Total Tax Rate Research Articles

The effect of taxation on Moroccan FDI in African countries: an empirical analysis using panel data

ABSTRACT The paper aims to analyse the impact of taxation policies in African countries on Moroccan foreign direct investment (FDI) using panel data from 29 African countries spanning the period 2005–2021, employing the Estimated Generalized Least Squares estimation method. The findings suggest that high total tax, profit tax, and other tax rates deter Moroccan multinational enterprises (MNEs) from investing in African countries. Conversely, fiscal incentives and reduced tax rates positively influence Moroccan FDI in African countries. Additionally, the results indicate that a high score for tax payment and tax rates positively influences Moroccan FDI in African countries, implying that high-quality taxation policies encourage Moroccan MNEs to invest in African economies. Furthermore, the study finds that the GDP of African economies positively moderates the effect of taxation on Moroccan FDI behaviour. This suggests that the larger the market size of a country, the less severe the negative impact of taxation on FDI.

A Fair Investment Environment: The Impact of the Shadow Economy, the Harshness of the Courts Against Corrupt Officials, Tax Pressure and Restrictions on Business

Creating a fair investment environment is crucial for economic growth and attracting domestic and foreign investors. The purpose of this study is to find out how the shadow economy, harshness of courts against corrupt officials, tax pressure, and restrictions on business affect the fair investment environment. Therefore, two economic-mathematical models are built using multiple least squares regression analysis, in which the outcome variables are: in model 1 ‒ control over corruption, which is a component of the Global Governance Index; in model 2 ‒ the European Business Association’s Investment Attractiveness Index. The composition of the factor attributes in both models is the same: Corruption Perceptions Index by Transparency International; level of shadow economy according to the Ministry of Economy of Ukraine; the number of criminal cases in courts under the article “Acceptance of an offer, promise or receipt of an undue benefit by an official” using open data from the Unified State Register of Court Decisions; total tax and fee rate, which reflects taxes and mandatory payments as a percentage of commercial profit, determined by the World Bank Group methodology; assessment of “Starting Business” by Doing Business, according to the methodology of the World Bank Group. The modeling is based on the example of Ukraine for 2012‒2022. Calculations based on Model 1 show that restrictions on business have the greatest impact on the corruption control indicator (a 10% reduction in restrictions leads to a 3-point reduction in the need to control corruption), the shadow economy and tax pressure have an average impact (a one-point increase in them will increase the level of corruption by 0.4 points). The harshness of the courts against corrupt officials has the least impact (most corruption cases in Ukraine do not reach the courts). Calculations based on Model 2 show that the complexity of starting a business exerts the greatest impact on investment attractiveness (if it decreases by 15%, investment attractiveness will increase by almost 1 unit). The average impact is exerted by the increase in the shadow economy (a 10% increase in the shadow economy leads to a rise in investment attractiveness by 0.4 units). The insignificant impact is exerted by the tax burden and judicial punishment of corrupt officials.

Tax Structure of India and Bangladesh: A Comparative Study

This study delves into the tax structures of India and Bangladesh, focusing on key indicators like tax-to-GDP ratio, overall tax payments, time to comply, number of tax payments, and total tax rate. India's total tax rate, though decreasing, still surpasses Bangladesh's, requiring competitiveness for economic growth. Corporate tax reductions aim to attract investments, yet increasing the tax-to-GDP ratio remains a challenge compared to South Asian counterparts. India must balance revenue collection, fairness, and economic growth to improve tax efficiency and support business development for global competitiveness.

