Tax systems in transition
How have tax systems, whose primary role is to raise resources to finance public expenditures, evolved in the transition countries of Eastern Europe and the former Soviet Union? The authors find that: (1) the ratio of tax revenue-to-GDP decreased l...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2003/01/2120326/tax-systems-transition http://hdl.handle.net/10986/19167 |
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okr-10986-191672021-04-23T14:03:41Z Tax systems in transition Mitra, Pradeep Stern, Nicholas TAX SYSTEMS TAX REVENUES BUSINESS ENVIRONMENT FOREIGN DIRECT INVESTMENTS INVESTMENT ENVIRONMENT TRANSITIONAL ECONOMIES TAX STRUCTURES SOCIAL SECURITY TAXES INCOME TAXES CORPORATE TAXATION INDIRECT TAXATION PAYROLL TAXES PUBLIC ENTERPRISES VALUE ADDED TAXES BUDGET CONTROL ACCOUNTING BENCHMARK CAPITAL GAINS CENTRAL PLANNING COMMAND ECONOMY CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES DEVELOPMENT ECONOMICS DEVELOPMENT PERSPECTIVES ECONOMIC DEVELOPMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPLOYMENT FINANCIAL SUBSIDIES FISCAL DEFICITS FISHING FORESTRY GDP GDP PER CAPITA GOVERNMENT EXPENDITURES HEALTH EXPENDITURES HOUSING INCOME INCOME LEVELS INCOME TAXES INDIVIDUAL INCOME TAXES INFLATION INSURANCE INTERNATIONAL TRADE MARKET DISCIPLINE PAYROLL TAXES PENSIONS PER CAPITA INCOME PERSONAL INCOME TAXES PRIVATE SECTOR PROPERTY RIGHTS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC SECTOR PUBLIC SPENDING PURCHASING POWER REVENUE SOURCES SECURE PROPERTY RIGHTS SOCIAL SERVICES SOFT BUDGET CONSTRAINTS STATE ENTERPRISES TAX TAX ADMINISTRATION TAX COMPLIANCE TAX REFORM TAX REVENUE TAX REVENUES TAX SYSTEMS TAXATION TRADE TAXES TRADEOFFS TRANSITION ECONOMIES UNEMPLOYMENT UNEMPLOYMENT RATE VALUE ADDED WEALTH How have tax systems, whose primary role is to raise resources to finance public expenditures, evolved in the transition countries of Eastern Europe and the former Soviet Union? The authors find that: (1) the ratio of tax revenue-to-GDP decreased largely due to a fall in revenue from corporate income tax; (2) the fall in revenue from the corporate income tax led to a decline in the importance of income taxes, notwithstanding a rise in the share of individual income tax; (3) social security contributions together with payroll taxes became less important in the Commonwealth of Independent States; and (4) domestic indirect taxes gained in importance in overall tax revenues. Apart from the increased role of personal income taxation, these developments go in a direction opposite to those observed in poor countries as they get richer. They show a key aspect of transition, namely a movement from a system where the government exercised a preeminent claim on output and income before citizens had access to the remainder, to one with a greatly diminished role for the public sector, as reflected in a lower ratio of public expenditure to GDP, where the government needs to collect revenue in order to spend. Can expected levels of public expenditure be financed by the basic instruments of a modern tax system without creating significant distortions in the private sector? The authors suggest that transition countries, depending on their stage of development, should aim for a tax revenue-to-GDP ratio in the range of 22 to 31 percent, comprising value-added tax (6 to 7 percent), excises (2 to 3 percent), income tax (6 to 9 percent), social security contribution together with payroll tax (6 to 10 percent), and other taxes such as on trade and on property (2 percent). The authors' analysis also sheds light on the links between tax policy, tax administration, and the investment climate in transition countries. 2014-08-01T15:14:15Z 2014-08-01T15:14:15Z 2003-01-31 http://documents.worldbank.org/curated/en/2003/01/2120326/tax-systems-transition http://hdl.handle.net/10986/19167 English Policy Research Working Papers; No. 2947 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Europe and Central Asia Europe and Central Asia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
