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Is It Really so Hard to Tax the Hard-to-Tax? The Context and Role of Presumptive Taxes

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  • Richard M. Bird

    (International Tax Program, Rotman School of Management, University of Toronto)

  • Sally Wallace

    ()
    (Georgia State University)

Abstract

This paper is concerned with the extent to which “presumptive taxation” can be an effective tool to cope with what are commonly called the “hard-to-tax”. While the HTT category is seldom very clearly defined -- often, for example, it excludes those at the top of the power pyramid who manage to save themselves from the full fury of the taxman in accepted (or at least untouchable) ways -- it appears to encompass much of the so-called “informal” (“hidden” “shadow” “underground”) economy that is such a prominent feature of economic reality in many developing and transition countries. Although much of the discussion in this paper covers the use (and abuse) of presumptive taxes in general, our specific focus is on the special simplified tax regimes that have been put into place recently in a number of transitional countries, with special attention to Ukraine and Russia. We analyze the implications of these special regimes in terms of their impact on economic efficiency, equity, and overall tax administration and compliance. We conclude with a brief discussion of the critical problems of developing an “exit strategy” from such special regimes as well as some alternative policies that may prove more promising paths to taxing the HTT.

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Bibliographic Info

Paper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0307.

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Length: 36 Pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:ttp:itpwps:0307

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Keywords: Hard to tax; presumptive tax; VAT; HTT; tax administration; tax evasion; Ukraine; Russia;

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References

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  1. Efraim Sadka & Vito Tanzi, 1992. "A Taxon Gross Assets of Enterprises as a Form of Presumptive Taxation," IMF Working Papers 92/16, International Monetary Fund.
  2. Khan, Mahmood Hasan, 2001. "Agricultural taxation in developing countries: a survey of issues and policy," Agricultural Economics, Blackwell, vol. 24(3), pages 315-328, March.
  3. Vito Tanzi & Parthasrathi Shome, 1993. "A Primeron Tax Evasion," IMF Working Papers 93/21, International Monetary Fund.
  4. Bird, Richard M., 1989. "Taxation in Papua New Guinea: Backwards to the future?," World Development, Elsevier, vol. 17(8), pages 1145-1157, August.
  5. Parthasrathi Shome, 1992. "Trends and Future Directions in Tax Policy Reform," IMF Working Papers 92/43, International Monetary Fund.
  6. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
  7. Friedrich Schneider & Christopher Bajada, 2003. "The Size and Development of the Shadow Economies in the Asia-Pacific," Economics working papers 2003-01, Department of Economics, Johannes Kepler University Linz, Austria.
  8. Sally Wallace, 2002. "Imputed an Presumptive Taxes: International Experiences and Lessons for Russia," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0203, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  9. Olivier P. Benon & Katherine Baer & Juan Toro R., 2002. "Improving Large Taxpayers' Compliance," IMF Occasional Papers 215, International Monetary Fund.
  10. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  11. Parthasrathi Shome, 1999. "Taxation in Latin America," IMF Working Papers 99/19, International Monetary Fund.
  12. Vito Tanzi & Parthasarathi Shome, 1993. "A Primer on Tax Evasion," IMF Staff Papers, Palgrave Macmillan, vol. 40(4), pages 807-828, December.
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