Top PDF Gender and taxation: analysis of personal income tax (PIT)

Uganda’s emphasis on strategies to make gender equality a priority in development action, were strengthened through the government’s commitment to the Beijing Platform for Action (1995). These commitments include the requirement to plan for and implement actions that take into consideration gender differences in resource allocation, which is a key entry point to the gender analysis of taxation. Earlier on, efforts had been made in establishing institutions; especially the Ministry of Women in Development (later on called Gender Labour and Social Development), to guide policy formulation and programme planning for gender equality. The government has also made commitments to address gender based discrimination through subscribing to the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) principles. Formal reporting on CEDAW is done by the Ministry of Gender and Social development in collaboration with Ministry of Justice as well as Law Reform Commission. However, such reports have not yet been able to show the extent to which taxation can

Albania is at a crossroad between the proportional and progressive tax system. Given the country’s growing income disparities, it is expected that the current reform will impose more taxes on the upper levels. Horizontal equity for taxation means that people in similar positions pay similar taxes but horizontal equity is not a major issue since the number of available exemptions in Albania is relatively small. Albanian transactions are mostly conducted on a cash basis thus making them difficult to be caught by the current taxation system. This fact relates to the still young and under development formal sector which is typical of developing countries. As a result, the enforcement of taxation on these evasive transactions is quite a challenge for the Albanian government. Also due to the large rural population and lack of tax enforcement power in rural areas, collection of personal income tax becomes rather difficult.

In this paper we try to evaluate the progressivity in Pakistan’s income tax structure using data from Household Income and Expenditure Survey 2001-02. We see the impact of Income Tax Ordinance for two separate years; 2002 (low growth year), and 2005 (high growth year). There is some previous research on the evaluation of tax progressivity in Pakistan. For example, see Ilyas (2004), Alauddin et al. (1981), Ahmed et al. (1986), Azfar (1972), Jeetun (1978), Malik et al. (1985, 1989). However, to our knowledge there is no decomposition analysis of personal income tax system. In the developing countries, this area of research has in the past received less importance, given that income tax constitutes relatively smaller portion of the overall revenue collections. See Sicat et al. (1988), Bird and Zolt (2005, 2008), Bird (2008) and Bernardi et al. (2006).

rate, known in the literature as the Laffer marginal tax rate, is identified with the marginal tax rate that assures a zero revenue variation in function . This condition is met when and are equal. Therefore, given the specific features of the Spanish PIT included in equations [5] and [6], we can calculate the Laffer marginal tax rate for each tax unit and study its distribution, along with determining the percentage of tax units and the volume of total taxable income and tax due that are located in the rising or decreasing sections of the Laffer curve. Table 9 presents this information for the reform under study. As can be seen, for the general taxable income, more than 68% of the tax returns are found in the decreasing section of the curve, comprising 72.29% of the reported tax base and 79.92% of net tax collected. For the case of savings these numbers vary significantly: more than 95% of the tax returns are located in the falling section of the Laffer curve affecting a smaller percentage of the reported taxable income (30.53%), albeit a bigger proportion of the tax due (83.82%).

Tax reform on residents’ income redistribution by the distribution function. [7] All of these inferred data would reduce conclusion authenticity and policy reference significance. (2) The other is the micro data from the small-scale survey organized by the research projects or from the official levying data organized by the local taxation bureau. The data is undisclosed. The conclusion from the data can’t be examed again by the readers, which is adverse to the credibility of the conclusion. In recent decade, there occur some disclosed micro surveys of households in China presided by some institutions, such as the Chinese Household Income Project (CHIP), the China Family Panel Studies (CFPS), the China Health and Nutrition Survey (CHNS), the China Health and the Retirement Longitudinal Study (CHARLS), which provide new data sources for the research of income redistribution. In the paper the Urban Dataset (2013) of the CHIP will be used as original data source to identify the impact of the Personal Income Tax reform for wages and salaries in 2011 on income redistribution in China based on the Gini index, tax progressive, average tax rate, just as the relative literatures did. Then the impact of the current Personal Income Tax reform on income redistribution will further be discussed in the context of the itemized levying system and from the residents’ subjective perceptions, which is different from the relative literatures.