Economic Environment and Entrepreneurial Development in North Central, Nigeria

This work sought to determine the impact of Economic Environment (EE) and Entrepreneurial development in North central, Nigeria. The unprecedented factors arising from inconsistencies, to lack of continuity of policies and programmes implementation constitute a lot of constraints that impede on the establishment, growth and development of Small and Medium Enterprises (SMEs) in the North central, Nigeria. The specific objectives of the study were to: (i) Ascertain the extent to which unemployment rate effects start-up business and entrepreneurial development in North central, Nigeria. (ii) Evaluate the extent to which total tax rate effects the growth of business enterprises in North central, Nigeria. (iii) Assess the extent to which domestic interest rate by banks to private sector impact on entrepreneurship development in North central, Nigeria. The study adopted survey research design, and ex-post facto, the population of the study was 18,173 staff made of owner-founder and management staff, from 2,178 private enterprises that registered with the respective state ministries of trade, commerce, industry and tourism in North central, Nigeria. A sample size of 377 was drawn from the population using Krejcie and Morgan (1970), sample size determination. The instrument used for data collection was mixed method: Quantitative method (structured questionnaire) and Ex-post facto (secondary data). The hypothesis were tested using Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) to ascertain the time series properties of the variable for hypothesis one. Hypotheses two and three were tested using simple linear regression. The findings revealed that, to a large extent the listed Economic factors had significant negative relationship with entrepreneurial development in North central, Nigeria. Based on the findings of the study it was recommended that, there should be strategic policy by government and individual put in place to ensure substantive numbers of work force engaged in both private and public sectors; government should encouraged entrepreneurial development by enforcing on financial institutions to issue one-digit interest rate loan to entrepreneurs and business concern to boost business activities in the region. More so the issue of double taxation on entrepreneurial activities should be minimized or avoided to provide a level plane ground for business enterprises to strive, grow and develop in North central, Nigeria.

Do Tax Rates Matter for Entrepreneurial Motivations? An Empirical Approach

There are a number of factors that can hinder the path of entrepreneurship development and the literature highlighted the fact that taxes are one of the most important barriers for entrepreneurs. This paper aims at identifying the relationship between tax rates and entrepreneurship and to establish the impact of tax rates on entrepreneurs considering their motivations (necessity, opportunity or improvement-driven opportunity). The research focuses on a sample of 46 countries grouped according to their income level, for a period of eight years (2012-2019). In order to test our hypotheses, we use multiple linear regression based on balanced panel data and we consider, as dependent variables, indicators that measure entrepreneurship and entrepreneurial motivations (early-stage entrepreneurial activity, necessity-driven entrepreneurs, opportunity-driven entrepreneurs, improvement-driven opportunity entrepreneurs, and motivational index). As independent variables, we consider indicators that measure the tax rates supported by entrepreneurs (total tax and contribution rate, profit tax, labor tax and contributions, and other taxes payable by businesses). The results show that tax rates play a key role in fostering the creation of new companies. Moreover, the impact is different, depending on the entrepreneurs’ motivations. Entrepreneurs motivated by necessity are positively related to total tax and contribution rate, while those motivated by opportunity are negatively related with this indicator. Therefore, tax rates discourage the entrepreneurs that seek innovation, but they do not affect those that do not have other options to obtain the necessary income for living.

OECD Ülkelerinde Vergi Açığının Ölçümü ve Vergi Açığı Bileşenlerinin Analizi: Panel Veri Yöntemi

Today, tax gap and measurement of tax gap is an important issue. In this study, in order to contribute to the literature, the tax gap of 35 OECD countries for the years 2005-2017 was measured. In the study, GDP, total tax rate and informal economy rates were used. The countries with the lowest tax gap rates are Luxembourg and Switzerland. The countries with the highest tax gap rates are Colombia, Greece and Costa Rica. In addition, the effects of GDP, total tax rate and informal economy rate on the size of the tax gap were examined. The data were tested by applying the panel data analysis method, cross-section dependency, unit root test and fixed effects models. According to the model's results, the informal economy rate increases the tax gap with the increase in the total tax rate and GDP. The tax gap, which exceeds the acceptable level, harms the economies. For this reason, it is very important that the tax gap remains at a controllable level. In this context, it is necessary to make legal arrangements in order to register the informal economy.

The Impact of the Tax Rate and Average Wage Level on FDI: The Case of Albania

The purpose of this work is to study the factors that have an impact on foreign direct investments in Albania. The data taken into consideration belong to the period 2005-2019. The data are quantitative and secondary. Their source is the World Bank, the Ministry of Finance and Economy and INSTAT. Albania is a developing country and for this reason foreign direct investments are of great importance for its economy. The increase in investments creates new jobs, the increase in individual income, the increase in consumption and thus the economic growth of a country. The data were tested with the SPSS statistical program. The EURO/ALL exchange rate, merchandise trade, the annual increase in the country's average wage and the total rate of taxes and contributions paid by a company were taken as independent variables. The total tax rate and the exchange rate negatively affect the growth of foreign direct investments. This impact is significant. Merchandise trade has a positive effect on the growth of investments and also this impact is significant. The average wage level of the country has a negative effect on foreign direct investments, but this effect is not significant.

