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Taxation for the 21st Century: The Automated Payment Transaction (APT) Tax

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  • Edgar L. Feige

    (The University of Wisconsin-Madison)

Abstract

This paper examines the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax. In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system. The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base. The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure. The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost. Like all taxes, the APT tax creates new distortions whose costs must be weighted against the benefits obtained by replacing the current tax system. ---Edgar L. Feige

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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0106001.

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Date of creation: 06 Jun 2001
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Handle: RePEc:wpa:wuwppe:0106001

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Web page: http://128.118.178.162

Related research

Keywords: tax reform; APT tax; tobin tax; electric money; transaction tax; flat tax; security transaction tax; globalization; fiscal harmonization; underground economy; automated payment system; elimination of tax returns; compliance costs.;

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References

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Cited by:
  1. Patrick Honohan, 2004. "Alternative Approaches to Taxing the Financial Sector: Wich is Best and Where Does Chile Stand?," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 11, pages 315-344 Central Bank of Chile.
  2. Cintra, Marcos, 2009. "Tax paradigms, globalization, and the electronic revolution," Textos para discussão 238, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  3. Pedro Albuquerque, 2006. "BAD taxation: Disintermediation and illiquidity in a bank account debits tax model," International Tax and Public Finance, Springer, vol. 13(5), pages 601-624, September.

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