Over the past decade, most OECD countries reduced the tax ratio, on average by about 1 percentage point. Since 2008, due to the recession there has been weakened the importance of corporate taxes (reduction by about 20%). Personal income taxes measured by average tax rates or tax wedges on personal incomes over the past decade decreased by approximately 2 percentage points for all types of households. The greatest support to the families with children bring benefi t systems to single parents with two children, where the diff erence between ATR and NATR makes up to 13 percentage points and during the last decade did not change. Over the past four years, the stable decrease in the importance of PIT in developed countries has halted.

captures, in the absence of any behavioural reaction, the pure arithmetical change in tax revenue, whereas the latter quantifies the revenue change due to the impact of marginal tax rates on economic activity. Although the notion of the Laffer curve is applicable to any tax as well as to the tax system as a whole, most of the empirical and theoretical work on the Laffer curve has focused on personal income taxation (PIT). However, the traditional formulation of the Laffer curve in PIT has omitted the impact of marginal tax rates on consumption 2 . As long

Background: In recent years’ income inequality has been an economic issue. The primary instrument for redistributing income is personal income tax. However, based on economic theory income inequality concerns indicators such as wages, transfer payments, taxes, social security contributions, and geographical mobility. Objectives: The objective of this paper is to examine the impact of certain labor market indicators on personal income taxation in Federation of Bosnia and Herzegovina (FB&H). Methods/Approach: Since personal income taxation consists of a very broad definition and for the purpose of this research only, income from dependent (employment) activity is observed. The econometric analysis is conducted using error correction modeling, as well as forecast errors variance decomposition. Results: The error correction model is estimated, and the cointegrating equation indicates that monthly wage and number of employees statistically significantly positively affect personal income taxes in FB&H in the long-run. After two years, the selected labor market indicators explain a considerable part of forecasting error variance of personal income tax revenues. Conclusions: The implementation of reforms in the labor market and tax policies of the FB&H is suggested. In order to achieve necessary reforms, efficient governance and general stable political environment are required.

The first post-independence PIT system from 1991 remained almost unchanged until 2004, when a new tax code was passed by parliament, coming into effect in January 2005. However, this code was changed in 2005, with the most important new element being the introduction of the schedular taxation of interest, dividends and capital gains, whereby a single 20% tax rate was introduced for these types of income. This code was only used in the fiscal years 2005 and 2006. In January 2007, a completely new PIT law came into effect. It retained the schedular taxation of capital income, while changing the tax schedule for other (non-capital) income. A major change was the replacement of the highest, 50% marginal tax rate with a new one of 41% ( Č ok, 2007). In addition, further changes in the tax code simplified the tax compliance procedure and costs (Klun, 2009). This law is still in use, even though it has been subject to several new amendments – a major one being the split of the general tax allowance into three sizes in 2008, depending on individual income, as already mentioned. As a direct response to the financial crisis, the general tax allowance for taxpayers with the lowest income was further increased in 2009.

Verification of this possible differential effect is becoming increasingly important given the number of countries that have or are considering the implementation of tax reforms with tax structures much flatter than their predecessors. Sabirianova Peter, Buttrick, and Duncan (2010) shows that personal income tax (PIT) structures today have fewer tax brackets, lower top statutory marginal tax rates and reduced complexity than 25 years ago. They also identify what appears to be a shift towards flat rate income taxes. By 2009, 24 countries adopted the flat rate PIT schedule and many more countries are seriously considering this policy. If progressivity and income inequality are negatively related, then there are important implications of such policies for the distribution of income. Given the tax evasion argument, however, it is not clear that shifting to flat taxes – or more generally, to income tax structures with lower levels of progressivity – will necessarily lead to greater levels of income inequality. This is where the distinction between observed and true income distribution and the potential differential effect of progressivity on both becomes extremely important.