TAX SYSTEMS TAX REVENUES BUSINESS ENVIRONMENT FOREIGN DIRECT INVESTMENTS INVESTMENT ENVIRONMENT TRANSITIONAL ECONOMIES TAX STRUCTURES SOCIAL SECURITY TAXES INCOME TAXES CORPORATE TAXATION INDIRECT TAXATION PAYROLL TAXES PUBLIC ENTERPRISES VALUE ADDED TAXES BUDGET CONTROL ACCOUNTING BENCHMARK CAPITAL GAINS CENTRAL PLANNING COMMAND ECONOMY CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES DEVELOPMENT ECONOMICS DEVELOPMENT PERSPECTIVES ECONOMIC DEVELOPMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPLOYMENT FINANCIAL SUBSIDIES FISCAL DEFICITS FISHING FORESTRY GDP GDP PER CAPITA GOVERNMENT EXPENDITURES HEALTH EXPENDITURES HOUSING INCOME INCOME LEVELS INCOME TAXES INDIVIDUAL INCOME TAXES INFLATION INSURANCE INTERNATIONAL TRADE MARKET DISCIPLINE PAYROLL TAXES PENSIONS PER CAPITA INCOME PERSONAL INCOME TAXES PRIVATE SECTOR PROPERTY RIGHTS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC SECTOR PUBLIC SPENDING PURCHASING POWER REVENUE SOURCES SECURE PROPERTY RIGHTS SOCIAL SERVICES SOFT BUDGET CONSTRAINTS STATE ENTERPRISES TAX TAX ADMINISTRATION TAX COMPLIANCE TAX REFORM TAX REVENUE TAX REVENUES TAX SYSTEMS TAXATION TRADE TAXES TRADEOFFS TRANSITION ECONOMIES UNEMPLOYMENT UNEMPLOYMENT RATE VALUE ADDED WEALTH |
| spellingShingle |
TAX SYSTEMS TAX REVENUES BUSINESS ENVIRONMENT FOREIGN DIRECT INVESTMENTS INVESTMENT ENVIRONMENT TRANSITIONAL ECONOMIES TAX STRUCTURES SOCIAL SECURITY TAXES INCOME TAXES CORPORATE TAXATION INDIRECT TAXATION PAYROLL TAXES PUBLIC ENTERPRISES VALUE ADDED TAXES BUDGET CONTROL ACCOUNTING BENCHMARK CAPITAL GAINS CENTRAL PLANNING COMMAND ECONOMY CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES DEVELOPMENT ECONOMICS DEVELOPMENT PERSPECTIVES ECONOMIC DEVELOPMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPLOYMENT FINANCIAL SUBSIDIES FISCAL DEFICITS FISHING FORESTRY GDP GDP PER CAPITA GOVERNMENT EXPENDITURES HEALTH EXPENDITURES HOUSING INCOME INCOME LEVELS INCOME TAXES INDIVIDUAL INCOME TAXES INFLATION INSURANCE INTERNATIONAL TRADE MARKET DISCIPLINE PAYROLL TAXES PENSIONS PER CAPITA INCOME PERSONAL INCOME TAXES PRIVATE SECTOR PROPERTY RIGHTS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC SECTOR PUBLIC SPENDING PURCHASING POWER REVENUE SOURCES SECURE PROPERTY RIGHTS SOCIAL SERVICES SOFT BUDGET CONSTRAINTS STATE ENTERPRISES TAX TAX ADMINISTRATION TAX COMPLIANCE TAX REFORM TAX REVENUE TAX REVENUES TAX SYSTEMS TAXATION TRADE TAXES TRADEOFFS TRANSITION ECONOMIES UNEMPLOYMENT UNEMPLOYMENT RATE VALUE ADDED WEALTH Mitra, Pradeep Stern, Nicholas Tax systems in transition |
| geographic_facet |
Europe and Central Asia Europe and Central Asia Europe and Central Asia |
| relation |
Policy Research Working Papers; No. 2947 |
| description |
How have tax systems, whose primary role
is to raise resources to finance public expenditures,
evolved in the transition countries of Eastern Europe and
the former Soviet Union? The authors find that: (1) the
ratio of tax revenue-to-GDP decreased largely due to a fall
in revenue from corporate income tax; (2) the fall in
revenue from the corporate income tax led to a decline in
the importance of income taxes, notwithstanding a rise in
the share of individual income tax; (3) social security
contributions together with payroll taxes became less
important in the Commonwealth of Independent States; and (4)
domestic indirect taxes gained in importance in overall tax
revenues. Apart from the increased role of personal income
taxation, these developments go in a direction opposite to
those observed in poor countries as they get richer. They
show a key aspect of transition, namely a movement from a
system where the government exercised a preeminent claim on
output and income before citizens had access to the
remainder, to one with a greatly diminished role for the
public sector, as reflected in a lower ratio of public
expenditure to GDP, where the government needs to collect
revenue in order to spend. Can expected levels of public
expenditure be financed by the basic instruments of a modern
tax system without creating significant distortions in the
private sector? The authors suggest that transition
countries, depending on their stage of development, should
aim for a tax revenue-to-GDP ratio in the range of 22 to 31
percent, comprising value-added tax (6 to 7 percent),
excises (2 to 3 percent), income tax (6 to 9 percent),
social security contribution together with payroll tax (6 to
10 percent), and other taxes such as on trade and on
property (2 percent). The authors' analysis also sheds
light on the links between tax policy, tax administration,
and the investment climate in transition countries. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Mitra, Pradeep Stern, Nicholas |
| author_facet |
Mitra, Pradeep Stern, Nicholas |
| author_sort |
Mitra, Pradeep |
| title |
Tax systems in transition |
| title_short |
Tax systems in transition |
| title_full |
Tax systems in transition |
| title_fullStr |
Tax systems in transition |
| title_full_unstemmed |
Tax systems in transition |
| title_sort |
tax systems in transition |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2003/01/2120326/tax-systems-transition http://hdl.handle.net/10986/19167 |
| _version_ |
1764439232375422976 |