Strategic Tax Collection and Fiscal Decentralisation: The Case of Russia

In a centralized federation, where tax rates and taxation rules are set by the federal government, manipulating the thoroughness of tax auditing and the effectiveness of tax collection could be attractive for regional authorities because of a variety of reasons. These range from tax competition to principal-agent problems, state capture and benefits of fiscal equalisation. In this paper we discuss strategic tax auditing and collection from the perspective of fiscal federalism and test for strategic tax collection empirically using data of the Russian Federation. Russia’s regional authorities in the 1990s have always been suspect of tax auditing manipulations in their favour. However, in the 2000s increasing bargaining power of the centre seems to induce tax collection bodies in the regions to manipulate tax auditing in favour of the federation. We find partial evidence in favour of both of these hypotheses.fiscal federalism, tax arrears, transition economies

Expanding taxable capacity and reaching revenue potential : cross-country analysis

An effective tax system is fundamental for successful country development. The first step to understand public revenue systems is to establish some commonly agreed performance measurements and benchmarks. This paper employs a cross-country study to estimate tax capacity from a sample of 104 countries during 1994-2003. The estimation results are then used as benchmarks to compare taxable capacity and tax effort in different countries. Taxable capacity refersto the predicted tax-gross domestic product ratio that can be estimated with the regression, taking into account a country's specific economic, demographic, and institutional features. Tax effort is defined as an index of the ratio between the share of the actual tax collection in gross domestic product and the predicted taxable capacity. The authors classify countries into four distinct groups by their level of actual tax collection and attained tax effort. This classification is based on the benchmark of the global average of tax collection and a tax effort index of 1 (when tax collection is exactly the same as the estimated taxable capacity). The analysis provides guidance for countries with various levels of tax collection and tax effort.Taxation&Subsidies,Debt Markets,Public Sector Economics&Finance,Emerging Markets,Economic Theory&Research

Informal sector, productivity, and tax collection

The informal sector is a prominent characteristic of many developing countries. Most of the literature has focused on understanding the determinants of informality. The connection between the informal sector and economic development is, nonetheless, relatively less understood. One of the most important determinants of informality is the tax enforcement quality of a country which, some authors argue, additionally distorts firms' decisions and creates inefficiency. In this paper, I assess the quantitative importance of the effects of incomplete tax enforcement on aggregate output and productivity. I use a dynamic general equilibrium framework to study effects that have received little attention in the literature. I calibrate the model using data for Mexico, an economy where 31% of the employees work in informal establishments. I then investigate the effects of improving enforcement. My main finding is that under complete enforcement, Mexico's labor productivity and output would be 17% higher.Informal Sector, Productivity, tax enforcement, TFP, Heterogeneous plants

Financing America\u27s Roads: The Past Is Prologue

This article provides a historical perspective of American roadway financing. It explores revenue collection and expenditures at the federal, state, and local governmental levels. Accounting practices of the Highway Trust Fund are discussed including the enactment of the Truth in Budgeting Act to shift revenue collection closer to a direct-user tax. Factors affecting roadway tax revenues are identified and the impact of increasing taxes is discussed. Four key considerations which will continue to shape roadway revenue collection are identified

Use tax collections

The article reports on a study which investigated the level of compliance with U.S. state use tax laws and the techniques employed by the states in order to enforce use tax. Most states utilize either of two forms of tax reporting and collection. These are: the introduction of a separate use tax form/return; or the use of a separate line on the state income tax return. It was observed that utilizing a separate line item on the state income tax return might cause a rise in the number of taxpayers

Cross-Border Tax Externalities: Are Budget Deficits Too Small?

In a dynamic optimising model with costly tax collection, a tax cut by one nation creates positive externalities for the rest of the world if initial public debt stocks are positive. By reducing tax collection costs, current tax cuts boost the resources available for current private consumption, lowering the global interest rate. This pecuniary externality benefits other countries because it reduces the tax collection costs for foreign governments of current and future debt service. In the non-cooperative equilibrium, nationalistic governments do not allow for the effect of lower domestic taxes on debt service costs abroad. Taxes are too high and government budget deficits too low compared to the global cooperative equilibrium. Even in the cooperative equilibrium complete tax smoothing is not optimal: current taxes will be lower than future taxes.

Financing Government Expenditures Optimally

In a simple cash-credit model, I study the effects of the combination of costly tax collection and tax evasion on fiscal and monetary policy for optimal resource allocation. Allowing the informal sector to use cash more intensively than the formal sector, I compute the optimal interest and tax rates for eleven OECD countries to finance their exogeneously given government spending. A comparison of the actual and optimal interest rates reveals that tax collection costs and tax evasion together can partly explain the cross-country differences in monetary policy, also rationalizing deviations from the Friedman Rule in the long-run.

Estimation of transaction costs during tax collection process

Tigran Jrbashyan; Davit Harutyunya

Tax reforms - taxes without tax laws

This paper suggests a new tax system without tax laws, tax collection departments and tax enforcement agencies.This new tax system will be without present system’s all Direct and Indirect taxes accompanied by tax laws, tax exemptions, multiple tax collection departments for States and Centre, compulsory accounting, auditing and tax returns to relieve 7 billion people of the world from the cobweb of ambiguous and complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing, tax returns and consequent quagmire of all tax related cases. Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments, distribution of subsidies, implementation of welfare schemes and money supply into the economy are unified and integrated in the banking system. There will be no tax collection expenditure for the Governments and no tax compliance costs for the people either. Citizens need not maintain separate account books and submit tax returns annually for paying either Direct taxes on personal incomes or Indirect taxes while running business or industry. Yet, this new tax system envisages 20 to 30 % more revenues from single tax called "TOP Tax” - than presently accruing revenues from multiple taxes collected by different tax collection departments/agencie