax avoidance restrict these tax-driven reporting changes. Our findings contribute to the literature on auditors’ constraining effect on corporate tax avoidance as well as to the debate over the costs and benefits of a mandatory financial statement audit regime.

ФОРМИРОВАНИЕ ВАРИАНТОВ РЕФОРМИРОВАНИЯ НАЛОГООБЛОЖЕНИЯ ПРИОРИТЕТНЫХ И СОЦИАЛЬНО-ЗНАЧИМЫХ ОТРАСЛЕЙ ЭКОНОМИКИ РОССИЙСКИХ РЕГИОНОВ НА ОСНОВЕ АНАЛИЗА ДАННЫХ КАЛЬКУЛЯТОРА НАЛОГОВОЙ НАГРУЗКИ

We made an analysis of the total tax burden and average salary in St. Petersburg for 2020 based on the scale of companies and types of economic activity, with a focus on priority and socially significant sectors of the economy. The object of the study is priority and socially important sectors of the economy of the Russian regions. The subject of study is economic relations in the process of taxation of enterprises of priority and socially important sectors of the economy of St. Petersburg. The study has been carried out in order to justify the reform of tax measures to support selected sectors using data from the official digital resource of the Federal Tax Service of the Russian Federation. The tasks are solved on the basis of modeling in the STATA program, where the dependent variables characterizing state support for priority and socially significant sectors are the tax burden and the average salary. The study is based on the method of dispersion analysis. A two-way analysis of variance of the dependence of these variables on the size of the organization and on the industry shows that the average salary depends on the size of the organization and on the sector; and the tax burden only on the type of activity. A one-way dispersion analysis of variables depending on the different scales and types of activity of companies revealed that the type of activity has an impact on the tax burden, and the relationship between the industry and the average salary is weak. To refine the results of a single-factor analysis of variance, dummy variables of the R language are used. It is revealed that the level of state support for priority and socially significant sectors is insufficient today and it is advisable to introduce additional tax preferences for them. Options for reforming the taxation of these industries are proposed: reducing the rate of mandatory payments to the system of compulsory social insurance and providing funding for the reimbursement of personal income tax paid for employees of small and medium-sized enterprises in these industries. Further research on the issues under study can be carried out by expanding time horizons; extrapolating methods and results to other domestic regions; substantiating in detail and concretizing proposals for reforming the taxation of priority and socially significant sectors of the relevant territory

MENGUAK EFEK PENURUNAN TARIF PAJAK PENGHASILAN DI MASA PANDEMI COVID-19

This article explains the effect of lowering income tax rates during the COVID-19 pandemic. The government's role in maintaining economic stability is carried out by issuing fiscal policies, in terms of taxation, namely by reducing the Corporate Income Tax rate. This research intends to find out the results of a decrease in corporate income tax rates affecting a decrease in current taxes deposited into the state treasury, a decrease in the total income tax burden, and recording in the income statement financial statements. The informants of this research are members of the Tax Rules Update Forum. This type of qualitative research uses a netnography approach. The reduction in current taxes deposited into the state treasury benefits the company by minimizing the costs incurred for the obligation to deposit state taxes. Companies that have deferred tax liabilities receive deferred tax benefits recorded in the balance sheet account, so the total income tax expense has decreased. In recording the income statement, the company has deferred tax assets adding to the deferred tax expense. Deferred tax expense in profit or loss account.

Who Pays Sin Taxes? Understanding the Overlapping Burdens of Corrective Taxes

We find that sin good purchases are highly concentrated with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin tax burdens are poorly explained by demographics (including income), but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 68% of sin taxes, are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.

