We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byCayden Rasberry
Modified over 2 years ago
Presentations – Jonathan Shaw
© Institute for Fiscal Studies Incorporating implementation concerns into tax policymaking Jonathan Shaw (IFS and TARC)
© Institute for Fiscal Studies Coming up Background How to incorporate implementation concerns into tax policy evaluation Empirical estimates and determinants of costs Strategies for effective tax implementation Conclusion
© Institute for Fiscal Studies Background
© Institute for Fiscal Studies What does tax implementation include? Anything related to how policy is going to work in practice Enacting laws and creating institutions Calculating how much taxpayers owe Getting tax liability into governments pocket Tasks involved Law-making Record-keeping Information gathering Decision-making Calculation Communication
© Institute for Fiscal Studies Importance of tax implementation What we care about is social welfare not national income: –Distribution of income matters as well as its total level –Income isnt the only thing that matters Implementation likely to be key for increasing output and welfare –Constrains what is feasible –Determines resources wasted on unproductive tax minimisation activities –Affects success of reforms and need for remedial intervention But few robust causal estimates of importance of implementation Most would agree implementation needs to be integral to policymaking process
© Institute for Fiscal Studies How to incorporate implementation concerns into tax policy evaluation
© Institute for Fiscal Studies Costs of taxation Lost purchasing powerThe revenue collected by the tax authority Distortion costsCosts that arise because taxes change relative prices and so distort decisions over e.g. how much to work and what to buy Administrative costsCosts incurred by tax authority in running tax system Compliance costsCosts incurred by taxpayers in complying with their tax obligations
© Institute for Fiscal Studies Raising revenue efficiently Tax authority has some flexibility over instruments used –Types of tax –Tax rates and thresholds –Enforcement regime Not all instruments impose the same costs Objective: raise revenue fairly and at minimum cost Optimal policy: equalise marginal efficiency cost of funds (MECF) of each tax instrument
© Institute for Fiscal Studies Implications of optimal policy 1.Evaluations of policy reforms need to include all costs of taxation 2.What matters for incremental policy changes are marginal costs not average costs 3.Administrative costs should receive a higher weight than compliance costs 4.Optimal setting of tax instruments are interdependent 5.Increasing enforcement until revenue equals marginal administrative cost is unlikely to be optimal
© Institute for Fiscal Studies Empirical estimates and determinants of costs
© Institute for Fiscal Studies Current state of play Governments recognise importance of some or most costs –Shadow price of public funds used to appraise spending projects But necessary empirical estimates often lacking for setting individual tax policy parameters –Not calculated at all, or –Not calculated on appropriate basis for assessing reforms
Distortion costs: scale and determinants UK TaxMarginal deadweight loss Income tax (top 1%)>100% Corporation tax £10k threshold40% £300k threshold9% VAT- © Institute for Fiscal Studies Notes: Estimates for UK taxes Sources: Brewer et al (2010), HMRC (2012), Devereux et al (2012) Key determinants Elasticity of taxable income Marginal tax rate Level of income
Evasion: scale and determinants UK TaxNon-compliance (% true liability) Income tax, NICs and CGT5.5% Self assessment18.1% SMEs1.0% Corporation tax8.8% VAT10.1% © Institute for Fiscal Studies Notes: Average figures for UK taxes in 2010/11 Source: HMRC (2012) Key determinants Probability of detection Size of penalty Tax morale
