Informal but not Insignificant: Unregistered Workers in North Cyprus

The size of the informal labour force and its contribution to the national income of North Cyprus has been an issue of considerable controversy and political significance. Because of the relatively free movement of labour between Turkey and North Cyprus, a significant body of unregistered workers have accumulated in North Cyprus. The findings are that from 1996 to 2000 the informal employment is between 35 to 40 per cent of the total labour force. Because not all the informal sectors production is excluded from the official national income statistics, the understatement of the official statistics is estimated to be between 12 to 17 percent of GNP. The fiscal losses are estimated to be about 9 percent of total tax revenues and a loss of social security revenues is approximately 38 per cent of the total annual contributions.Cyprus, informal sector, informal labour force, fiscal losses, unrecorded income, underground economy

Is the Value Added Tax Naturally Progressive?

A broad based consumption tax, such as a value added tax, is generally considered to be a regressive tax. This conclusion, however, has not taken into account the fact that in developing countries the commodities on which poor households spend most of their income, even if they are included in the legal tax base, are administratively impractical to tax. This paper employs a rich data set on household incomes and expenditures for the Dominican Republic. The data set covers 2042 goods and services purchased by households of different income and consumption levels. It also contains information on the type of establishment from which the items were purchased. With this information, we estimate the effective rate of tax that has been paid on each item purchased by households. These estimations include the effect of the different rates of the tax compliance across households with different expenditure levels. The results of the study show that the burden of the current VAT in the Dominican Republic is progressive over all the quintiles of household expenditure. Furthermore, if the base of the VAT is made comprehensive, the estimated incidence of the burden of the VAT is still progressive over all the quintiles of household expenditure.Value Added Tax, incidence, compliance

Regulation and Taxation of Casinos under State-Monopoly, Private Monopoly and Casino Association Regimes

This paper considers alternative forms of regulation and taxation of the casino sector. The model considers the situation of a typical tourist destination country that is using casinos to attract and entertain foreign tourists. The objective is to invest in the sector efficiently while maximizing the amount of government revenue or profits accruing to the country. The regulator must determine how the price of gambling will be set, how many casinos will be allowed to enter the industry and the form and rates of taxation. Four alternative forms of regulation are considered: price regulation, state-owned monopoly, private monopoly and casino association regulation. Turnover taxes on the amount of funds gambled and also annual taxation of the fixed costs of the casinos are evaluated. Applications of the models are carried out for North Cyprus. The conclusion is that the economic efficiency costs and the revenue losses from the absence of effective regulation in these tourist destinations can be very substantial with welfare costs equal to the approximately 75 percent of the tax revenue generated by this sector. Furthermore it shows that while a tax on turnover can be efficient in the case of a competitive industry or a cartel association form of regulation, it will be distortunary if a private monopoly is controlling the sector. In contrast a tax on fixed costs will lead to an efficient result in the case of a competitive or private monopoly cases, but it will lead to allocate inefficiencies if the sector is regulated by a casino association that can only control the number of casino entering the sector.Casino regulation, taxation, state-monopoly, welfare cost

The Economics of Casino Taxation

In this paper, a model of the costs of a casino is developed that focuses on the implications for economic welfare of different taxation schemes for casinos. The situation being considered is in a country where casinos cater exclusively to foreign tourists. The goal of the country is to determine the maximum amount of taxes that can be extracted from the activities of this sector under different systems of taxation. When the price of gambling is set by regulation above its competitive level, the economic losses created by excessive investment in the sector can be reduced by taxation. A turnover tax on the amount gambled can maximize both tax revenue and the economic welfare of the country. Due administrative constraints, a number of countries rely on the taxation of the casinos’ fixed assets or a combination of a turnover tax and a tax on fixed costs. The model is applied to the situation in North Cyprus. The annual economic efficiency loss from its poorly designed tax policies on casino gambling is estimated to be about 0.5 percent of GDP.Casino, taxation, gambling, tourism, economic benefit

The Fiscal Burden of the Legacy of the Civil Service Pension Systems in Northern Cyprus

This paper estimates the fiscal burden of the Pay-As-You-Go (PAYGO) civil service pension systems that were closed in 2008 to new members in North Cyprus. At that time, a new pension system was introduced for the newly hired government employees and new private sector workers. Estimates are made of the difference between the present values of future contributions and the pension benefits. This approach measures the government’s net liabilities related to the accruals of the pension rights received by the individuals covered through these plans for the period from 2009 to the death of the last member in the system. The estimated unfunded cost of these civil service pension plans is 7.3 billion euros or 276% of GDP. This amount of implicit debt is significantly higher than 5.8 billion euros that has been estimated as the amount of cash compensation for land and property that would need to be paid in order to reach an agreement for a solution to the Cyprus conflict.civil service pensions, pension liabilities, implicit pension debt, pension indexing, North Cyprus

Evaluating the Relative Impact of Fiscal Incentives and Trade Policies on the Returns to Manufacturing in Taiwan 1955-1995

In this paper, an integrated cash flow model is developed to examine the relative impact of tax incentives, financial subsidies, and macroeconomic variables on the profitability of industrial investments. It allows for various variables to interact with each other. An application of the model is carried out for Taiwan, which implemented a variety of fiscal incentives over the past forty years. The principal policy conclusion is that trade and macroeconomic policies are much more important than income tax incentives or subsidized finance policies in determining the success of industrialization process. The effects of any of the fiscal incentives are found generally much smaller than those of the trade policies or the fundamental trends in macroeconomic variables such as the movement of the real exchange rate and the real wage rate.tax incentives, export promotion, industrialization, real exchange rate, trade policy, Taiwan

Infrastructure Choices in Education: Location, Build or Repair

The purpose of this study is to develop a model to arrive at a joint optimizing strategy for the use of a given capital budget for the construction of new school buildings and for the repair of the already existing schools. This is to be done in a way that will have the maximum positive impact on the enhancement of the education system. Cost effectiveness analysis is used as the main analytical tool in the analysis. A key factor of the model is that it gives one the optimal mix of repair versus new construction that should be undertaken under a fixed budget constraint. The model is simulated using a sample data set from the information available for the education sector of Limpopo Province, South Africa. It utilizes a very basic set of information that is available in all school districts across the province. Application of this model for the selection of infrastructure investments (either building or repair) in the education sector would increase the efficiency of capital expenditure in this sector. This is particularly the case for the countries that are faced with a large excess demand for school buildings.education, cost effectiveness, school location, school construction, school repair, South Africa

Water flow risks and stakeholder impacts on the choice of a dam site

This study evaluates three alternative locations for building a fresh water dam in the Yeşilirmak Valley of North Cyprus. Each of the three sites has different investment costs, water storage capabilities and socio‐political repercussions. These kinds of trade‐offs have in recent years characterised much of the worldwide debate surrounding the construction of electricity and irrigation dams. Another issue raised in this paper is the appropriate treatment of the risk and variability associated with the availability of water to fill the dam through time. This paper demonstrates how an integrated financial‐economic‐stakeholder analysis can provide the inputs needed by decision‐makers in such situations to make rational political and economic choices.Resource /Energy Economics and Policy,