Distributional health and financial consequences of increased cigarette tax in Iran: extended cost-effectiveness analysis

BackgroundTo assess the potential impact of a tax-induced cigarette price increase on financial and health outcomes by different socioeconomic groups.MethodsIn a modeled condition using pooled cross-section data from Household Income and Expenditure Survey (2002–2017) and Iran 2019 population data, a methodology of an extended cost effectiveness analysis (ECEA) was applied to model the impact on cigarette consumption of hypothetically increased cigarette tax. The methodology was employed to evaluate: [1] health benefits (premature deaths averted); [2] health expenditures regarding smoking-related disease treatment averted; [3] additional tax revenues raised; [4] change in household expenditures on cigarettes; and [5] financial risk protection among male Iranian smokers in a time span of 60 years following a one-time increase in cigarette price of 75%. The Stata version 15.1 (StataCorp., College Station, TX, USA) was used to perform the relevant analysis and estimate regression models.ResultsA 75% increase in cigarettes price through taxation would reduce the number of smokers by more than half a million, 11% of them in the poorest quintile; save about 1.9 million years of life (11% of which would be gained in the lowest quintile compared to 20% in the highest one); eliminate a total of US$196.4 million of health expenditures (9% of which would benefit the bottom quintile). Such a policy could raise the additional annual tax revenues by roughly US$ 1 billion, where the top two quintiles bear around 46% of the total tax burden. We estimated that the tax increase would avert an estimated 56,287 cases of catastrophic expenditure that wholly concentrated among the bottom two expenditure quintiles.ConclusionIncreasing cigarette tax can provide health and financial benefits, and would be pro-poor in terms of health gains, Out-of-Pocket (OOP) savings, and financial risk protection against smoking-related diseases.

Six Decades of U.S. Tax Reform: Why Has the Average Couple's Tax Burden Increased?

ABSTRACTWe collect basic federal tax laws over a 64-year period in order to simulate the historical effective tax rates of median income wage-earning couples. We find that effective income tax rates have decreased over the sample period; however, when payroll taxes are included in our calculations, total tax burdens have increased significantly. Interestingly, this increase in middle-class wage taxation has occurred over an historical period in which total federal tax revenue relative to GDP has remained somewhat constant. This implies that the middle class has borne an increasing relative tax burden in recent years. We hope that our analyses inform both the taxpaying public and policy makers of the historical status of middle-class wage earners.

Tax Structure and Institutional Determinants in Transition Economies

Economies that do not have a corporate tax system in their historical heritage have sought to establish a tax system with their independence. The tax structure means the financing free-market reforms of transition economies. The study aims to evaluate the current tax structure of 31 transition economies. Also, the relationship between corruption and total tax burden, GDP per capita, openness, economic freedom, corporate-income-consumption tax rates in 24 transition economies were examined to evaluate the tax structure and the effectiveness of the institutional structure of the tax system. Corruption is high-ranking in countries with a low economic freedom index. GDP per capita is lower in economies with high corruption. Bribery in transition economies is seen as a substitute for tax due to reasons such as high tax burden, low justice in income distribution, and institutional weakness of tax administrations. According to static analysis, a one-unit increase in income per capita in transition economies positively affects corruption at 0.0371%, openness at 0.0134%, economic freedom at 0.0394%, and income tax rate at 0.0122%. According to dynamic analysis, two variables negatively affect corruption. Economic freedom negatively affects the corruption index by 0.073% and excise taxes by 0.108%. On the other hand, tax revenues (0.064), per capita income (0.056), the trade deficit (0.073), and income tax rate (0.063) positively affect corruption.

Who Pays Sin Taxes? Understanding the Overlapping Burdens of Corrective Taxes

We find that sin good purchases are highly concentrated with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin tax burdens are poorly explained by demographics (including income), but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 68% of sin taxes, are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.

Effect of the Quality of Institutions on Fiscal Pressure in the Countries of the West African Economic and Monetary Union (WAEMU): Evidenced by Informal Sector Channel

This paper aims to analyze the effects of the quality of institutions on the total tax burden through the informal sector in WAEMU countries over the period 1996-2015. The estimation of the parameters by GMPs shows that the improvement in the quality of the institutional environment reduces the size of the informal sector and this reduction in the size of the informal sector in turn leads to an increase in the tax burden rate. It also shows that the level of development and trade openness improve the total tax burden of WAEMU countries, while inflation, the share of agriculture and the informal sector in GDP reduce the total tax burden. As for the share of natural resources in GDP, its effect on fiscal pressure is ambiguous because it varies according to the indicator used to measure the quality of institutions in the regression. Keywords : Tax pressure, Informal sector, Institutions, WAEMU DOI: 10.7176/JESD/11-20-12 Publication date: October 31 st 2020