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to identify the tax effect, while column (2) uses only the top tax bracket executives and identifies out of the time variation in the top tax rate only. The estimates in these two columns show that the option grant sensitivity increased in response to the tax increases of 1993 and 1994, but this increase is statistically significant only in column (1). These estimates, however, may be biased due to the omitted time trends in executive compensation that are correlated with tax rate changes. To ac- count for these time trends, columns (3) and (4) repeat the specifications of columns (1) and (2) with the addition of linear industry time trends. With these controls, the net-of-tax-rate elasticity becomes positive (about two thirds), significant, and numerically similar across the two columns. The comparison to the estimates in columns (1) and (2) reveals that it is indeed important to control for the under- lying time trends in executive compensation when identifying the tax effect. The results in columns (3) and (4) may, however, still be biased due to the restrictive way (linearity) the time effects are controlled for. To address this problem, columns (5) and (6) repeat the specifications of columns (1) and (2) with the addition of year dummies in both columns and linear industry time trends in column (6). That is, these two columns identify the tax effect using the difference-in-differences ap- proach. With these controls, the net-of-tax-rate elasticity remains positive, but its magnitude approximately doubles and the coefficient estimates become statistically insignificant. One possible explanation for the large standard errors and hence sta- tistical insignificance in columns (5) and (6) is that, as displayed in Table 3, the difference in the tax rate increase between the two tax brackets is only 3.6 per- centage points, leaving the difference-in-differences approach with little identifying variation. A similar caveat applies to all the subsequent results as well. However, reading the results from columns (3)-(6) together suggests a positive net-of-tax-rate elasticity of the option grant sensitivity once the time trends are controlled for. In the case of the one-tax model, the elasticity of the after-tax option grant sensitivity is of interest as well (see Proposition 2). This elasticity is obtained by adding one to the coefficient estimates on the net-of-tax-share variable, with the standard errors being unaffected. In all six columns, this estimate is positive and significant, con- firming the prediction of Proposition 2. The coefficient estimates on other variables are consistent with predictions outlined in the previous section.

We will now consider a proposal of reform that was explicitly debated in the Italian parliament during the nineties. According to this proposal each household income Y is divided into “parts” y=Y/N, according to the family size: the IRPEF rule t(…) described in equation [1] is then applied to y instead of individual incomes. Total tax liability is then given by T=N × t(y). N is equal to 1 for the first household component and 0.5 for the others. Family benefits and deductions have been excluded from the model, since there is less scope for such correction mechanisms with household taxation. In the simulation, t(…) is represented by the IRPEF system in place in 1987; thus, we can directly compare these results with those of the previous section.

There is an old but still ongoing debate on the best tax system in most OECD coun- tries. Especially in Germany and the U.S., there are proponents of consumption- oriented taxation on the one hand and of comprehensive income taxation on the other. In a major reform, the Nordic countries have implemented in the 1990s a Dual Income Tax, which apportions total income into segmented tax bases of labor and capital income (see, e.g., Sørensen, 1994). In all cases, however, this debate fails to consider the effects of risk on personal income and therefore does not deal with risky tax revenue. Consequently, the questions we want to answer in this paper are: First, what is the optimal income taxation in case of aggregate risk? Second, which tax system should therefore be implemented?