Relationship between total tax and contribution rate and ease of doing business score for India, China and USA during 2014-2019

The Purpose of the study was to analyse the impact of Total Tax contribution rate (% of profit) on the Ease of doing Business score in case of the three countries, i.e., India, China, and the USA for the time period of 6 years (2014-2019). The data for the study was collected through the World Bank website. Study was conducted with the help of various graphs, depicting the data and through various excel tools like correlation and regression. The correlation between the two variables is also seen as negative, implying that Total tax and contribution rate (% of profit) does have some effect on the score. It implies that as the Total tax and contribution rate (% of profit) increases, the Ease of Doing Business Score for the countries decreases, and vice-versa. Regression analysis of the data taken has also shown that Total tax and contribution rate (% of profit) in the 3 countries over the 6 year period is explaining only 47% (approximately) change in the Ease of Doing Business Score for the countries. This result is in line with the calculation of the Ease of doing Business Score as there are 10 other parameters that affect the score.

Taxation and innovation: evidence from Colombia

ABSTRACT We use firm-level data from a Colombian manufacturing survey, complemented with data from the tax department, to test the effect of firms’ total tax and contribution rate (TCR) on the ratio of innovation expenditures to sales. We construct a data panel from 2003 to 2018 comprising 104,762 observations and implement fixed effects and instrumental variables estimation methods. Our results suggest that an increase of one percentage point in direct taxation leads to a decrease of 0.10% in the probability that firms engage in innovation investments, and market power moderates this effect. We discuss distinctive features of the effect of taxation on innovation in emerging economies—one being the inability of local innovation clusters to temper it. Policy implications include considering modifications to the magnitude and composition of the TCR as an alternative to R&D tax credits.

Tax Optimality in Turkey: An Analysis for Total Tax Revenues

Within the scope of optimal tax theory, the optimality problem of fiscal policies in the Turkish tax system for the period 1980-2019 will be discussed from the perspective of the Laffer curve. The study, it is aimed to obtain the real Laffer curve showing the relationship between total tax revenues and tax rate for Turkey. Macroeconomic variables such as tax rates, tax revenues, crisis periods, unemployment rates, and real wages are included in the analysis with the help of an econometric package program. Within the scope of time series, the effect of the tax rate on tax revenues was investigated using Johansen and ARDL cointegration approaches. According to the findings obtained from the analyses, the total tax rates in Turkey are on the right of the Laffer curve, in other words, the Laffer curve exceeds the optimal point. Based on the hypothetical existence of Laffer theorem’s in Turkey, the optimal tax rates were calculated for the total tax revenues, and the current tax rates of each year were compared with the optimal tax rates. It has been determined that the total tax rates in the specified period are in the forbidden region of the Laffer curve. This situation, which states that the tax burden has increased, reveals that the taxation process should be revised. There is no comprehensive empirical analysis of Turkey. The findings will guide the applications that will contribute to the field. The originality of the work; is based on the inclusion of time series analysis of macroeconomic data such as crisis periods, unemployment rates, real wages as independent variables in determining the relationship between tax revenues and tax rates. The validity of the Laffer curve for each tax (Income Tax, Corporation Tax, VAT) in the Turkish tax system can be examined with the data and methods used in the research.

Impact of tax aggressiveness on the profitability of publicly traded companies listed on B3

The practice of tax aggressiveness aims to alleviate the high cost of taxes caused by the complexity of tax legislation, aims to reduce tax expenditures and maximize the organizations' performance. The present study analyzes the impact of tax aggressiveness on the profitability of publicly traded companies listed on B3 in the period from 2016 to 2020, since in the Brazilian context, evidence on the relationship between this practice and the companies’ profitability is still limited. The final study sample consisted of 204 Brazilian companies and the proxies used to measure tax aggressiveness were the total Book Tax Difference (BTD) and Effective Tax Rate (ETR). Regarding the variables of profitability, the return on investments, return for shareholders and operational activities were observed. The analysis was performed using descriptive statistics, multiple regressions (with random effects) and quantiles, and the results found did not show consensus between the proxies. While the BTD points out that the greater the tax aggressiveness, the greater the profitability, the ETR shows an inverse relationship. As tax aggressiveness proxies do not show consensus in the results, it was not possible to state that higher levels of tax aggressiveness increase the profitability of publicly traded companies listed on B3. Thus, the empirical evidence allows reflections on the use of tax aggressiveness in Brazil and the managers’ decision-making.

