tax assignment conclusion

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A key issue in the literature on fiscal federalism is the question of how subnational authorities might best be financed. This complex issue has no easy solutions, given the wide variety of systems actually applied in different countries and at different times in specific countries. Although there is no ideal system of financing state or regional and local governments, because every country faces different problems and different perspectives, some basic objectives may provide broad guidelines on how tax assignment can best be carried out. Tax assignment can hardly be looked at in isolation. It is an issue intimately related to the question of expenditure assignments across different levels of government, which was discussed in detail in Chapter 2. Even a carefully designed system of intergovernmental expenditure allocation will not work satisfactorily unless it is supported by an equally well-thought-out financing system, and vice versa.

A key issue in the literature on fiscal federalism is the question of how subnational authorities might best be financed. This complex issue has no easy solutions, given the wide variety of systems actually applied in different countries and at different times in specific countries. Although there is no ideal system of financing state or regional and local governments, because every country faces different problems and different perspectives, some basic objectives may provide broad guidelines on how tax assignment can best be carried out. Tax assignment can hardly be looked at in isolation. It is an issue intimately related to the question of expenditure assignments across different levels of government, which was discussed in detail in Chapter 2 . Even a carefully designed system of intergovernmental expenditure allocation will not work satisfactorily unless it is supported by an equally well-thought-out financing system, and vice versa.

This chapter focuses on the questions to be addressed when decisions are being made on tax assignment among different levels of government. The term “tax assignment” here describes the level of government responsible for determining the level and rate structure of various taxes, whether their revenue is to be collected or received by that level, or shared with others.

  • Tax Assignment and Tax Sharing

The general principles of decentralization must guide the assignment of taxes to different levels of government. According to these principles, as laid out in the traditional local finance literature, regional and local governments should ideally fulfill mainly allocational functions by providing services that accrue primarily to the local population, services whose costs the local constituency bears as far as possible. In the same vein, because of the degree of openness of local economies, the literature on fiscal federalism argues in favor of limiting regional and local government roles in economic stabilization, as well as in distributional policies.

In very broad terms, the assignment of funds to local jurisdictions may in principle follow one of three options. The first, and probably least attractive, option assigns all tax bases to local jurisdictions and then requires them to transfer upward part of the revenue to allow the national government to meet its spending responsibilities. As this option may hinder effective income redistribution across the national territory, as well as the effectiveness of fiscal stabilization, it may not represent the most efficient way of raising public resources and may provide inadequate incentives for the local jurisdictions to participate in the financing of the national economy. This system resembles that previously in force in the former Yugoslavia and is somewhat similar to the system of negotiated tax-sharing previously practiced in Russia. The system previously in force in China, generally recognized to have inhibited the government’s ability to pursue stabilization policies, had analogous features to this extreme model.

A second option, on the other extreme, is to assign all taxing powers to the center, and then finance subcentral governments by grants or other transfers, either by sharing total revenue or by sharing specific taxes. The main disadvantage of this option is that it completely breaks the nexus between the level of tax revenue collected and the decisions to spend that revenue, which constitute the basic prerequisite for a multilevel governmental system that enhances efficiency. Without this connection, the risk is that fiscal illusion will lead to overprovision of local government services. Also, because of the risk of frequent, discretionary cuts in transfers to local levels of governments, this system could also make it difficult to establish a stable system of service provision at the local level. This kind of system bears some resemblance to that once applied in the former Soviet Union and in Hungary. Substantial grant financing of local governments is still practiced in a number of industrial countries, such as France, Italy, and the Netherlands.

The third broad option is the more normal one of assigning some taxing power to the local jurisdictions, if necessary (that is, if vertical imbalances persist) complementing the revenue raised locally with tax-sharing arrangements or other transfers from the central government. This option leads directly to the question of which taxes should be assigned to local jurisdictions and which taxes should remain the responsibility of the national government (the tax assignment problem). By assigning taxes and thus letting the local jurisdictions bear the tax burden at the margin associated with expenditure decisions, the budgetary actions of local governments will be guided by tax-benefit considerations and will in this way improve economic efficiency. 1

The tax assignment problem is typically not an either/or problem with a specific tax placed clearly and solely under the responsibility of either the local, the state, or the central government: rather, in reality (for most taxes) a spectrum of different designs exists ranging from full and complete local autonomy to systems with some local discretion and to others with no local autonomy whatsoever. In other words, even if a specific tax, such as an income tax, has been assigned to the local level because it is found to satisfy the criteria for a “good local tax” (see below), it is possible to design the income tax with varying levels of local revenue autonomy. Table 1 illustrates this important point in a very general way by providing a ranking of different tax designs with respect to the degree of autonomy that they leave with the local governments. For the sake of illustration, the table also includes the main nontax sources of revenues for local governments, although obviously a ranking of this nature can only be broadly indicative.

Fiscal Autonomy in Subcentral Governments

Complete local fiscal autonomy over revenues requires in principle that local governments can change tax rates and set the tax bases. In many countries, however, the central government either defines local tax bases or sets relatively narrow limits to the capacity of local governments to influence the tax base. In some countries (for example, Norway), the central government also sets out limits to the possible variation of local government tax rates.

Taxes assigned to lower levels of government may take the form of own taxes (sometimes referred to as tax separation systems), defined as taxes accruing solely to lower levels of governments, which can determine the rate and, in some cases, also have some autonomy to influence the tax base. An alternative system is represented by overlapping taxes (sometimes called piggybacking systems of local taxation) with the same (or almost the same) tax base for the different levels of government, but with the right of each level of government to set its own tax rate on that common base. This is the system of personal income taxes applied in, for example, the Nordic countries. In Canada, the income tax system used by the provinces involves levying the tax as a percentage of the federal tax revenue accruing within each province. As opposed to tax separation systems, a system of overlapping taxes may involve administrative advantages with regard to assessing the base and to tax collection. This, however, may be at a potential cost of reduced transparency as the tax levied at each level of government may be less easily identifiable for the taxpayers.

Some, in particular federal, countries prescribe in their constitution the system of tax assignment to be applied. Thus, in India, the Constitution prevents overlapping tax powers so that one type of tax can be levied by only one level of government. Likewise, the modalities of local government taxing powers are specified in the Constitutions of Nigeria and Brazil. In Switzerland, the federal government is prohibited by law from imposing indirect taxes, whereas in Australia a similar rule applies for the states.

The question of local fiscal autonomy may be considered almost completely independent from the question of who actually administers and collects the tax. The allocation of these tasks should be determined on the basis of where they can be carried out most efficiently, although one consideration may be that local accountability may be encouraged if the tax is assessed and collected locally.

Probably the single most critical issue in the discussion of subcentral fiscal autonomy, when looked at from the tax side, is whether the authorities concerned can determine their own tax rates. It could be argued that the case for local discretion, as far as the tax base is concerned, should be limited, because changing tax base definitions (for example, by allowing local governments to set individually the amount of a basic allowance, to introduce special tax reliefs, or to exempt specific sources of income or groups of taxpayers) could lead to distortions in the allocation of resources across localities, and also could have important redistributional consequences—an area in which local autonomy is generally believed to be unwarranted. If local governments cannot alter their tax rates, they cannot alter the level of their services in accordance with local preferences. In some countries, subcentral authorities rely mainly on taxes whose rates are fixed by the central government (for example, the countries with extensive tax-sharing arrangements, such as Portugal and Germany) or whose rate is subject to a ceiling. (Norway is a special case in this regard in that all local governments apply the ceiling rate of the local income tax.)

The importance attached to a lack of discretion in local tax policy depends mainly on the role subcentral authorities are supposed to play. To the extent that they are seen mainly as agents, implementing the policies laid down by other tiers of government, their limited autonomy with respect to tax policy would not appear to be serious. In contrast, if they are meant to implement their own expenditure programs and independently set their service levels in accordance with local preferences, their inability to determine tax rates and thus the level of their own revenues is a serious problem owing to the potential conflict between expectations, needs, and wishes of the local population, and the actual revenue potential available to local governments.

The main arguments against providing subcentral authorities with extensive fiscal autonomy center on the risk of increasing economic disparities between areas or localities and alleged restraints on central government macroeconomic control. Administrative simplicity or administrative economies of scale are also used as arguments for centralized taxes with a specific proportion of tax revenues being allocated to subordinate levels of government.

In what follows, the more specific aspects of tax assignment are dealt with by addressing the basic question of which taxes can be considered good candidates for state and local tax sources and which cannot. What characterizes a good local tax?

A Good Local Tax

A good local tax adequately supports a decentralized public expenditure system. The literature on fiscal federalism and local government finance 2 generally suggests that the following criteria and considerations should form the basis for decisions on which taxes can adequately be assigned to the subcentral level and which should remain at the national level.

To the extent that the tax in question is aimed at, and is suitable for, economic stabilization or income redistribution objectives, it should be left to the responsibility of the central government.