Management priorities of tax reform in Ukraine: implementation of international experience

The paper proves that the Ukrainian economy’s systematic structural crises stipulated the necessity of choosing the effective forms of tax mechanism for its regulation. Systemic and institutional methods have been used to study the peculiarities of Ukrainian tax regulation. The methods of coefficient and relative values have been used to assess certain parameters of the tax burden. The dynamics of statistical data have been studied by the method of trend analysis. To determine the impact of the current tax system of Ukraine on economic growth, the authors tested several hypotheses about the dependence of the tax system and: GDP (1), industrial production (2), exports (3), investment dynamics (4), and unemployment rate (5) using econometric analysis with the package-statistical module EViews. The existence of a directly proportional relationship between the growth of tax revenues to the budget of Ukraine and the change of certain macroeconomic indicators is substantiated. It was found that the total tax burden on business in Ukraine reaches 41.5% of corporate profits, which exceeds similar indicators in most European countries. A tax regulation mechanism to stabilize the Ukrainian economy is proposed, in particular: proposals to revise tax rates, implement macroeconomic risk management tools, customs post-audit while providing transparency of tax legislation and its harmonization with the EU Customs Code, digitalization of the service component of tax administration.

Evaluation of Tax Burden on Labor Income for OECD Countries

The concept of tax regulated by law should be collected from taxpayers in proportion to their ability to pay as a requirement of the principle of fairness in taxation. The importance of the ability of tax payment has been increasing in terms of tax burden in recent years. The tax burden is expressed as both individual and total tax burden. The personal tax burden is calculated by the ratio of taxes paid by individuals to their personal income. Countries and organizations such as OECD calculate the tax burden in more detail and specifically. In this study, a comprehensive analysis of the change of tax burden in OECD countries for the period 2000-2018 is carried out. Before analyzing, some basic information about main concepts such as labour income, tax burden, personal income tax are given. The percentage change in the process of the tax burden for household types during that period are shared through tables which are included with the datas from OECD database and its reports, and the findings related to them are evaluated.

Why rational agents report zero or negative WTPs in valuation experiments

ABSTRACT In surveys of the willingness-to-pay for different policies, typically there are responses that are classified as protest responses. Such responses appear to defy efforts to address the issue through best practice in the design and testing of survey instruments. The general impression from the literature is that the predominant approach to identifying and handling outliers, including protest responses, is by econometric techniques. In contrast, in this paper we focus on a simple theoretical model of agents equipped with well-behaved (textbook) preferences. The model is used to identify one type of responses that, at first glance, might be characterized as protest responses or possibly as scenario rejection. The novel explanation of the, in fact, perfectly rational behaviour relates to the total tax burden faced by a respondent. A possibly provocative finding is that the agent is searching for the constrained optimum while the survey-designer, intentionally or unintentionally, is trying to induce/convince the agent to value a second-best option. In particular, we don’t have to turn to behavioural economics, i.e. question rational choice theory, to arrive at a plausible theoretical explanation of what could be taken for protest responses.

The Impact of Taxation on Growth: A Quantitative Analysis on a Panel Data of 24 OECD Countries

Over the last decades tax rates have grown substantially and taxation systems have become more complex than ever. With this scenario in mind, this thesis aims to assess the impact of taxation on growth, through a quantitative analysis on a panel data of 24 developed economies. The results obtained show that an increase in the total tax burden by 1% is likely to slow down growth on average by the same amount over a period of 5 years. Furthermore, it appears that among single taxes, social security contributions and taxes on consumption are the most harmful for growth, while taxes on property are the least harmful. Additional tests have proven that small countries are more sensitive to tax changes than large ones. Finally, in the last chapter I identify a possible optimal tax structure capable of maximizing growth while keeping constant or even reducing income inequality (inclusive growth).