Does Fiscal Policy Matter for Business R&D Investment? Panel Data Evidence from Central and Eastern Europe

This paper examines the impact of fiscal policy on business investment in research and development (R&amp;D). Panel regression models &#8211; with independent variables for the total tax and contribution rate, government appropriations and outlays for R&amp;D, and the R&amp;D tax subsidy rate &#8211; are set up to examine cross-country differences in business investment in R&amp;D, with a set of control variables. The latter include, most notably, the number of full-time researchers, tertiary education attainment, the protection of intellectual property rights, governance, the long-term interest rate, and trade openness. The panel encompasses eleven countries of Central and Eastern Europe over ten years (2010&#8211;2019). The findings suggest that fiscal policy does not affect BERD, while trade openness, tertiary education attainment, and full-time researcher employment have a significant positive impact. These findings are consistent with some of the earlier studies on the effectiveness of fiscal policy in stimulating business investment, calling for greater allocation of public and private funds for R&amp;D professional development and training programs.<br />Implications for Central European audience: This paper used recent data for eleven Central and Eastern European countries. Therefore, the findings are directly applicable to these countries. As the paper used random-effects generalised least squares estimation for panel data, the findings can be generalised to other countries.

Economic Crises And Entrepreneurship: A Comparison Of Developed And Less Developed Countries

This paper examines the change in entrepreneurial activity in developed and less developed countries during the period surrounding the 2008-2009 Global Crisis. The paper also examines how several entrepreneurship-related factors including costs, taxes, number of procedures, legal rights and credit coverage had changed for the two groups of countries after the Global Crisis. For the developed nations, we find that most factors had not significantly changed from the pre-crisis period to the post-crisis period. Out of the eighteen factors that are examined, only three had significantly changed. The cost to export had worsened (i.e. increased), while the number of tax payments and the time required to start a business had improved (i.e. declined). When we look at new business formation, we find that for the developed nations, there was no significant change in new business density and new business registrations. For the less developed nations, we find that most factors had significantly changed from the pre-crisis period to the post-crisis period. Out of the eighteen factors that are examined, fifteen had significantly changed (i.e. two of them worsened and thirteen of them improved). The “cost to export” and the “cost to import” both worsened (i.e. increased). On the other hand, the cost of business start-up procedures, the number of tax payments, the total tax rate, the legal rights, the number of procedures to register property, to start a business, the time required to build a warehouse, to register property, to start a business, to prepare and pay taxes, the credit depth, the private credit bureau coverage, and the public credit registry coverage all improved. For the less developed nations, similar to the developed nations, we find that there was no significant change in new business density and new business registrations. We conclude that, in terms of the entrepreneurial environment, the Global Crisis had a more negative impact on less developed nations when compared to developed nations. While entrepreneurial activity had not significantly changed in both groups, the less developed countries achieved this by improving several different aspects of the entrepreneurial environment. In order to protect their entrepreneurs, they had to be more proactive when compared to the developed nations.

Tax policy in the system of post COVID-19 anti-crisis measures

Research Background: Tax policy and reforms are the means to overcome the COVID-19 crisis, contributing to economic growth. The study is based on an analysis of tax regimes before the pandemic. Purpose of the article: Purpose of the article is to develop instruments of tax regulation in anti-crisis tax policy. Methods: The analysis employs macroeconomic indicators from the IMF, and WB databases. The comparative analysis of countries in terms of Total Tax and Contribution Rate (TTCR), Labour Tax TTCR, other taxes TTCR has been conducted on the basis of WB/PWC tax ranking methodology. The paper presents a classification of tax systems according to six rankings, and suggests tax policy modifications. Findings &amp; Value added: The main directions of tax policy reform are: 1) The tax system should maintain its progressive character while increasing social equity, a new quality of economic growth and life. 2) Income taxation is less conducive to economic growth than consumption taxation. The study suggests differentiation in tax policies for developed and developing countries. 3) The choice between a flat and a progressive personal income tax scale should be made on the bases of the thorough analysis of the tax systems of countries leading in the quality of life. Their regimes can serve as a benchmark. 4) The taxation of interest, dividends and capital gains under dual treatment is a promising tax policy direction. 5) Reforming the CIT on the basis of differentiated rental income would allow for part of the income to costs and part to profits.