The base for taxes assigned to the local level should not be very mobile, otherwise taxpayers will relocate from high to low tax areas, and the freedom of local authorities to vary rates will be constrained. For this reason, general consumption taxes are found at subordinate levels of government only where geographical areas are very large (for example, Canada and the United States). Thus, the more mobile a tax base, the greater the presumption to keep it at the national level.

Tax bases that are very unevenly distributed among jurisdictions should be left to the central government.

Local taxes should be visible, in the sense that it should be clear to local taxpayers what the tax liability is, thereby encouraging local government accountability.

It should not be possible to “export” the tax to nonresidents, thereby weakening the link between payment of the tax and services received.

Local taxes should be able to raise sufficient revenue to avoid large vertical fiscal imbalances. The yield should ideally be buoyant over time and should not be subject to large fluctuations.

Taxes assigned to the local level should be fairly easy to administer or, in other words, the more important economies of scale in tax administration are for a given tax, the stronger the argument for leaving the tax base for that tax to the national level. Economies of scale may depend on data requirements, such as a national taxpayer identification number and computerization.

Taxes and user charges based on the benefit principle can be adequately used at all levels of governments, but are particularly suitable for assignment to the local level, inasmuch as the benefits are “internalized” to the local taxpayers.

This set of broad criteria translates into more specific recommendations regarding which taxes should be assigned to different levels of government, that is, which taxes may be considered good local taxes and which should be left in the domain of the central government. It is generally acknowledged in the literature 3 that the most obvious candidates as good local taxes are land or property taxes and, to some extent, personal income taxes. With some exceptions, turnover or consumption taxes, as well as taxes on capital income, in particular corporate income taxes, are generally considered less appropriate at the local level and in some cases also at the state level 4 because of the mobility of the corresponding tax bases. This broad conclusion derived from principles of local finance seems in very general terms to conform to the financing system actually found in most countries.

The following discussion addresses these questions on a tax-by-tax basis and is intended to cover all the main taxes to which tax assignment is applied in practice (disregarding whether these taxes according to the general principles are considered appropriate at subordinate levels of government or not). The treatment of the different taxes is also intended to be in descending order of importance for subordinate level of governments, although this ordering must necessarily be somewhat subjective (see Tables 2 and 3 ). 5

Distribution of Tax Revenue Among Different Levels of Government

1 Includes supernational authorities’ share of general government total tax revenue for Belgium (1.5 percent), France (0.7 percent), Germany (0.9 percent), the Netherlands (1.4 percent), and the United Kingdom (1.2 percent).

2 Data for general government do not include local government.

Distribution of Different Taxes Within Different Levels of Government

(In percent)

2 There are no state governments in unitary countries.

3 No data on local governments are available.

  • Property Taxes

Property taxes, including in particular land taxes, have historically been widely used as subcentral taxes without any special regard to their alleged incidence. This is the outcome of the perceived advantages of the property tax as a local tax. With a property tax it is always clear which authority is entitled to the revenue it yields, which is not always so for income taxes and other taxes. Administration costs are generally found to be lower for a property tax (provided that there is a registry of properties with updated values) than for an income tax, which requires complex tax returns. The yield of a property tax can be predicted more accurately than for an income tax or a profits tax. Finally, some of the tax will be levied on businesses, which seems reasonable to the extent that businesses derive benefits from subcentral services, such as roads and other infrastructure services.

An additional argument for the use of property taxes is that, while almost all residents pay directly or indirectly (through rents) the property tax, thus avoiding free-rider problems in local service provision, this is not always the case for local income taxes. It has also been argued that property taxes are guided by the benefit principle of taxation to the extent that the corresponding spending by local governments benefits local properties by increasing their value. Against this view, it could be held that, although land and existing structures and thus the tax base cannot move in a physical sense, the tax base can do so in a fiscal sense via the capitalization of property taxes to the extent that property taxes are not used for purposes viewed as beneficial to property owners.

The main disadvantage of property taxes lies in the fact that they almost universally realize lower amounts than needed. There are many reasons for this, including the fact that it is a very visible tax (and thus politically unpopular), that it is perceived to have unwanted distributional consequences to the extent that the tax is borne by renters and not by owners of property, and that there are problems associated with the measurement of the tax base, including in particular the “correct” valuation of property, and its updating.

Some countries prefer to distinguish between residential property and commercial and industrial property, with the former being assigned to local taxation, and the latter either to local taxation with a uniform rate or to national taxation only (as is the case in some Nordic countries). In this regard, a particularly contentious issue in many countries (whether industrial, developing, or in transition) has been the taxation of agricultural land. In countries with a general income tax (including income from agriculture), a tax on land could be seen as a discriminatory surcharge on a basic factor input in one sector of the economy, rather than a local benefit tax. In countries without an income tax on agriculture, it has been argued that a land tax on agriculture impedes the development of this important foreign exchange earning sector. Whatever the merits of these arguments may be, the relatively modest tax burden on agriculture found in most countries (which is generally independent of the level of development of the countries in question) seems to reflect the political influence of this sector rather than economic principles or sound fiscal policies.

Other countries apply alternative criteria for the assignment of property taxes to different levels of government. In Brazil, for example, urban property is taxed at the municipal level, while the federal government levies and administers the tax on rural property.

More specifically, at least four important issues relate to the definition and measurement of the base upon which property taxes are levied: the coverage of the base, the use of capital or rental values, the number and nature of exemptions, and the frequency and methods of updating property values. The main issue regarding coverage has been whether land, improvements to land, and buildings should all be subject to tax. The systems applied vary substantially between countries, although most of the countries for which information is available include the unimproved value of land, the value of land improvements, and usually also the value of buildings. The efficiency and equity implications of property taxes have been intensively debated in the literature and will not be pursued further here (see McLure (1977) for an overview of the issues).

In principle, the impact of using rental values or capital values should be the same, assuming well-functioning property and capital markets. It has been argued, however, that there may be major differences in the actual outcome to the extent that rental values reflect mainly the current use of the property, while capital values are said to reflect the value of the property in the best alternative use. Also in this regard, actual methods vary between countries. Capital values are generally based upon market values, although some countries apply corrections to these market values (for example, use a specific proportion of the market value).

Most countries apply a large number of different reliefs under the property tax, for example, in the form of exemption of government property, highways, railways, and other transport or communication facilities, and mining, agriculture, and forestry industries. The subsidies implicit in this kind of treatment, not least with respect to agricultural land, have been increasingly criticized in a number of countries. As indicated above, many countries apply different tax treatment to residential and business property, with residential property usually subject to a more favorable treatment.

A particularly contentious problem in a number of countries has been the frequency and method used to update property values. Thus, in most developing countries, assessment of property values and updating seem to be the major issues. The unpopularity of this type of tax may in some countries be associated with infrequent updates of values, leading to large and abrupt increases in tax liabilities when updating actually takes place. Although property valuations are generally based on market prices, problems are also encountered during certain periods and in areas with modest turnover of property. State and central governments usually perform the valuation of property in order to achieve the necessary coordination between different areas, but the way in which and frequency with which it is done vary substantially across countries.

Although most of the revenue from property taxes generally accrues to subcentral levels of government, state or local governments do not always have complete discretion over the base or the rate. Central governments typically set the rules governing valuations and their frequency and determine exemptions and other reliefs. Also, the central government may impose restrictions on the variations in property tax rates. In practice, local government discretion may be limited in other ways, for example, in the form of earmarking of property revenues, or if higher rates adversely affect grants (as in the United Kingdom before 1989). In Italy, the central government sets a minimum rate for the property tax. If a municipality does not apply the floor rate, transfers to it from the central government are supposed to be reduced correspondingly. Thus, although most of the revenue from property taxes primarily accrues to subcentral authorities in most countries, the respective central governments are generally heavily involved in formulating and administering the provisions of the taxes.

  • Personal Income Taxes

Most countries assign all or a large proportion of personal income taxes to the central government. Exceptions include the Scandinavian countries, Switzerland, the Baltic countries, Russia, and the other countries of the former Soviet Union. Generally, there are advantages as well as disadvantages of using personal income taxes at the subcentral level. Among the advantages is the fact that personal income taxes generally are buoyant and thus capable of raising the necessary revenue, and in addition they are believed not to fall on businesses, thereby avoiding the risk of subcentral authorities, anxious to attract new industry, indulging in tax-cutting competitions with adverse effects on services provided.

One of the main disadvantages of a local income tax as the main revenue raiser is the fact that, depending on the level of the tax threshold, many people may not pay the tax, although they receive local services. 6 This could have an adverse impact on the way a decentralized system works and has been used as an argument for supplementing an income tax with other tax sources, thereby including the majority of the local constituency in the local tax net. In this regard, two schools of thought may be distinguished. First, many countries (including, for example, most Mediterranean countries and Austria) seem to place considerable weight on income redistribution and on making income tax systems easy to administer by setting a high tax threshold, thereby excluding a large proportion of the population from the tax net. In contrast, other countries (such as New Zealand, Switzerland, and the Scandinavian countries) generally put more emphasis on the inclusion of most of the population in the tax net by setting relatively low tax thresholds, so that more people share the cost of public services.

