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Global Reform of Personal Income Taxation, 1981-2005: Evidence from 189 Countries

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  • Peter, Klara Sabirianova

    () (University of North Carolina, Chapel Hill)

  • Buttrick, Steve

    (Georgia State University)

  • Duncan, Denvil

    () (Indiana University)

Abstract

In this paper we use a panel of 189 countries to describe the salient trends that have emerged in national personal income tax systems spanning the twenty five year period from 1981 to 2005. Using complete national income tax schedules, we calculate actual average and marginal tax rates at different income levels as well as time-varying measures of structural progressivity and complexity of national tax systems. We show that frequent alterations of tax structures have reduced tax rates at higher levels of income and diminished the overall progressivity and complexity of national tax systems; however, the degree of this change varies considerably across countries. We also find that the relationship between the tax rates and revenue is positive for high income countries; however, the strength of the relationship declines with weaker institutions and lower levels of economic development.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4228.

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Length: 54 pages
Date of creation: Jun 2009
Date of revision:
Publication status: published in: National Tax Journal, 2010, 63 (3), 447-478
Handle: RePEc:iza:izadps:dp4228

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Keywords: personal income tax; marginal rate; average rate; tax complexity; progressivity; flat tax; revenue; global trends;

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References

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  1. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
  2. Gorodnichenko, Yuriy & Martinez-Vazquez, Jorge & Peter, Klara Sabirianova, 2007. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," IZA Discussion Papers 3267, Institute for the Study of Labor (IZA).
  3. Sicat, Gerardo P & Virmani, Arvind, 1988. "Personal Income Taxes in Developing Countries," World Bank Economic Review, World Bank Group, vol. 2(1), pages 123-38, January.
  4. Peter, Klara Sabirianova, 2009. "Income Tax Flattening: Does It Help to Reduce the Shadow Economy?," IZA Discussion Papers 4223, Institute for the Study of Labor (IZA).
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  23. Crane, Steven E & Nourzad, Farrokh, 1986. "Inflation and Tax Evasion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 217-23, May.
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Citations

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Cited by:
  1. Bird, Richard M. & Zolt, Eric M., 2011. "Dual Income Taxation: A Promising Path to Tax Reform for Developing Countries," World Development, Elsevier, vol. 39(10), pages 1691-1703.
  2. Jorge Martinez-Vazquez & Blanca Moreno-Dodson & VIoleta Vulovic, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1225, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. Wayne Thirsk, 2008. "Tax Policy in Pakistan: An Assessment of Major Taxes and Options for Reform," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0808, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Philipp Doerrenberg & Andreas Peichl, 2012. "The Impact of Redistributive Policies on Inequality in OECD Countries," Cologne Graduate School Working Paper Series 03-05, Cologne Graduate School in Management, Economics and Social Sciences.
  5. Strecker, Nora & Egger, Peter & Radulescu, Doina, 2012. "Effective Labor Taxation and the International Location of Headquarters," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62086, Verein für Socialpolitik / German Economic Association.
  6. Philipp Doerrenberg & Denvil Duncan & Clemens Fuest & Andreas Peichl, 2012. "Nice guys finish last: are people with higher tax morale taxed more heavily?," Cologne Graduate School Working Paper Series 03-02, Cologne Graduate School in Management, Economics and Social Sciences.
  7. John Creedy, 2009. "The Personal Income Tax Structure: Theory and Policy," Department of Economics - Working Papers Series 1063, The University of Melbourne.
  8. Duncan, Denvil & Peter, Klara Sabirianova, 2012. "Unequal Inequalities: Do Progressive Taxes Reduce Income Inequality?," IZA Discussion Papers 6910, Institute for the Study of Labor (IZA).
  9. Tomasz Wołowiec & Janusz Soboń, 2011. "EU Integration and Harmonisation of Personal Income Taxation," Contemporary Economics, University of Finance and Management in Warsaw, vol. 5(1), March.
  10. Isabelle Joumard & Mauro Pisu & Debbie Bloch, 2012. "Tackling income inequality: The role of taxes and transfers," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 37-70.
  11. Peter, Klara Sabirianova, 2009. "Income Tax Flattening: Does It Help to Reduce the Shadow Economy?," IZA Discussion Papers 4223, Institute for the Study of Labor (IZA).

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