FOREIGN DIRECT INVESTMENTS INTO EASTERN AFRICA REGION: THE INFRASTRUCTURE DEVELOPMENT NEXUS

Infrastructure development is an essential element in economic growth and development. Good infrastructure fosters low transaction costs hence making production efficient and attracting foreign direct investments. However, there has not been adequate scholarly focus on how infrastructure development can affect the flow of foreign direct investments hence this paper sought to fill this gap. This paper utilized panel data from 12 eastern Africa countries from 2004 through 2017. Data on Infrastructure development variables was obtained from the Africa Development Bank’s, Africa Infrastructure Development Index, that of control variables from the World Development Indicators kept by the World Bank and that of Foreign direct investments from UNCTAD. Due to the presence of heteroscedasticity in sample data, the study opted for a Generalized Least Squares (GLS) estimation method. The study established a significant relationship between infrastructure development and foreign direct investment inflows into the eastern Africa region. However, only Africa Infrastructure Index and Electricity Composite Index were positive while Transport Composite Index, ICT Composite Index and Water Supply and Sanitation Index were negative. Reasons being, Transport, ICT, water and sanitation are considered as social development factors. One of the control variables, total tax and contribution rate was negative indicating a unit increase in tax leads to a decrease in foreign direct investments whereas market size was positive and significant. The study recommends to policy makers to allocate resources into infrastructure development as an enabler of production efficiency, appraise the tax system to ensure a balance is stroked between taxing of investment returns and generating adequate tax revenue from multinationals and enhance its markets through multilateral and preferential trade agreements and regional integration agreements.

CONCEPTUAL BASIS OF TAX POLICY FORMATION IN THE GLOBALIZATION CONDITIONS

The purpose of the article is to analyze the tax systems of the countries of the European Union and Ukraine, the impact of individual indicators of the tax system on the economies development, study the possibility of applying the accumulated experience. The subject-matter of the study is the methodological and conceptual foundations of the tax policy-making process of the EU and Ukraine. Methodology. Based on the analyzed scientific literature on tax policy formulation of countries, the methodological principles of this study provide for the joint application of a set of well-known general scientific and special methods of research in economics. In particular, the dialectical method, the method of scientific abstraction, the method of systematic analysis, economic and mathematical modeling were used. Results. The article analyzes the individual indicators of the tax system functioning of 28 countries of the European Union and Ukraine; and the impact of these indicators on the economy development. In particular, the following indicators were studied: customs and other import duties, firms expected to give gifts in meetings with tax officials; firms that do not report all sales for tax purposes; firms visited or required meetings with tax officials; labor tax and contributions; net taxes on products; other taxes; other taxes payable by businesses; profit tax; tax payments; tax revenue; taxes on exports; taxes on goods and services; taxes on income, profits and capital gains; taxes on income, profits and capital gains; taxes on international trade; time to prepare and pay taxes; total tax rate. The dependence of foreign direct investment on profit tax, tax revenue; taxes on income, profits and capital gains; time to prepare and pay taxes and total tax rate have been studied. The study shows that, on average, tax revenue affects foreign direct investment, net inflows with the same strength as time to prepare and pay taxes, but almost twice as much as taxes on income, profits and capital gains. Practical implications. The article contains a set of tools and rules for reviewing approaches, guidelines and criteria for the effectiveness of Ukraine's tax policy in line with the global development concept. Value / originality. The conceptual criteria for the formation and implementation of the tax policy of the state are determined, it is carried out the comparative analysis of the tax policy of Ukraine and the EU countries within the framework of the European economic integration, which occurs simultaneously with the globalization of the world economy.