Compliance costs: scale CountryTaxCompliance costs (% revenue) Administrative burdens (% revenue) UKPAYE/NICs1.3%0.4% UKCorporation tax2.2%1.9% UKVAT3.7%1.1% IrelandPAYE/PRSI4.6%0.3% IrelandSelf employed-7.4% IrelandCorporation tax-1.0% IrelandVAT-2.5% © Institute for Fiscal Studies Notes: Averages for various years. Administrative burdens are based on Standard Cost Model methodology, covering businesses and excluding costs such as tax planning, dealing with change and understanding which obligations are relevant Sources for compliance costs: Sandford et al (1989), Inland Revenue (1998) and Leonard and OHagan (1985). authors calculations Sources for administrative burdens: HMRC (2012), Revenue Commissioners (2012)
Administrative costs: scale CountryTaxAdministrative costs (% revenue) UKIncome tax0.97% UKCorporation tax0.76% UKVAT0.60% IrelandAll taxes0.85% © Institute for Fiscal Studies Notes: Average administrative costs as percentage of net revenue collected Sources: HMRC (2012), Revenue Commissioners (2013)
© Institute for Fiscal Studies Administrative and compliance costs: determinants Complexity of tax –Number of rates, reliefs and boundaries Level of tax rates Characteristics of tax base Complexity of tax –Size, mobility and registration Existence of optional schemes Stability Responsibility for assessment Responsibility for remittance Availability of help and guidance
© Institute for Fiscal Studies Strategies for effective tax implementation
© Institute for Fiscal Studies Implementation strategies Taxing market transactions –Tend to be better documented and involve arms-length prices Information reporting –Requirement to tell tax authority about transactions incurring tax –Often means coordination is required if evasion is not to be detected Withholding –Tax liability remitted by someone other than the statutory bearer –Safeguard against no tax being remitted Relying on firms –Takes advantage of existing systems and economies of scale
© Institute for Fiscal Studies Implementation strategies (2) International cooperation –Information sharing –Coordination of tax regimes Exploiting IT –Cuts cost of processing –Reduces risk of errors –Helps expose non-compliance –May cut amount of information to collect Exploiting media channels –Advertising –Name and shame
© Institute for Fiscal Studies Conclusions Effective implementation is crucial for a well-functioning tax system Implementation concerns can be incorporated into standard tax policy evaluation framework Empirical estimates of necessary parameters often lacking But available estimates suggests they are quantitatively important Wide range of strategies for effective implementation
Gareth D. Myles Lynne Oats Jonathan Shaw July 2013.
THE CORPORATION TAX Chapter 19. I’ll probably kick myself for having said this, but when are we going to have the courage to point out that in our tax.
The design of the tax system Chapter 12. A financial overview of the U.S government Amazingly, the U.S federal government collects 2/3 of the taxes in.
Governmental Opportunities and Constraints. Content Government policies affecting business: –UK and EU Law Health and safety Employment Consumer protection.
© 2007 Thomson South-Western. “In this world nothing is certain but death and taxes.”... Benjamin Franklin Taxes paid in Ben Franklin’s.
Irish Taxation Institute Presentation to Joint Committee on Economic and Regulatory Affairs Tax Administration Burden on Irish Business.
Copyright©2004 South-Western 12 The Design of the Tax System.
INTRODUCTION TO APPLIED WELFARE ECONOMICS AND BENEFIT-COST ANALYSIS.
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 19 THE CORPORATION TAX.
(c) 2008 The McGraw ‑ Hill Companies 1 The Public Finance Context.
Chapter The Design of the Tax System 12. Table Total government tax revenue as a percentage of GDP 1 2 Sweden France United Kingdom Germany Canada Brazil.
Chapter 16 Efficient and Equitable taxation.
Contribution. Definition of contribution Contribution is the difference between sales revenue and variable cost Contribution is the difference between.
Copyright©2004 South-Western 8 Applications: The Costs of Taxation.
The Design of the Tax System E conomics P R I N C I P L E S O F N. Gregory Mankiw Chapter 12.
The Design of the Tax System Chapter 12. “ In this world nothing is certain but death and taxes. ”... Benjamin Franklin Taxes paid.
12 The Design of the Tax System. “In this world nothing is certain but death and taxes.”... Benjamin Franklin Taxes paid in Ben Franklin’s.