In the context of financing local governments, there seems to be a case for making a distinction between schedular and global income taxes, since schedular income taxes can in some cases be used by local jurisdictions without great difficulties, in particular if the taxes on, for example, interest income, dividend income, and wages and salaries are withheld at source and constitute the final tax paid. However, the more developed is a country, the higher is the likelihood that individuals receive income from different sources, and furthermore that these incomes are derived from different jurisdictions. This may move countries to prefer a global income tax system in which the different income sources are added together for each individual and the tax liability is adjusted according to individual circumstances. 7 For such a system to work well at the local level, it requires flows of information on personal income received from other jurisdictions and thus poses the risk of tax evasion. Against this background, it may be better to leave a global income tax base with the national government, which is in a better position to acquire the necessary information.

However, such a system can be combined with revenue sharing, such as is the case in India, where the states receive about 85 percent of total income tax revenue, allocated on the basis of population, tax effort, and a measure of backwardness. In Brazil, 44 percent of the income tax revenue is transferred to lower level governments under a tax-sharing arrangement, and in Poland, in 1992, 15 percent of the personal income tax revenue was shared with local governments. As part of a recent reform of intergovernmental fiscal relations, shared personal income taxes have also been introduced in Hungary (in 1991, 50 percent of the revenue accrued to local governments). Similar tax-sharing arrangements were also important elements in the financing reform in China in 1980 (under the present financing arrangements, local governments receive all of the yields from personal income taxes).

Notwithstanding these considerations, and to the extent that the administrative capabilities are present at the national level, there is a fairly easy and cost-effective way of taxing a global income tax base in local jurisdictions, namely for the local jurisdictions to use the same statutory tax base as for the national income tax (that is, overlapping taxes or piggybacking). This solution, which reduces administrative as well as compliance cost, is actually used in a number of countries (such as, for example, the Nordic countries and Canada, where the provincial tax is levied as a percentage of the federal tax). 8 However, although it introduces an additional complexity to the tax and thus offsets at least in part some of the administrative savings, some of the countries applying this system (for example, the United States) also use specific tax reliefs in their state and local tax systems. Thus, the extent to which countries using overlapping income taxes coordinate the taxes levied at different levels varies considerably. In the Scandinavian countries and Canada, for example, there is a high degree of coordination, while coordination is lacking in Switzerland and the United States.

Generally, because the system requires a fairly advanced administrative system with up-to-date recording of taxpayers’ residence, overlapping personal income taxes are generally seen only in developed countries. Combined with an efficient equalization system, such a system is seen, in the countries that apply it, to ensure that variations in tax rates across jurisdictions reflect similar differences in locally determined service levels. Even in industrial countries, however, the administrative recording requirements have been used as an argument against the workability of local income taxes (which, for example, is the case in the United Kingdom).

A special case of overlapping personal income taxes (or partly overlapping income taxes, if some differences in tax bases are allowed) arises when local income taxes, as in the United States, are deductible from federal income tax liability (deductibility is not applied in the majority of countries using overlapping personal income tax systems). The rationale of such a system is the protection it provides for the taxpayer against excessive aggregate marginal tax rates as a result of high local income taxes. An unwarranted side effect may, however, be the incentive for local governments to expand their expenditures, partly financed—at the margin—by nonresidents. It may also reduce the overall level of progressivity of the tax system.

Taxes on income deriving from the activities of small business establishments or from agriculture may often be imposed as efficiently by local governments as national governments, and in some cases local governments may even possess more information than national governments. However, since record keeping by small establishments is often modest or even absent, taxation of such business income has in many cases to rely on presumptive income, based for example on gross sales, on the floor space in which the activity takes place, or on other criteria (for example, in Hungary, the local business tax is levied on the gross turnover of businesses at a maximum rate of 0.3 percent). Taxes on income from small businesses, from self-employed, and from agriculture, with the revenues accruing mostly or solely to local governments, are well known in a number of Central and Eastern European economies in transition, including Poland and Romania, as well as in a number of developing countries, such as India.

Notwithstanding which level of government actually receives the revenue of personal income taxes, practice differs substantially across countries with regard to which level is responsible for the assessment and for the collection of the income taxes at the subordinate level. National or central government responsibility, or—at the most—state responsibility, seems, however, to be the main rule owing principally to the economies of scale involved in the administration of these taxes.

  • Sales Taxes

The popularity of assigning property taxes—and to some degree also income taxes—to subordinate levels of government is attributable in part to the fact that, with these taxes, differences in tax rates between areas are unlikely to cause serious problems owing to the relative immobility of the tax bases. In contrast, different sales tax rates between different jurisdictions can drive consumers (or rather their purchases) away from high tax areas, as is perhaps best reflected in the serious cross-border trade problems between countries with different tax systems and tax levels (such as between Canada and the United States, and between Ireland and the United Kingdom). A distinction must be made, however, between single-stage sales taxes, such as excises and retail taxes, and multistage sales taxes, such as turnover taxes and value-added taxes (VATs).

Retail sales taxes and excises levied on the final sale to the consumer can be given to local jurisdictions as a revenue source, provided that they do not levy these taxes with highly different tax rates. If they do, citizens will be encouraged to shop in other jurisdictions. The main factors determining the extent to which this will take place are the vicinity of other jurisdictions, the cost of travel, and the value of the goods purchased. 9 Another constraining factor for the use of such taxes at the local level with anything but a modest level of tax rates is the risk of tax evasion, which may be relatively more serious for these (single-stage) sales taxes, especially under high tax rates. However, the existence of, for example, both state and municipal sales taxes in many countries must reflect the fact that these caveats are not universally perceived as serious. Thus, in India, the main revenue source of the states is the sales tax. Turnover taxes and some excises are also important provincial revenue sources in Argentina.

A case can be made for distinguishing between excises on goods, which generally should be assigned to the central level to minimize tax exporting, and excises on selected services, consumed locally, and thus much less prone to tax exporting. Some countries, such as India, assign selected excises to the central government (combined with a tax-sharing scheme), and other excises to state and local governments. A number of countries use local excises or special taxes on automobiles or on fuels, which could be regarded as benefit taxes associated with the costs to local governments of maintaining roads. Municipalities in Brazil are allowed to levy a 3 percent tax on retail sales of fuels and gas. In Poland, own sources of revenue for local governments include a tax on automobiles.

Some countries combine earmarking sales taxes with tax assignment to different levels of government. In Russia, for example, a system of regional and federal road funds is in place, financed in part by excises on fuel and on vehicles, supplemented by taxes on registration and ownership of vehicles.

Sales taxes levied at the manufacturing level should, as a general rule, be assigned to the upper tier of government and to subordinate levels of government only where geographical areas are large.

There seems to be broad albeit not universal consensus in the literature that VATs are most appropriately assigned to the central level of government. This dictum rests on the fairly extensive administrative capabilities required to operate the tax (a requirement that is generally best met by central governments) in combination with the need to make the VAT neutral with respect to the spatial allocation of production and consumption, implying that—generally—the VAT should conform to the destination principle. 10 Implementation of this principle requires, however, border control between jurisdictions if the tax is to be levied by individual provinces or states. This would in most countries be neither feasible nor desirable because of the administrative costs implied and because of the impediments to the free flow of goods and services it would create. In addition, a subnational VAT system would pose problems with regard to which provinces or states should receive the revenues from VAT on imports, and which should bear the burden of VAT refunds on exports. 11 Following this kind of reasoning, comprehensive VATs should be left solely with the national government, as is, in fact, the case in most countries. In some countries (for example, China, Germany, and Russia), central VAT revenues may be shared with subnational levels, although this raises the same kind of problems referred to above, if the tax sharing is based on the derivation principle.

Similar considerations on different aspects of VAT design constitute important elements in the ongoing tax reform discussion in India, which contemplates introducing a comprehensive VAT to replace existing excises and sales taxes, with the aim of sharing the revenue between the three levels of government. However, one of the main questions is whether such a system could function properly without fundamental changes in the present system of intergovernmental fiscal relations in India. According to Bird (1993) , it could prove difficult to establish consensus on a formula distributing the VAT proceeds in a context of sharp regional inequalities as the one currently prevailing in that country. Bird also questions the rationale behind sharing the proceeds of any particular tax, because it would seem doubtful that the central government would go through the pain of increasing tax revenues that will accrue in large part to other governments. A more satisfactory alternative—according to Bird—would be to share with the states a fixed share of aggregate central tax revenues.

Brazil offers an example of a VAT assignment system that is generally believed to have had detrimental effects on economic performance. All three levels of government in Brazil are assigned taxing powers on consumption, but with different tax systems, and with the tax covering the widest base, the VAT-type ICMS assigned to state governments and not to the federal government. Furthermore, a large fraction of the federal government consumption tax (the IPI) is transferred to lower levels of governments under a tax-sharing arrangement. This particular design is believed to encourage tax competition between entities of government and to foster tax evasion, which is, furthermore, exacerbated by a large number of different tax rates and exemptions (see Chapter 18 for details).