414 See, in the US, IRC Section 172 (business operating losses may be carried back two years before the year o f the loss and forward twenty years) and IRC Section 1212 (for capital losses there is a carryback o f three years and a carryforward period o f five years). In the UK, for “trading” losses, carryback period o f one year and unlimited carryforward period provided set-off is made against income arising from the same trade. As for capital losses, unlimited carryforward but no carryback period allowed. N ote that from N ovem ber 24, 2008 to N ovem ber 23, 2010, as a temporary measure to counter the effects o f the econom ic downturn, the period for which a business may carryback current trading losses against previous profits is extended to a period o f three years. See FURSDON, British Tax Guide: Corporation Tax, supra note 410, at 85. See also on the need for year loss limitations PREBBLE, Why is Tax Law Incomprehensible?, supra note 11, at 385 (“ [A]s soon as we draw lines to divide incom e into periods delimited by time we must have whole bodies o f rules to allocate receipts and expenses to their correct years...Also, we must have other bodies o f rules to try to minimize the unfair effects that strict year-by-year accounting otherwise has on people ... w ho have incomes that are lumpy, in that they fluctuate in amount.”); M. CAMPISANO & R. ROMANO, Recouping Losses: The Case for Full Lass Offsets, 76 Northwestern University Law Review 709 (1981) at 710 (‘T h e present statutory scheme is usually supported by a rationale based on the concept o f incom e averaging: that is, the idea that taxpayers whose incom e fluctuate from year to year should receive tax treatment equivalent to those with stable incom es”). 415 While

Language skills affect income in a positive direction. Being of Estonian na- tionality may also increase hourly income, but the effect is relatively modest in size and not very precisely estimated. The ethnicity variable is not sta- tistically significant. The pay gaps based on nationality or ethnicity are ar- guably somewhat smaller than the corresponding measures found in Leping and Toomet (2007). Education affects income positively. Hourly incomes are higher in the northern region of Estonia, but living in Tallinn does not appear to bring about an additional effect. People living in rural areas have substan- tially lower income than people living elsewhere. Overall, the results are com- mensurable with previous microeconometric studies analysing wage or labour income formation in Estonia (Siliverstovs and Koulikov, 2002; Võrk, 2004; Alloja, 2005a). Before proceeding, we will discuss three possible problems concerning specification (2.1).

• EU and EEA citizens who neither have their residence nor their habitual abode in Austria but receive the main part of their income from Austrian sources may opt to be treated as being subject to unlimited tax liability. The option may be exercised if 90 % of the income is obtained in Austria or the total amount of income generated abroad is not higher than EUR 11,000. Despite this option taxation is still restricted to domestically sourced rather than worldwide income. However, the benefit of this option is that tax benefits which are generally enjoyed only by residents are also available to the non-resident individual upon such option, e.g. certain indivi- dual tax deductions (sole-earner deduction, single-parent deduction, support-money deduction), extraordinary expenses as well as the general income tax threshold of EUR 11.000.

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Tax system in the Croatian legislation is decorated in a particular way and represents a modern system, compliant with the guidelines of the European Union. It is important to emphasize that the Republic of Croatia applies 57 of the Agreements on Avoidance of Double Taxation, which are in legal force above the law. Corporate Income Tax and Personal Income Tax, regulated by special regulations respectively the Law on corporate Income Tax and the Law on Personal Income Tax. There are also a number of special laws and other regulations which separately regulates vorious forms of tax and the rights and duties of taxpayers. After intoductory considerations briefly considered the general guidelines oft he tax system, development of the corporate income tax, considered its main features from the tax payer to the tax return. Considering the income tax where he looks at himself and his concept oft he essential characteristics including its sources, relief and exemptions until the tax loss.

Tax evasion is a major problem plaguing many emerging economics across the globe and Nigeria situation seems peculiar when viewed against the scale of corrupt practices prevalent in the country. Under the direct personal taxation as practiced in Nigeria, the major problem lies in the collection of the taxes especially from the self-employed such as the businessmen, contractors, professional practitioners like lawyers, doctors, accountants, architects and traders in shops among others (Kiabel and Nwokah, 2009). As observed by Ayua (1999) cited in Kiabel and Nwokah (2009) these persons blatantly refuse to pay tax by reporting losses every year. Ayua (1999) further asserts that many of these professionals live a lifestyle inconsistent with reported income, which is usually unrealistically low for the nature of their businesses. The only categories of individuals who fulfill their tax obligation in Nigeria are civil servants and other salaried workers. However, even among the salaried workers, many have the statutory personal allowance and relief into a