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Presumptive Taxation: Lessons from Bulgaria

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  • Konstantin Pashev

Abstract

This article draws on the experience of Bulgaria with two forms of presumptive taxes—the patent (licence) tax and the minimum social insurance income thresholds. It argues that there is an inevitable trade-off between efficiency and equity, which may drive presumptive taxation away from its initial objectives of simplicity and lower compliance and enforcement costs. Therefore presumptive taxes should not be overloaded with equity objectives, or used as tax incentives, but rather assigned to enhance collection efficiency and reduce the cost of voluntary tax compliance of the small business. The study concludes that their optimal use might be as licence taxes on micro-businesses and the self-employed levied by local governments rather than as central taxes on small business income.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Post-Communist Economies.

Volume (Year): 18 (2006)
Issue (Month): 4 ()
Pages: 399-418

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Handle: RePEc:taf:pocoec:v:18:y:2006:i:4:p:399-418

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Cited by:
  1. Konstantin Pashev, 2007. "Tax Decentralization: Solutions for Bulgaria," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 67-88.
  2. Tonin, Mirco, 2011. "Too Low to Be True: The Use of Minimum Thresholds to Fight Tax Evasion," IZA Discussion Papers 5509, Institute for the Study of Labor (IZA).
  3. Elek, Peter & Kollo, Janos & Reizer, Balázs & Szabó, Péter A., 2011. "Detecting Wage Under-reporting Using a Double Hurdle Model," IZA Discussion Papers 6224, Institute for the Study of Labor (IZA).
  4. Leibfritz, Willi, 2011. "Undeclared economic activity in central and eastern Europe -- how taxes contribute and how countries respond to the problem," Policy Research Working Paper Series 5923, The World Bank.

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