  • Corporate Profit Taxes

There seems to be almost universal agreement that the taxation of larger businesses, and in particular corporate profit taxes, should be left to the national level and to provinces or states only where these are very large (as in Canada). This reflects the fact that the economic activities of corporations are typically much more diversified and complex, with factor inputs originating from a number of jurisdictions (and possibly also from abroad), and with sales similarly going to a multitude of jurisdictions. Depending on the nature of the specific markets in question, local taxes on corporate profits would to a large degree be exported or shifted to other jurisdictions in a nontransparent way, thus rendering the associated tax burden almost imperceptible to local citizens. In addition, a high local-tax rate may lead the business entity in question to move the tax base to other jurisdictions, either by physically moving the corporation or by adjusting the internal transfer pricing arrangements.

Leaving the taxation of corporate profits entirely in the hands of local governments would thus create serious informational problems because of the administrative issues associated with the allocation of taxable profits between different jurisdictions in cases of enterprises with economic activity spread over many localities. But also in this case these problems could, at least in part, be overcome by some form of overlapping tax bases between the national and the local level (piggybacking), although the room for tax-rate variations is much smaller for the corporate profits tax than for personal income taxes. In Canada, the base is harmonized to a considerable degree between the provinces and the federal level (although provinces do have the possibility of providing individual investment incentives), while provinces have the flexibility to vary rates. In Brazil, the states can levy a 5 percent surcharge on the corporate income tax.

Some countries have, with the above-mentioned problems in mind, chosen instead to allocate a fixed portion of the profit tax revenue originating within each jurisdiction to the local governments under a tax-sharing arrangement. Thus, Russia allocates 25 percentage points of the 38 percent tax rate on corporate profits to regional governments, while the remaining 13 percentage points remain with the federation. 12 Of the corporate tax revenue in Poland in 1992, 5 percent was shared with local governments. In Nigeria, a special system is in force according to which the federal authority has the legal jurisdiction over the company tax, but the states nevertheless collect the tax and retain the proceeds.

  • Payroll Taxes

Like VATs and corporate profit taxes, different types of payroll taxes are also generally seen as an appropriate revenue source for the central government only, because different payroll tax rates could drive employers, and jobs, away from high tax areas. In addition, tax exporting is probably significant in the sense that, first, part of the tax may be shifted to prices and thus borne by consumers outside the jurisdiction that receives the revenue, and, second, the tax may be levied on employees with residence outside the revenue-receiving jurisdiction. Thus, the tax may not be visible to the local taxpaying constituency, and the relationship may be weak between tax payments and services provided by jurisdictions. 13

Notwithstanding these general considerations, tax-sharing arrangements for payroll taxes actually exist in a few countries. A relatively small payroll tax is also levied by the states in Australia.

  • Natural Resource Taxes

Taxes on natural resources are generally perceived as poor candidates for local taxation, since normally the base of these taxes is very unevenly distributed across jurisdictions. In addition, extraction of economic rent from natural resources could be held to be a national prerogative, which should benefit the whole of the nation and not just selected fortunate regions. The taxes in question are also in many cases characterized by a high level of revenue volatility owing to price fluctuations. The associated uncertainty, it could be argued, should be absorbed by the central government, which generally has a number of alternative revenue sources at its disposition, and not by regional or local governments, which are meant primarily to conduct allocative functions (price fluctuations on oil, for example, have created sharp swings in the revenues of states in Nigeria). These theoretical considerations, however, do not take into account the important fact that, in practice, cultural and ethnic differences may be the reason for strong pressures toward regional independence, including regional control over natural resources, as is seen, for example, in Russia.

Alternatively, it could be held that, at least in part, these taxes should be considered as benefit taxes, that is, as payments for the benefits deriving from the provision by local or regional governments of the necessary infrastructure investment without which either exploitation of the natural resources would not be possible, or the return to the investments required could be significantly reduced. In other cases, the taxes may be considered as compensation for the environmental costs associated with the exploitation of natural resources. This might also constitute part of the reason why a number of countries actually operate tax-sharing schemes for natural resource taxation (see country chapters for details). In Russia, local governments in regions rich in natural resources benefit from the retention of a high share of these taxes. Previously, in Nigeria, all taxes accruing from oil production went to the states. In Argentina, a revenue-sharing scheme is in place for royalties on mineral extraction.

  • Import and Export Taxes

Import and export taxes, apart from being generally considered inferior to the taxes dealt with above, should always be imposed by the national government to reduce the possibility of introducing major distortions within the country through differential foreign trade taxes imposed by different jurisdictions. In fact, the large majority of countries assign import duties exclusively to the central government (Nigeria being one exception, with import tax revenue being shared). Nevertheless, in some countries, such as Russia, the formula for sharing important export tax receipts with regions from which the exports originate remains an important tax policy issue (because of the nature of the exports in question, these taxes may as well be considered special cases of taxes on natural resources). India operates a special tax on interstate sales with a maximum rate of 4 percent, and with a number of exemptions (see Chapter 21 for details).

  • Benefit Taxes and User Charges

In addition to what has been said above about specific sources of taxation, it is generally held that benefit taxes, license fees, and user charges should all be used to the maximum extent feasible at the local level because they are transparent, they minimize the risk of tax exporting, they generally do not involve problems of vertical or horizontal equity, and they increase economic efficiency. Although these charges are significant sources of revenue for the localities, they are generally modest compared with some of the taxes considered above.

  • Tax Assignment in Practice

A striking feature of the financing of subcentral levels of government is the significant variation in the level and composition of local government taxation across countries. This feature is illustrated in Tables 2 and 3 , which for a fairly limited sample of countries show the attribution of total tax revenues to subsectors of general government as percentage of total tax revenue, in federal as well as in unitary countries, and the composition of the tax revenue for each subcentral level of government with respect to different types of taxes (including revenues from the tax-sharing arrangements). These tables by their nature do not indicate the actual degree of state, provincial, or local autonomy over the tax revenues, which, as discussed this chapter, may vary considerably across countries.

Nevertheless, as the tables show, most countries have more than one subcentral tax (although the tables do not distinguish between cases where revenues are solely assigned to the subcentral level and where they are shared under tax-sharing arrangements), and this holds for industrial as well as for developing countries, and for federal as well as for unitary countries. Generally, the personal income tax seems (as expected) to be of greater importance for the subcentral level in industrial countries than in developing countries, although for example in most Anglophone countries the property tax is the dominant tax, especially at the local level (this holds in Australia, Canada, the United States, Ireland, New Zealand, and, until 1990, the United Kingdom).

In some, especially federal, countries, general consumption taxes and in some cases also excises play a considerable role, particularly at the state level (for example, in Austria, Brazil Canada, Germany, India, South Africa, Spain, and the United States). A predominant feature seems to be that these taxes are used by large countries with correspondingly large subcentral areas. Also, in some of these countries, consumption tax systems take the form of tax-sharing arrangements with little or no state or local discretion, as in the case of the Austrian and German VAT.

A common feature not shown in these tables is the dominant use of personal income taxes at the subcentral level as opposed to corporate income taxes, reflecting the fact that corporate income taxes are generally considered unsuitable at the subcentral level owing to the mobility of the tax base.

Although the property tax is among the most popular subcentral taxes, not least in federal industrial countries and unitary developing countries, its revenue measured as a percentage of GDP is generally modest and seldom exceeds about 3 percent. This is probably because it is a highly visible tax, it is hard to evade, there are problems associated with the valuation of property, and it is generally perceived as a regressive tax. For these reasons, the property tax has become increasingly unpopular politically, which may also help to explain why its importance as a revenue source has declined in many countries during the last decade or so.

  • Concluding Remarks

The theory on fiscal federalism provides some fairly broad guidelines with regard to which taxes can appropriately be assigned to subnational levels of government and which should be kept at the central level. However, although some general patterns in accordance with these guidelines can be identified in country practices, even fairly homogeneous countries at the same level of development have in many cases chosen different solutions to these problems. One of the main reasons for this is that the historical, geographical, ethnic, and constitutional character of each country has profound implications for the range of feasible and efficient tax assignment policies.

Some lessons may nevertheless be drawn from actual country experiences. First is the importance of tax administration: a decentralized fiscal system cannot function satisfactorily without the necessary administrative capabilities at the subcentral level. In other words, the design of tax systems should clearly be adapted to the level and quality of administrative resources that have been found politically appropriate to devote to the subcentral levels of government. Generally, the more complicated the tax in question is made for other reasons (for example, for reasons of revenue or equity), the stronger the argument for placing the tax with a higher or the highest tier of government. As a reflection of this “rule,” more complex systems of taxation are generally assigned to subcentral levels of governments only in more developed countries.

Second, in addition to the crucial question of the choice of tax sources at subordinate levels of government, actual experience indicates that a decentralized system will work satisfactorily only if state, provincial, and local governments are given at least one major own source of revenue, that is, a source of revenue over which they have autonomy to determine the revenue (assuming that this system is supported by adequate equalization of tax capacities and expenditure needs). Only then can a multilevel system of government promote accountability and ultimately economic efficiency.