Impact of tax policy in sub-Saharan territories on Moroccan FDI: An econometric cointegrating panel modelling experiment

Since the 2000s, inflows of FDI into sub-Saharan countries from Morocco have increased significantly in the context of south-south cooperation and the economic integration of Morocco in its African continent. However, the volume of Moroccan FDI flows to sub-Saharan territories differs from one country to another, and this is explained by the heterogeneity of the factors of localization of FDI, including the fiscal policy of these countries, which constitutive an important determinant of the attractiveness of FDI alongside socio-political-economic conditions. Therefore, This work raises the question on the contribution of the fiscal policy of the countries of sub-Saharan Africa on the attractiveness of Moroccan foreign direct investment (FDI) using the econometric methodology to study this impact and particularly the co-integration approach with dynamic panel data for the period 2004-2017. The result confirms the evidence of the co-integration of the panel between FDI and the variables of fiscal policy. As a result, we found that Moroccan inward FDI is influenced positively by the tax payment score and negatively by the tax rate on profits. However, the effects of the tax burden and the total tax rate are not identified.

Deshadowing the Economy as the Vector to Ensure Effective State Tax Policy

The article is devoted to the study of the interconnection of tax policy indicators and the shadow economy in the complex interaction in the context of the country’s competitive tax system. Key indicators of tax policy implementation (total tax and contribution rates, number of taxes, time to administer taxes by economic entities) of Ukraine are compared with the countries of the European Union. The paper uses empirical correlation coefficients to determine the relationship between tax rates, tax revenues, and the level of economy shadowing, both for the Ukrainian economy and internationally. The dual role of the shadow economy in the use of the Laffer concept is substantiated. The key directions of the deshadowing policy of the economy of the country are identified. It will help to balance and increase the efficiency of the implementation of the mechanisms of taxation of economic entities. Keywords: shadowing of the economy; tax policy; tax rate; tax revenues; tax burden; Laffer concept.

Tax Morale and Public Sector Revenues in Baltic Countries

This article investigates issues behind households’ tax payment morale, theoretical and practical aspects of the tax payment gap, and its impact on public sector revenue in Baltic countries. The attitude of households on tax payment is assessed quantitatively by employing a dichotomous logit-probit regression analysis. The tax payment gap among Baltic households has been investigated by applying a “macro approach,” the main components of which are the shadow economy and the total tax rate. The effect of any hypothetical changes in tax morale is assessed by applying social accounting matrixes, which are based on national account data and allow to keep the economy balanced at all time. The results presented in this research suggest that taxes uncollected from households constitute nearly one fifth of total general government revenues and count nearly one tenth of the nominal GDP. Measures applied to strengthening tax morale positively contribute to public sector revenue and in general to the economy, though they should be applied gradually.

Debt and Deficit Growth Rate Reporting for Post-Communist European Union Member States

A focalized analysis and reporting on the problems of general government debt (GGD) and government deficit (GD) and their influencing factors on economic growth rate tell the story of positive, neutral, and negative economies. Research was conducted over a nineteen-year period between 2000 and 2018 on all eleven post-communist European Union Member States (MS). MSs are divided in to three regional blocks: (1) the Baltic countries, (2) Central and Eastern European countries, and (3) the Balkan countries. Reviewed literature examined different types of GGD and GD with denoted influence on each MS’s economy and government. GGD and GD increase as a result of State intervention by reacting to economic fluctuations needed in creating redistributive-related fiscal policy. A breakdown of the problems of fiscal policy is explained. Datasets were compiled and systematically analyzed using Eurostat indicators. European regulatory benchmarking was used for GGD and GD as a percentage of gross domestic product. Results were divided at the regional group level. Comparative tax systems based on total general government revenue as well as total tax and contribution rate were evaluated. Histo-geographical research was considered and a comparative examination of GGD, GD and growth rate illustrated. In terms of GGD, GD, and growth rate, the Baltic countries were best situated, while all other countries were generally stable—with the exception of Hungary, Croatia, and Slovenia. In all, negative or stagnant periods revealed a general positive trend throughout the study with the exception of the world financial crisis of 2008, in which a deteriorative impact on growth rate was evident in all MS—especially from 2009. In the latter years, MSs’ economic promise signals a high potential for renewed public finance and stability initiatives.