MSME Taxation in Transition Economies : Country Experience on the Costs and Benefits of Introducing Special Tax Regimes

The paper analyzes the design of simplified small business tax regimes in Eastern Europe and Central Asia and the impact of such regimes on small business tax compliance. Although many approaches for tax simplification exist, a general trend in the...

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Bibliographic Details
Main Authors:	Engelschalk, Michael, Loeprick, Jan
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	NOTARIES TRANSITION ECONOMY LIMITED‐LIABILITY TAX COLLECTION PRODUCT TAXES TAX TREATMENT INDIRECT TAXATION REGRESSIVE TAX PENSION BUSINESS TAX CORPORATE TAX TAX OFFICES TAX COMPLIANCE COSTS TAXABLE INCOME MICRO‐ENTERPRISE INVESTMENT ESTIMATED TAX TAX COLLECTIONS TAX BRACKETS LAND TAX TAX RATE TAX REFORMS TAX RETURNS RETURNS TAX POLICY PROFIT MARGIN TAX WEDGE GUARANTEE INTERNATIONAL FINANCE SHARES TAX MINIMIZATION FLAT TAX VALUE ADDED TAX CASH FLOW EXCHANGE RATE TAX REFORM TAX COMPLIANCE TAX SYSTEMS PUBLIC FINANCE TAX LIABILITY TURNOVER TAX TAX ADMINISTRATION MONETARY FUND INVESTMENT ACTIVITIES TAX AVOIDANCE SALES TAX DIRECT TAXATION TAX EVASION PAYMENT OBLIGATIONS INSURANCE LIMITED LIABILITY PROPERTY TAX RULE OF LAW GOODS LIQUIDITY ACCOUNTING GOOD TAX RATES TAX RETURN MARGINAL TAX RATES TAX LIABILITIES BENEFICIARIES LOCAL GOVERNMENTS CHECK BUDGETS VALUE OF ASSETS TREASURY TAX CODE EXCHANGE PROGRESSIVE TAX TAX SIMPLIFICATION TAXPAYERS DEDUCTIONS INTEREST MICRO‐ ENTERPRISES SMALL BUSINESS TURNOVER TAX SYSTEM BUSINESS TAXES PERSONAL INCOME VALUE‐ADDED TAX DEVELOPING COUNTRIES TAX REVENUES REGULATORY FRAMEWORK FLAT RATE INCOME TAX TRANSITION COUNTRIES FINANCE TAX REVENUE TAXES TAX LAW INCOME TAX INFLATION RATES INTERNATIONAL BANK INSTRUMENTS TAX REGIME PERSONAL INCOME TAX LIABILITIES PROPERTY SMALL BUSINESSES TURNOVER TAXES PROFITS BALANCE SHEET TRANSACTIONS INTELLECTUAL PROPERTY ADDED TAX TRANSPARENCY LOCAL BUSINESS TRADING PENSION FUND TAX DEDUCTIBLE SINGLE TAX CAPACITY CONSTRAINTS INFLATION ENTRY BARRIERS LOCAL MARKET SHARE TAX REGULATION SHAREHOLDERS PENSIONS COMPLIANCE COSTS INCOME TAXES PROFIT MARGINS RETURN TRANSACTION LOCAL GOVERNMENT BANK POLICY REVENUE TAX OBLIGATIONS ASSET VALUE COMPLIANCE COST COMMERCIAL LAWS CORPORATE INCOME TAX TAX LAWS TAX REGIMES TAX AUDITS LIABILITY TAX MARKET MARKETS PAYROLL TAXES TAXATION OPTION FLAT TAXES MICRO ENTERPRISE LABOR MARKET SECURITY PROFIT TAX BASE REVENUES ACCOUNTING STANDARDS MARKET ECONOMIES TRANSITION ECONOMIES LIQUIDITY PROBLEMS
Online Access:	http://documents.worldbank.org/curated/en/2015/10/25167890/msme-taxation-transition-economies-country-experience-costs-benefits-introducing-special-tax-regimes http://hdl.handle.net/10986/22864

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Summary:	The paper analyzes the design of simplified small business tax regimes in Eastern Europe and Central Asia and the impact of such regimes on small business tax compliance. Although many approaches for tax simplification exist, a general trend in the region is to offer small businesses the option to be taxed based on their turnover instead of net income. The study finds that many of the regimes in place are overly simplistic and neither take into account fairness considerations nor do they facilitate business growth and migration into the standard tax regime. Although revenue generation is not a main objective of such regimes, low revenue performance and the risk of system abuse by larger businesses should be issues of concern. More attention should therefore be devoted to improving the design of simplified regimes and monitoring their application. This will require in particular a more profound analysis of the economic situation and the tax compliance challenges in the small business segment and increased efforts to improve the quality of bookkeeping.

MSME Taxation in Transition Economies : Country Experience on the Costs and Benefits of Introducing Special Tax Regimes

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