Finally, there are obvious potential gains as well as risks associated with decentralizing taxing powers. The gains include improved mobilization of revenue sources and the potential efficiency gains alluded to above. The risks take the form of leaving the central government in a more vulnerable position with respect to its ability to conduct effective fiscal policies, especially for stabilization purposes.

This assumes chat there are no substantial externalities associated with the provision of local services, that the tax cannot be shifted to other jurisdictions, and that an efficient equalization scheme is in place.

For general expositions of the principles of fiscal federalism, see Oates (1972) and King (1984) .

See in particular King (1984) , Musgrave and Musgrave (1980) , and Oates (1972) .

Unless the areas in question are large as is the case in, for example, Canada and the United States.

As illustrated in Tables 2 and 3 , the importance of different tax sources varies considerably across countries. Based on more comprehensive information than that presented here, there seems to be a broad tendency for income taxes at subordinate levels of government to increase in importance with increasing level of development, although there are some exceptions to this rule.

In some countries, such as Finland and Norway, the income tax threshold in the local tax is much lower than in the central government income tax.

However, schedular mechanisms such as withholding or minimum contributions may be widely used under a global system for ease of administration.

This particular feature may increase the revenue elasticity of the subcentral tax compared with a normal flat rate system to the extent that subcentral governments will share the gains of any bracket creep effects in the federal tax.

This disregards the problems posed by mail order systems, particularly with regard to the control and setting of tax rates (in the United States, some of these problems have been addressed by applying the rates of the destination states to mail order sales). Although based on a fairly limited sample of countries, Table 3 seems to indicate that the degree of development is also important in this regard, in that there is a tendency for sales taxes to be of larger revenue importance for local governments in developing than in developed countries.

Which means that the tax is levied by the jurisdiction in which consumption takes place, independent of the origin of the goods (that is, expotts are exempt and imports are liable to tax), as opposed to the origin principle, according to which the VAT is levied by the jurisdiction in which production takes place, that is, interstate exports are taxed and imports are not.

In China and Russia, ail import VAT accrues to the federal government, and only domestic VAT revenues are shared with the regions.

Formally, the 25 percent local rate is a maximum, but the large majority of regions are believed to apply the maximum rate.

In the majority of countries, provision of regional or local government services is related to the residency of individuals.

Bird , Richard M. , 1993 , “Tax Reform in India,” Economic and Political Weekly , Vol. 28 ( December 11 ), pp. 2721 – 26 .

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  • Export Citation

King , David N. , 1984 , Fiscal Tiers: The Economics of Multi-Level Government ( London : Allen & Unwin ).

King , David N. , 1992 , ed. , Local Government Economics in Theory and Practice ( London : Routledge ).

McLure , Charles E. , Jr. , 1977 , “The ‘New View’ of the Property Tax: A Caveat,” National Tax Journal , Vol. 30 , No. 1 , pp. 69 – 75 .

Musgrave , Robert A. , and Peggy B. Musgrave , 1980 , Public Finance in Theory and Practice ( New York : McGraw-Hill ).

Oates , Wallace E. , 1972 , Fiscal Federalism ( New York : Harcourt Brace Jovanovich ).

Tanzi , Vito , 1996 , “Fiscal Federalism and Decentralization: A Review of Some Efficiency and Macroeconomic Aspects,” in Annual World Bank Conference on Development Economics, 1995 ( Washington : World Bank ).

Within Same Series

  • 4 Tax Reform in Russia
  • PART I Theory
  • 6 Recent Tax Policy Trends and Issues in Latin America
  • VII: Tax Reform and IMF Tax Policy Advice
  • Chapter 2. Modernizing the Tax Policy Regime
  • PART III Practice: Developing Countries
  • PART IV Practice: Economies in Transition
  • Chapter 3. Strengthening Tax Administration
  • IV: Income and Wealth Taxes
  • PART II Practice: Industrial Countries

Other IMF Content

  • Revenue Assignments—Tax Policy and Administration
  • 11 Basic Issues of Decentralization and Tax Assignment
  • Rethinking Subnational Taxes: A New Look At Tax Assignment
  • 5 Tax Administration
  • 8 The Assignment of Oil Tax Revenue
  • 12 Local Taxation in an International Perspective
  • Tax Policy Options for a United Germany
  • Technical Assistanceon Tax Policy: A Review
  • How to Design Tax Policy in Fragile States

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  • A Comparative Analysis of Tax Administration in Asia and the Pacific
  • Tax Expenditure Estimation Tool Kit
  • The Governance Brief Issue 30, 2017-Localizing Global Agendas in Multilevel Governance Systems: The Benefi ts of Functional Assignment as Core Element of Decentralization Reforms
  • Asian Development Outlook (ADO) 2022: Mobilizing Taxes for Development
  • Mapping Property Tax Reform in Southeast Asia
  • Excise Tax Policy and Cigarette Use in High-Burden Asian Countries

Inter-American Development Bank

  • Switching from Payroll Taxes to Corporate Income Taxes
  • The Impact of the Business Cycle on Elasticities of Tax Revenue in Latin America
  • The Harmonization of Indirect Taxes in the Andean Community
  • Quo Vadis Income Tax?: Towards the PIT-CA
  • Economic Integration and the Transformation of the Tax Mix: Cyprus 1990-2001
  • Brazil's ICMS Tax: Origin, Changes, Current Situation, and Paths to Recovery
  • Trade Liberalization and Trade Taxes
  • Party System Institutionalization and Reliance on Personal Income Tax in Developing Countries
  • A Basic Framework for Evaluating Value Added Tax Expenditures

The World Bank

  • Determinants of Property Tax Revenue: Lessons from Empirical Analysis
  • Exploring Reform Options in Functional Assignment
  • Ghana Tax Gap Analysis
  • The Entry of Randomized Assignment into the Social Sciences
  • A Handbook for Tax Simplification
  • Not(ch) Your Average Tax System: Corporate Taxation under Weak Enforcement
  • Guinea - Opportunities for Enhanced Domestic Revenue Mobilization: Value-Added Tax and Excise Taxes
  • Academic Peer Effects with Different Group Assignment Policies: Residential Tracking versus Random Assignment
  • Informality, Consumption Taxes and Redistribution
  • Property Tax Diagnostic Manual

Cover Fiscal Federalism in Theory and Practice

Table of Contents

  • Front Matter
  • 1 Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview
  • 2 Assigning Expenditure Responsibilities
  • 3 Tax Assignment
  • 4 Intergovernmental Transfers
  • 6 Budgetary and Financial Management
  • 7 Control of Subnational Government Borrowing
  • 8 Australia
  • 13 Switzerland
  • 14 United Kingdom
  • 15 United States
  • 16 Argentina
  • 19 Colombia
  • 20 Ethiopia
  • 25 Bulgaria
  • 28 Russian Federation

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How to write a taxation assignment.

Students taking taxation course study the policies, rules, and laws that control the legal process. During their study, teachers require them to write assignments on various taxes and the law governing them. When you get an assignment, the first thing you should do is to read the instructions carefully to determine the specific requirements by your instructor.

Choosing theTaxation AssignmentTopic

Your tutor can assign a topic or ask you to develop one. If it your choice, pick a topic that allows you to explore the issue of taxation and demonstrate your knowledge on the matters you have been covering in class. Some of the general areas to get your topic on taxation includes:

  • New tax legislations
  • Tax status of individuals
  • Capital gains tax
  • Tax on salary
  • Corporate tax
  • Tax on interests and dividends
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Writing a taxation assignment requires you to have an in-depth knowledge on theoretical, application and mathematical aspects of taxes. Before you begin writing it is necessary that you familiarize yourself with compilation strategy of calculations and sentences.

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Research on The Taxation AssignmentTopic For Content

Tutors appreciate well researched original work. Get a good overview of your topic and assess it carefully before to determine how much you know about it. A thorough evaluation enables you to determine about the material in your possession and if there is need to carry further research on the topic.

Identify the important concepts to analyse and choose research sources those that will fulfil the requirements of your examiner. Identify those that which will support your topic firmly. Books, journal articles, and relevant website reference are good sources. It is necessary to confirm the accuracy of the figures and precision of the calculations as even a single error in your taxation assignment might ruin your grades.

Writing the Taxation Assignment


Introduce your topic by identifying the key theories and concepts you will discuss in the paper. Present a thesis statement towards the end of your introduction.

Put down the information from your research focusing on those with a stronger connection to your topic or assignment question. Maintain the continuity of ideas for them to flow deliberately within paragraphs and transition smoothly to another. Avoid confusing the reader by mixing up ideas by dividing the work into different paragraphs each with one concept or idea.

Use information from various sources to reflect your understanding and back the evidence to your claims with examples that show how your concepts apply in real practice.

