nep-pub New Economics Papers
on Public Finance
Issue of 2009‒07‒17
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. CAN WE TAX THE DESIRE FOR TAX EVASION? By Ratbek Dzhumashev; Emin Gahramanov
  2. Tax Assignment Revisited By Richard M. Bird
  3. The BBLR Approach to tax Reform in Emerging Countries By Richard M. Bird
  4. Incidence of Taxes in Pakistan: Primer and Estimates By Umir Wahid; Sally Wallace
  5. Tax Policy in Pakistan: An Assessment of Major Taxes and Options for Reform By Wayne Thirsk

  1. By: Ratbek Dzhumashev; Emin Gahramanov
    Abstract: A static income tax evasion model à la Yitzhaki (1974) predicts that an increase in the tax rate causes taxpayers to increase their income declaration. In an important contribution, Lin and Yang (2001) obtained exactly the opposite result by extending the Yitzhaki (1974) model to a dynamic one with Ak(t) production technology. In this paper we show that once the Lin and Yang (2001) model becomes fully compatible with the Yitzhaki’s (1974) setting, the negative relationship between taxes and evasion still prevails. We then enrich the dynamic model with a productive public sector, and obtain an ambiguous relationship between taxes and evasion incentives as in Allingham and Sandmo (1972). We also prove that the growth-maximizing share of public expenditures in total output satisfies the natural efficiency condition even in the presence of tax evasion. However, the latter result is not robust to the introduction of the costs associated with income declaration and concealment activities.
    Keywords: Tax Evasion, Optimal Taxation, Economic Growth
    JEL: H26 H21 D91
    Date: 2009–06
  2. By: Richard M. Bird (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper first restates the lessons to be learned from Richard Musgrave’s pioneering discussion of the tax assignment issue. Next, it considers subsequent developments in the theory of fiscal federalism related to the issue of tax assignment. Surprisingly little clear guidance is offered by the theoretical discussion when it comes to the practical policy issues facing any country with respect to tax assignment: what countries do seems to bear little relation to what theory suggests they should do. This point is illustrated this point by a brief review of tax assignments observed around the world in large emerging countries. The tax assignment issue in such countries as India and China is both important and unduly neglected: for the most part, these are still countries in search (whether they know it or not) for a sustainable solution to this problem. The paper concludes with some reflections about what seem to be future possible -- or, perhaps better, needed -- developments with respect to both the theory and practice of tax assignment, again with special reference to large emerging countries.
    Keywords: tax assignment; fiscal federalism; Richard Musgrave; Brazil, India, China, Nigeria, Russia
    Date: 2008–12–01
  3. By: Richard M. Bird (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Fiscal experts have years proposed a holy trinity of tax reform options for developing countries: broader bases, lower rates, and better administration. The review in this paper of fifty years of experience auggests that what might be called the BBLR approach-- broader bases and lower rates -- to tax structure reform holds up fairly well. Nonetheless, some qualifications to the basic BBLR approach are suggested and the continuing fundamental importance of understanding and improving tax administration is stressed.
    Keywords: tax reform, tax bases, tax rates, tax administration
    Date: 2008–12–01
  4. By: Umir Wahid; Sally Wallace (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Who pays Pakistan’s taxes? Do they fall inordinately on low-income families, or on labor working in the formal sector, or is the tax burden borne disproportionately by the higher income classes, who also own most of the capital in the country? The fairness of the tax system is not only affected by who pays taxes, but by who does not. The latter group might include those working in the hard-to-tax informal sector, agriculture, those who benefit from legal exemptions, and those who evade taxes.
    Keywords: Pakistan, Pakistan taxation, hard-to-tax informal sector
    Date: 2008–12–01
  5. By: Wayne Thirsk (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper undertakes a critical evaluation of the strengths and weaknesses of all of Pakistan’s major sources of tax revenue: the individual income tax, the corporate income tax, the sales tax, excise taxes and trade taxes on imports. For each major tax it describes the nature of the current tax base and the rate or rate structure that is applied to that base. After that exercise the paper identifies certain features of each tax that raise significant concerns for tax policy and constitute the beginning of an agenda for future tax reform. In each case the tax policy issues that have been flagged are discussed within a policy framework that appeals to the broadly accepted norms of “good” taxation and international experience in grappling with these issues. The concluding section of this paper sets forth for consideration an array of tax reform proposals that attempt to address the most important flaws and problems that have been detected in Pakistan’s tax system.
    Keywords: Pakistan, Pakistan Taxation, fiscal decentralization, revenue mobolization, sources of tax revenue
    Date: 2008–12–01

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