Progressivity of personal income tax in Croatia: decomposition of tax base and rate effects

This paper presents progressivity breakdowns for Croatian personal income tax (henceforth PIT) in 1997 and 2004. The decompositions reveal how the elements of the system – tax schedule, allowances, deductions and credits – contribute to the achievement of progressivity, over the quantiles of pre-tax income distribution. Through the use of ‘single parameter’ Gini indices, the social decision maker’s (henceforth SDM) relatively more or less favorable inclination toward taxpayers in the lower tails of pre-tax income distribution is accounted for. Simulations are undertaken to show how the introduction of a flat-rate system would affect progressivity

Indices of redistributive effect and reranking: reinterpretation

Kakwani decomposition of redistributive effect into vertical and reranking terms is one of the most widely used tools in measurement of income redistribution. However, Urban (2009) argues that the decomposition features some methodological problems and calls for its reinterpretation. This paper builds several different measurement models, constructs new indices of redistributive effect and reranking reinventing the existing ones, and establishes important propositions on the role of reranking in redistributive process. All that is done to prove that standard interpretation of Kakwani decomposition is misleading. New roles are suggested for the well-known indices of redistributive, vertical and reranking effect.Kakwani decomposition, redistributive, reranking and vertical effects.

Progressivity of personal income tax in Croatia: decomposition of tax base and rate effects

This paper presents progressivity breakdowns for Croatian personal income tax in 1997 and 2004. The decompositions reveal how the elements of the system – tax schedule, allowances, deductions and credits – contribute to the achievement of progressivity, over the quantiles of pre-tax income distribution. Through the use of ‘single parameter’ Gini indices, the social decision maker’s relatively more or less favorable inclination toward taxpayers in the lower tails of pre-tax income distribution is accounted for. Simulations are undertaken to show how the introduction of a flat-rate system would affect progressivity.personal income tax, progressivity, decomposition

Income Redistribution in Croatia: The Role of Individual Taxes and Social Transfers

The paper discusses the methodology and preliminary results of an investigation of the redistributive effects of social security contributions (SSC), personal income tax (PIT), public pensions as well as means-tested and non-means-tested cash benefits in Croatia. The transition from a pre- to a post-tax-and-benefit income is analyzed in order to reveal which instruments contribute most to the reduction of inequality. The Croatian system of individual taxes, pensions and social benefits seems to be highly redistributive, with public pensions being the instrument that contributes most, followed by SSC and PIT.income inequality, redistribution, fiscal instruments

Estimating the Size and Growth of Unrecorded Economic Activity in Transition Countries: A Re-evaluation of Electric Consumption Method Estimates and their Implications

It is widely acknowledged that underground (unrecorded) economic activities play a major role in transition economies. Evaluations of the success and failure of the transition experience should therefore be based on total economic activity [TEA], namely, the sum of recorded and unrecorded economic activity. Substantive conclusions concerning the effects of unrecorded activities on the transition process as well as investigations of the causes and consequences of unrecorded activities have to date, relied extensively on estimates of unrecorded income based on variants of the electric consumption method [ECM] during the first half of the transition process. We first attempt to replicate these estimates employing improved data series. We then go on to extend and update alternative versions of the ECM estimates of unrecorded income for twenty five transition countries for the period 1989-2001. These new estimates enable us to examine the sensitivity of the results to alternative specifying assumptions, particularly, initial conditions. We find that our updated ECM estimates of the size of the unrecorded sector are not only highly sensitive to initial conditions, but they produce negative estimates of unrecorded income for many transition countries. Our findings are also compared to the new national accounting procedures that attempt to estimate exhaustive measures of the “non-observed economy”. Our disturbing results call into question many of the substantive conclusions reached by other scholars who relied on earlier ECM estimates to draw inferences about the transition process as well as the causes and consequences of underground economies in transition. In short, while we conclude that ECM estimates of the size of the unrecorded economy are unreliable, it is still possible to use the growth rate of the unrecorded sector to make important inferences about the transition process by examining the dynamic relationship between recorded and unrecorded sectors. The extension of our data base to cover the entire transition period will hopefully result in new investigations employing panel data rather than the more traditional method of applying simple cross country test procedures. Key words: underground, unreported, unrecorded, unobserved, hidden, informal, nonobserved, shadow economy, transition economies.http://deepblue.lib.umich.edu/bitstream/2027.42/40022/2/wp636.pd

Measuring Underground (Unobserved, Non-Observed, Unrecorded) Economies in Transition Countries: Can We Trust GDP?

This paper compiles alternative estimates of underground economies in twenty five transition countries during the transition decade and finds a disturbing lack of convergence between them, calling into question the reliability of GDP figures (which in varying degrees now include non-transparent imputations for the ìnonobserved economyî) as well as the macro model estimates of the unrecorded economy.http://deepblue.lib.umich.edu/bitstream/2027.42/64384/1/wp913.pd

Tax expenditures in Croatia

The tax system of the Republic of Croatia contains a large number of very diverse kinds of tax expenditures whose the declared aim is to achieve certain social and economic objectives. This paper considers all the items that constitute tax expenditures in Croatia, within the systems of the personal income tax, corporate income tax, and real estate transfer tax and value added tax. The objective of the article is to determine the real level of tax expenditures per form of tax in the 2001-2004 period. We hypothesised that the tax expenditures in the analysed forms of tax are both high and growing, which was ultimately borne out, for almost all the analysed items in the tax forms considered are growing.tax expenditures, personal income tax, corporate income tax, real estate transfer tax and value added tax.

Activity, Incomes and Social Welfare: A Comparison Across Four New EU Member States / Manuela Sofia Stănulescu i Tine Stanovnik (ur.)

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Activity, Incomes and Social Welfare: A Comparison Across Four New EU Member States / Manuela Sofia Stănulescu and Tine Stanovnik (eds.)

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Measuring Underground (Unobserved, Non-Observed, Unrecorded) Economies in Transition Countries: Can We Trust GDP?

This paper compiles alternative estimates of underground economies in twenty five transition countries during the transition decade and finds a disturbing lack of convergence between them, calling into question the reliability of GDP figures (which in varying degrees now include non-transparent imputations for the “nonobserved economy”) as well as the macro model estimates of the unrecorded economy.Underground, unrecorded, unobserved, non-observed, NOE, hidden, informal, shadow, GDP, national accounts, transition economies.