It is essential that demonstrate the relevance and importance of your arguments to the overall discussion.You can use figures, tables, and graphs to break down complex statistics. Number them sequentially and label them. Place them close to the text that you are referring as possible. You can also place them in the results section and complex raw data in your appendix. It is essential to guide the reader to interpret the information.

Avoid borrowing too much information from one source as it will lead plagiarism although unintentional. Read the content from your source and write in your words unless you are quoting directly. When you revamp data from the information of origin to another format, ensure that you cite references of the information. Do not pop up tables or figures in the text without referring to its existence and relevance to the argument in preceding text.

Concluding the Research on the Taxation Assignment

A conclusion brings your assignment to closure. Write a conclusion that will summarize the most important points and combines them together into one thread. Your conclusion should also restate the thesis statement in your introduction using different words to tie up your entire work and bring it to a full circle.

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Book cover

Local Public Finance and Economics pp 39–80 Cite as

Expenditure and Revenue Assignment: Principles

  • Harry Kitchen 4 ,
  • Melville McMillan 5 &
  • Anwar Shah 6  
  • First Online: 06 September 2019

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1 Citations

This chapter provides a conceptual overview of the principles of expenditure and revenue assignment to local governments. Local government is seen to be more aware of local preferences and conditions and more accountable to local residents than senior governments. Core and noncore responsibilities are distinguished (e.g., local streets versus schooling). Financing follows function. Financing follows the benefit criterion; that is, local residents pay for the local services from which they benefit—with user charges and local taxes although grants may be needed. Various (especially) noncore services involve interjurisdictional spillovers and/or redistributive considerations and so, if assigned to local governments require intergovernmental transfers to achieve efficiency and equity objectives. Financing alternatives and appropriate uses are reviewed.

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The vast number of references found in Bahl and Bird ( 2018 ) and Boadway and Shah ( 2009 ), two books providing comprehensive examinations of fiscal federalism and decentralization, illustrate the growth and extent of the literature. Earlier valuable contributions include those by Bahl and Linn ( 1992 ), Bird et al. ( 1995 ), Litvack et al. ( 1998 ), Manor ( 1999 ), McLure ( 1983 , 1999 ), OECD ( 1987 , 1997 , 1999 ), Owens and Norregaard ( 1991 ), Shah ( 1991 , 1994 ), and Ter-Minassian ( 1997 ).

A resulting additional argument for decentralization is that it enhances political participation. Greater responsiveness, accountability, and enhanced participation have long been seen as advantages of decentralization in the political literature. Other widely noted potential positive features of local government are greater transparency of government to local residents and, of course, greater autonomy. Shah ( 2014 ) advocates for movements toward FAIR (fair, accountable, incorruptible, and responsive) local governance and outlines a framework for evaluation. Blending these desirable characteristics with the economics of fiscal federalism has created a powerful case for decentralization and a more valuable tool for the analysis of decentralized government.

Besley and Coate ( 2003 ) have extended the theory underlying the conventional arguments for decentralization. Their more general model assumes cost sharing of centrally provided outputs under a nationally uniform tax system, allows for non-uniform central provision across localities, locally elected representation to the central government, cooperative and non-cooperative legislative decision-making, varying degrees of heterogeneity in local tastes, and varying interjurisdictional spillovers. Heterogeneity of tastes and the degree of spillovers are central to the centralization-decentralization choice with less heterogeneity and more spillover favoring centralization. However, the case for decentralization is surprisingly strong and prevails even when tastes are uniform and spillovers significant. Also see Ingram and Hong ( 2008 , 17–108).

Critical assessments of fiscal federalism and, particularly, decentralization have emerged—motivated in part by difficulties experienced within some countries. Oates ( 2005 ) characterized those as an emerging second-generation of fiscal federalism. He categorized the second-generation literature (notably in Oates 2008 ) as having two strands. The first strand applies a broader range of economic modeling (i.e., beyond the more conventional public finance) to the questions of fiscal federalism while the second strand evolved from public choice with a focus on political institutions. Both address problems with decentralization that have or might occur. A dominant concern is the problems that emerge with soft (rather than hard) budget constraints on decentralized governments. Essentially, the second-generation literature focuses on problems that can arise when there are flaws in the decentralization design. Surveys of the impacts of decentralization generate mixed results but do point to the importance of good design and implementation (e.g., see Bahl and Bird 2018 , Chapter 2). Also, there is some evidence that better-quality government enhances personal well-being (Helliwell and Huang 2008 ; Helliwell et al. 2018 ) and, though somewhat mixed and deserving of more detailed analysis, that decentralization can also increase well-being/life satisfaction (e.g., Bjornskov et al. 2008 ; Diaz-Serrano and Rodriguez-Pose 2012 ; Gao et al. 2014 ; Tomaney et al. 2011 ). Closely related is a literature on measuring the decentralization of government (e.g., Ivanyna and Shah 2014 ; Hooghe et al. 2010 , 2016 ; Hooghe and Marks 2016 ). The OECD provides valuable recent overviews of fiscal federalism and decentralization (e.g., OECD 2013 , 2016 , 2018 ).

It is important to recognize that borrowing is not a substitute for adequate funding. Debt must be repaid and debt-servicing costs met from the borrowing government’s revenues. Borrowing only facilitates financing long-term capital investments, particularly when they are large and irregular.

For example, see Wiesner ( 2003 ) for a discussion of the role of market-based decentralization in Latin America and Dollery and Wallis ( 2001 ) for a more general discussion of competition in the delivery of public services. Oates ( 1999 ) includes a discussion of market-preserving federalism.

See Tresch ( 2015 , Chapters 26 and 27) for a discussion of a redistributional role for local government.

For further discussion of the topics addressed in this section, see, for example, Dollery and Wallis ( 2001 , Ch 2), Fisher ( 1996 , Ch 6), and Oates ( 1972 ).

See a public finance text (e.g., Fisher 1996 ) for details of the ideal allocation of the cost of public goods. The basic idea is that each individual is charged a personal marginal cost equal to that person’s marginal benefit and the ideal level of output exists when, in the case of a pure public good, the sum of all individual marginal benefits equals the marginal cost of the output.

The problem of distinguishing between economics of sharing and economies of scale is that it is often difficult to distinguish between units of output when many individuals benefit from the same unit of output. For example, there could be economies of scale in the operation of an air pollution abatement system (e.g., cost per unit of particulate matter removed decline to some point) but the benefits of the improvement in air quality resulting from some additional abatement (change in output) could be enjoyed by many or few people (economies of sharing).

For insight into and a brief review of empirical economies of scale analyses, see Byrnes and Dollery ( 2002 ).

For discussion and empirical insights, see McMillan et al. ( 1981 ) and McMillan ( 1989 ).

For illustrations of the assignment of responsibilities among multi-tiered governments, see Table 4.1 of Chap. 4 and Shah ( 2006 , Chapter 1).

Even when services are purely local, citizens may prefer having an upper-level government to review certain activities (e.g., water quality, sewerage treatment, refuse disposal) to provide an informed and independent assessment of performance and especially of the less observable aspects.

See Dahlby ( 2001 ) for a “consensus view” of tax assignments. The shift of the payroll tax to the upper tier(s) of government has been prompted as well by its widespread utilization by senior governments to finance earmarked social benefit programs such as unemployment insurance and social security/pensions.

This treatment reflects the usual top-down perspective on tax assignment in that the matter is decided at the center. In some cases, however, tax assignment is a bottom-up decision where federating states decide upon what tax powers the new central authority should have. See Dahlby ( 2001 ).

In the interests of maintaining the advantages of an internal common market (i.e., free trade within the country) the only taxes, if any, on cross-border movements of goods and services should be national levies on foreign trade.

Bird ( 1999 ) argues that the international adoption of national value-added taxes and their revenue importance have contributed to this centralization.

A broader discussion of transfers—beyond the gap-closing role—appears in the latter part of this chapter.

Dahlby ( 2001 ) notes several problems with the “consensus” view. Those are (a) the need to link expenditure and tax decisions, (b) a need to consider expenditure assignment and grant systems, (c) neglect of distributional impacts of subnational government policies, (d) overlooking certain problems of joint occupancy of tax fields, (e) ignoring that some economic shocks calling for stabilization are region specific, and (f) putting little emphasis on administration and compliance costs of alternative tax assignment regimes.

It is important to remember that property taxes, and especially those taxing improvements as well as land, also may not match benefits exactly and, like a local personal income tax, involve some redistribution. On the other hand, a local personalincome tax may match better benefits and costs for a local service such as schooling.

Kitchen and Slack ( 1993 ) found that about 40 percent of municipal government (i.e., nonschooling) expenditure benefited nonresidential property.

Also see Bahl and Bird ( 2018 , pp. 208–211).

When prices for the services of local government enterprises are above the levels consistent with user charges (e.g., utility charges exceed full costs), the difference is effectively a special sales tax on those services.

For those reasons, Bird ( 1999 ) has recommended a more uniform local business value-added tax.