1 ECGD4214 Systems Engineering & Economy. 2 Lecture 1 Part 1 Introduction to Engineering Economics.
The Economics of Taxation and Dynamic Scoring: Theory and Evidence for Tax Policy Evaluation John A. Spry, Ph.D. Associate Professor Opus College of Business.
VAT Administration in Korea National Tax Service March 2005.
Dr. A. DeMaskey Managing the Multinational Financial System International Financial Management.
Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development Auditing Multinational Enterprises 10. Practical Aspects.
The Design of the Tax System 1. 2 Government Revenue as a Percentage of GDP This figure shows revenue of the federal government and of state and local.
What Do We Know About the Compliance Costs of the Tax System? Arindam Das-Gupta.
Principles of Macroeconomics: Ch. 16 Second Canadian Edition Department : Business Studies Inflation Inflation.
Next page MAKING TAXES LESS NASTY Make them Transparent Make them Fair Minimize Efficiency Losses and Leaks Minimize Collection Cost.
PSI Charging Policy: Some open issues Budapest, March 23 rd, 2012.
10 CHAPTER Positive Principles of Taxation PUBLIC SECTOR ECONOMICS: The Role of Government in the American Economy Randall Holcombe.
The Case Against “Progressive” Taxation Reykjavik, Iceland November 16, 2012.
Changes in IFRS Lease Accounting Potential Tax Consequences Philip Marwood, Tax Partner – KPMG LLP.
County Financial Statements – The County Official’s Role Dave Geertsen, Kenosha County David Maccoux, Schenck SC Dawn Gunderson Schiel, Ehlers Wisconsin.
Supply Side policies. Supply side policies aim to… Improve the efficiency of factor markets, to boost productivity and hence the overall capacity of the.
Taxes Taxes are often levied on good things like working or investing, we get less of them. Creates dead weight losses.
Chapter 12 Tax Administration & Tax Planning Income Tax Fundamentals 2013 Student Slides Gerald E. Whittenburg Martha Altus-Buller Steven Gill 2013 Cengage.
FINANCING DEVO MORE Alan Trench Edinburgh, 25 January 2013.
The Design of the Tax System Chapter 12. IN THIS CHAPTER YOU WILL... 1.Get an over view of how the U.S. government raises and spends money 2. Examine.
Taxation and Government Intervention 8 Collecting more taxes than is absolutely necessary is legalized robbery. Calvin Coolidge CHAPTER 8 Copyright © 2010.
Fiscal policy 1. Meaning Fisc means State Treasury Fiscal policy may be defined as that part of governmental economic policy which deals with taxation,
Newsletter Transfer pricing in Ukraine from Issue #4 Laws of Ukraine “On Amendments to the Tax Code of Ukraine concerning improvement of.
Taxation Frederick University Taxation and Government For government to provide goods and services such as national defense, social security, national.
How Firm is The Firm? The firm is a business activity that is organized as: a) A depository for capital (Marx) b) A reservoir of labor (Ricardo) c) An.
1 The need for coherent Macroeconomic Statistics Workshop on SNA and GFS Istanbul November 2013 Kurt Wass, EFTA.
Fiscal Rules for Subnational Governments Teresa Ter-Minassian Director, Fiscal Affairs Department International Monetary Fund Contact:
Sole Proprietorship. Types of Businesses Sole Proprietorship Partnership Corporation.
Introduction to Tax Policy Design and Development Richard M. Bird and Eric M. Zolt (Draft: April 4, 2003)
Tax Assignments Jorge Martinez-Vazquez Georgia State University Intergovernmental Fiscal Relations.
Tax Law and Tax Accounting Economics and Management School Lanzhou University of Technology.
Chapter 1 An Introduction to Taxation. Learning Objectives Discuss the history of taxation Differentiate between three types of tax rate structures Describe.
12 The Design of the Tax System. What’s in this chapter? How does the US government raise money and what does it do with it? Is our tax system efficient?
© 2017 SlidePlayer.com Inc. All rights reserved.