Besides the references cited below, the following provide valuable insights into intergovernmental transfers: Bird ( 2000 ), Bird and Smart ( 2002 ), Ebel and Yilmaz ( 2001 ), Martinez-Vazquez and Searle ( 2007 ), Shah ( 1999 , 2004 ), and Shah and Thompson ( 2004 ).

At the local government level, however, fiscal disadvantages may be offset in part through capitalization into property values.

Bird ( 1993 ) offers an additional rationale for conditional matching grants. Conditional matching funding can induce local governments to spend some of their own funds on the grantor’s priorities (e.g., achieving minimum standards or greater uniformity of local services) thus stretching the grantor’s budget. While a legitimate perspective, the basis for the mutual interest is in some shared or spillover benefits. Gramlich ( 1977 ) classifies conditional transfers aimed at such grantor policy objectives as also blending the advantages of centralized finance and decentralized supply as having a political-institutional justification. However, because those grants have an efficiency basis, they are distinguished here from the politically motivated grants below.

Bahl, Roy, and Richard M. Bird. 2018. Fiscal Decentralization and Local Finance in Developing Countries . Northampton, MA: Edward Elgar Publishing.

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Bahl, Roy W., and Johannes F. Linn. 1992. Urban Public Finance in Developing Countries . New York: Oxford University Press.

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Besley, Timothy, and Stephen Coate. 2003. Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Approach. Journal of Public Economics 87 (12): 2611–2637.

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Bird, Richard M. 1993. Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization. National Tax Journal 46 (2): 207–227.

———. 1999. Rethinking Subnational Taxes: A New Look at Tax Assignment . IMF Working Paper 165, International Monetary Fund, December.

———. 2000. Intergovernmental Fiscal Relations: Universal Principles, Local Applications . Working Paper 00-02, International Studies Program, School of Policy Studies, Georgia State University, April.

Bird, Richard M., and Michael Smart. 2002. Intergovernmental Fiscal Transfers: Some Lessons for International Experience. World Development 30 (6): 899–912.

Bird, Richard M., and Francois Vaillancourt, eds. 1998. Fiscal Decentralization in Developing Countries . Cambridge: Cambridge University Press.

Bird, Richard M., Robert D. Ebel, and Christine I. Wallich, eds. 1995. Decentralization of the Socialist State: Intergovernmental Finance in Transition Countries . Washington, DC: The World Bank.

Bjornskov, Christian, Axel Drehe, and Justina A.V. Fischer. 2008. On Decentralization and Life Satisfaction. Economics Letters 99 (1): 147–151.

Boadway, Robin, and Frank Flatters. 1982. Efficiency and Equalization Payments in a Federal System of Government: Synthesis and Extension of Recent Results. Canadian Journal of Economics 15 (4): 613–633.

Boadway, Robin, and Anwar Shah. 2009. Fiscal Federalism: Principles and Practice of Multiorder Governance . New York: Cambridge University Press.

Burki, Shahid Javed, Guillermo E. Perry, and William R. Dillinger. 1999. Beyond the Center: Decentralizing the State. In World Bank Latin American and Caribbean Studies . Washington, DC: The World Bank.

Byrnes, Joel, and Brian Dollery. 2002. Do Economies of Scale Exist in Australian Local Government? A Review of the Recent Evidence. Urban Policy and Research 20 (4): 391–414.

Council of Europe. 1985. European Charter of Local Self-Government . .

Dahlby, Bev. 2001. Taxing Choices: Issues in the Assignment of Taxes in Federations . ISSJ 167/2001, UNESCO. Oxford: Blackwell Publishers.

Dethier, Jean-Jacques, ed. 2000. Governance, Decentralization and Reform in China, India and Russia . Dordrecht: Kluwer Academic Publishers.

Diaz-Serrano, Luis, and Andres Rodriquez-Pose. 2012. Decentralization, Subjective Well-Being, and the Perceptions of Institutions. Kyklos 65 (2): 179–193.

Dollery, Brian E., and Joe L. Wallis. 2001. The Political Economy of Local Government . Cheltenham: Edward Elgar.

Ebel, Robert D., and Serdar Yilmaz. 2001. Concept of Fiscal Decentralization and Worldwide Overview . Paper presented at the Symposium of the Quebec Commission on Fiscal Imbalance, Quebec City, Quebec, September 13–14.

Fisher, Ronald C. 1996. State and Local Public Finance . Chicago, IL: Richard D. Irwin.

Gao, Song, Xiangyi Meng, and Li Zhang. 2014. Fiscal Decentralization and Life Satisfaction: Evidence from Urban China. Social Indicators Research 119 (3): 1177–1194.

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Enhancing Tax Analysis Skills Through Excel-Based Scenarios

  • Individual Income Taxation
  • Specialized Issues

A joint task force of the AICPA and the American Taxation Association (ATA) issued a revised Model Tax Curriculum (MTC) in May 2014. This represents the fourth iteration of this valuable resource for accounting educators.

The document highlights both the importance of, and challenges for, the study of taxation. The MTC has provided guidance to educators since 1996, complementing other resources such as the Accounting Education Change Commission report, the AICPA Core Competency Framework, the Association to Advance Collegiate Schools of Business Assurance of Learning standards, and the ongoing work of the Pathways Commission. Despite this encouragement and support, however, the MTC notes that "significant gaps in fundamental principles and skills remain."

Researchers have explained this shortfall by noting the dynamic state of the business environment and growth in technology and the resulting inability of accounting education to keep pace (Wessels, "A Critical Learning Outcome Approach in Designing, Delivering and Assessing the IT Knowledge Syllabus," 19 Accounting Education 439 (October 2010)). The issue must be considered from the viewpoint of both accounting and tax educators. From a tax perspective, the MTC emphasizes that all accounting students should develop basic tax knowledge "because taxation is pervasive, complex and critical to decision-making" (MTC, 2014).

The MTC recommends a variety of active learning approaches to achieve the document's learning outcomes and as a basis for future learning. Similarly, researchers have explored pedagogies from a number of perspectives. For example, the MTC and the Core Competency Framework recommend a broader approach to tax education and active student involvement, an approach that supports a skills-based curriculum and enhances lifelong learning (Hite and Hasseldine, "A Primer on Tax Education in the United States of America," 10 Accounting Education 3 (2001)). Educators can enhance student-centered learning through an interactive environment such as computer-based instruction (Larres and Radcliffe, "Computer-Based Instruction in a Professionally-Accredited Undergraduate Tax Course," 9 Accounting Education 243 (2000)). Educators can also develop abilities with information communication technologies such as spreadsheet software through active learning methods, thereby improving skill sets desired by employers (Ling and Nawawi, "Integrating ICT Skills and Tax Software in Tax Education," 27 Campus-Wide Information Systems 303 (2010)). Panelists at an accounting conference on professional judgment emphasized the benefits of developing accounting intuition, building problem-solving skills, using experiential hands-on learning, focusing on process rather than outcomes, and learning to choose between alternatives (Correll, Jamal, and Robinson, "Teaching Professional Judgement in Accounting," 6 Accounting Perspectives 123 (2007)).

Educators frequently seek to accomplish learning outcomes through the traditional use of textbooks and, specifically, end-of-chapter (EOC) material. An emphasis on EOC material, however, can result in a narrow focus on students' technical knowledge and a lack of development of higher-order cognitive skills (Gupta and Marshall, "Congruence Between Entry-Level Accountants' Required Competencies and Accounting Textbooks," 14 Academy of Educational Leadership Journal 1 (2010)). Higher-­order skills, according to the classification developed by Benjamin Bloom in 1956, include analysis of data, application of knowledge, choosing among alternatives, and the process of evaluation (Davidson and Baldwin, "Cognitive Skills Objectives in Intermediate Accounting Textbooks: Evidence From End-of-Chapter Material," 23 Journal of Accounting Education 79 (2005)). As the MTC Task Force reorganized and reworded the MTC learning outcomes, it did so based on Bloom's taxonomy of learning.

The assignment that follows represents a modest attempt to address within a first course in federal income taxation of individuals the MTC's concern for delivering basic tax knowledge and developing student skill sets. The assignment requires students to use tax-compliance software to generate multiple Form 1040 tax returns and Excel to summarize and graph output from the returns. From an analysis and application standpoint, the assignment challenges students to carefully consider a series of questions designed to enhance their understanding of some of the intricacies of the underlying tax law. Given the length of the assignment, the authors recommend dividing students into two- or three-person teams.

After the instructor provides students a basic understanding of the individual tax formula and a primer on entering information into selected tax-­compliance software, students receive an Excel spreadsheet detailing income and expense items for a married couple filing a 2013 joint return (see Exhibit 1 ). The input spreadsheet allocates total income within a $100,000 to $1 million range among these categories:

  • Salary (50%);
  • Schedule C income (25%);
  • Taxable interest (5%);
  • Tax-exempt income (5%);
  • Qualified dividends (5%);
  • Net long-term capital gain (NLTCG) (5%); and
  • Schedule E income (5%).

The following highlighted items on the input spreadsheet are fixed:

  • Mortgage interest;
  • Property taxes;
  • Medical expenses;
  • Charitable contributions;
  • Safe deposit box rental fees;
  • Exemptions;
  • Dependent ages and higher-education expenses; and
  • Estimated state tax payments on Jan. 15, 2013.

The remaining input spreadsheet items (federal and state withholding, federal and state estimated tax payments, and itemized deductions for state income tax, investment advisory fees, and investment interest expense) are automatically calculated. Students should review the assumptions built into the underlying cell formulas, particularly the assumptions used to derive estimated federal tax payments.

The instructor can next require students to perform the following tasks:

Enter data from the input spreadsheet into the tax-compliance software to generate 10 separate returns corresponding to each of the 10 income levels. Students can expect to generate the following forms and schedules, depending on the scenario:

  • Form 1040, U.S. Individual Income Tax Return ;
  • Schedule A, Itemized Deductions ;
  • Schedule B, Interest and Ordinary Dividends ;
  • Schedule C-EZ, Net Profit From Business ;
  • Schedule D, Capital Gains and Losses ;
  • Schedule E, Supplemental Income and Loss ;
  • Schedule SE, Self-Employment Tax ;
  • Schedule 8812, Child Tax Credit ;
  • Form 2106-EZ, Unreimbursed Employee Business Expenses;
  • Form 4952, Investment Interest Expense Deduction ;
  • Form 8863, Education Credits ;
  • Form 8959, Additional Medicare Tax ; and
  • Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts .

For simplicity, students should enter the Schedule C income as a gross receipts amount and the Schedule E income as the taxpayer's share of ordinary income from a partnership. Note that the scenario assumptions, while somewhat artificial, do allow for meaningful comparisons across income levels.

After completing and saving the tax returns, construct a summary output spreadsheet reflecting the following for each total income level:

  • Tax-exempt interest;
  • Gross income;
  • Deductions for determining ­adjusted gross income (AGI) ("above the line");
  • Itemized deductions;
  • Exemptions; and
  • Taxable income.
  • Regular tax;
  • Alternative minimum tax (AMT);
  • Refundable tax credits;
  • Self-employment tax;
  • Additional Medicare tax;
  • Net investment income tax; and

For analysis purposes, students should also express each of the above items as a percentage of total income within the output spreadsheet.

Generate three bar graphs depicting the following: (1) the Form 1040 items that together make up taxpayer gross income—taxable income, exemptions, itemized deductions, for-AGI deductions, and tax-exempt interest; (2) regular tax liability; and (3) other taxes (i.e., net investment income tax, additional Medicare tax, self-employment tax, and AMT) across all total income levels. Exhibit 2 reflects a sample output spreadsheet for this Base scenario.

To illustrate various client planning strategies, the instructor can now require students to modify tax returns and the output spreadsheet employing the following assumptions:

  • The taxpayer becomes a material participant in the activities of her partnership interest (an MP scenario). (The K-1 worksheet within the tax-compliance software defaults to a passive investor assumption.) Exhibit 3 represents a sample revision of the output spreadsheet.
  • The taxpayer elects to include qualified dividends and NLTCG as investment income to maximize the deduction for net investment interest expense (a Max scenario). Exhibit 4 represents a sample revision of the output spreadsheet.
  • The taxpayer becomes a material participant in the activities of her partnership interest and elects to include qualified dividends and NLTCG as investment income (an MP+Max ­scenario). Exhibit 5 represents a sample revision of the output spreadsheet.

Note : The creation of additional scenarios (MP, Max, and MP+Max) generates several compelling taxable income and tax liability differences that instructors can use to develop some challenging analysis questions for students (see Part III sample questions below).

After students complete output spreadsheets for each of the above scenarios, the instructor can then require students to respond to various questions designed to enhance their understanding of the tax-compliance software and under­lying tax law as well as their appreciation for the interplay of the various scenarios and associated planning opportunities. The number and sophistication of the questions will vary from instructor to instructor based on time constraints, course emphasis, and student ability.

Sample Questions

  • Explain why the itemized deduction total for each income level on the input spreadsheet does not match the corresponding amount on the output spreadsheet for the Base scenario. As income progresses from $100,000 to $1 million, describe how and why the difference changes.
  • The taxpayer does not appear to benefit from any nonrefundable credits, including an education credit, at any of the Base scenario income levels. What accounts for the absence of a nonrefundable education credit at $200,000? What accounts for the absence at $100,000?
  • If one defines the taxpayer’s marginal tax rate as the change in total tax liability divided by the change in total income, compute a rate for each $100,000 change in income within the Base scenario. Explain why the rate appears to spike as income increases from $200,000 to $300,000. As income increases from $300,000 to $1 million, explain any other significant changes to the marginal rate (e.g., changes equal to or greater than 2%).
  • If one alternatively defines the taxpayer’s marginal tax rate as the change in total tax liability divided by the change in taxable income, recompute the rate for each $100,000 change in income within the Base scenario. How do the rates, as recomputed, compare with the above rates? As income increases from $300,000 to $1 million, explain any other significant changes to the marginal rate (e.g., changes equal to or greater than 2%).
  • If one defines the taxpayer’s effective tax rate as the total tax liability divided by total income, describe how the rate changes over the Base scenario income levels. How would the effective rates change if the effective tax rate equals total tax liability divided by taxable income? Graph both sets of effective tax rates across the Base scenario income levels and summarize the results.
  • Using the graphs generated within the output spreadsheet for the base scenario, describe the progression of AMT as income increases from $100,000 to $1 million. Explain why AMT declines in the upper income ranges.
  • Summarize how investment-related expenses (including investment interest expense) on Schedule A compare with those reflected on Form 8960, net of any cutbacks. Explain any differences.
  • Summarize how investment income on Form 8960 compares with total income on Form 1040 exclusive of salary and Schedule C income. Explain any differences. Repeat the above steps comparing the Base and MP scenarios.
  • If the taxpayer becomes a material participant in the activities of her partnership interest (i.e., the taxpayer moves from the Base scenario to the MP scenario), explain why net investment income tax declines for income levels equal to or more than $300,000. At $300,000 in total income, would you encourage the taxpayer to pursue material participation status, all other things being equal?
  • If the taxpayer elects to include qualified dividends and NLTCG as investment income (i.e., the taxpayer moves from the Base scenario to the Max scenario), explain what causes net investment income tax to (1) decline for income levels equal to or greater than $400,000 and (2) remain the same for income totaling $300,000. For income levels equal to or greater than $200,000, why does regular tax liability decrease as more income loses preferential treatment?
  • If the taxpayer becomes a material participant in the activities of her partnership interest and elects to include qualified dividends and NLTCG as investment income (i.e., the taxpayer moves from the Base scenario to the MP+Max scenario), total tax liability appears to decrease for income levels equal to or greater than $200,000. Why does the strategy appear to be ineffective in years when the taxpayer earns $100,000? Would your answer change if the taxpayer earns $200,000 in total income allocated as follows?:

Listed below are condensed responses from one three-student team in the authors’ master of science in accounting program. The team completed the assignment during the summer 2014 term. Given the condensed summer term, the authors elected to supply the team with Excel files associated with Exhibits 1–5, listed above, and access to all the associated tax returns prior to assigning the Part III questions. Ideally, the assignment should be administered during a regular term, allowing students sufficient time to generate their own tax returns, output spreadsheets, and graphs. Grading the project in phases would also permit teams to correct their tax returns prior to addressing any analysis questions.

The team observed that limits on various itemized deductions (e.g., medical expenses), certain miscellaneous itemized deductions (e.g., unreimbursed employee and investment expenses), and investment interest expense can create a mismatch between amounts on the input and output spreadsheets. The team explained that as income progresses from $100,000 to $1 million, the spread between the input and output spreadsheet amounts increased. The team attributed most of this widening discrepancy to the phaseout of total itemized deductions associated with high-income taxpayers.

With income at $200,000, the team attributed the absence of a nonrefundable education credit to the income limit associated with taxpayers’ filing jointly. With income at $100,000, the team explained that the taxpayer reported insufficient tax liability to trigger a nonrefundable credit.

The team computed the following marginal rates for the taxpayer:

The team attributed the rate spike between $200,000 and $300,000 in income to significant increases in regular tax liability (from $13,839 to $34,178), AMT (from $302 to $7,625), and the net investment income tax (from $0 to $1,210). The team also noted a substantial increase in the marginal rate once the taxpayer earned $800,000 or more, which it attributed to increases in regular tax liability more than offsetting the absence of AMT.

The team recomputed the following marginal rates for the taxpayer:

The team attributed most of the rate changes to the same factors as in Question 3. The team did note, however, that the lower base (taxable income vs. total income) resulted in consistently higher percentages across the entire income range.

The team computed the following effective tax rates for the taxpayer:

The team noted that the output sheet for the Base scenario already showed these percentages. The team explained how the effective rate grew at a decreasing rate over the income range and graphed the results (see Exhibit 6 ).

The team recomputed effective tax rates using taxable income as a denominator and graphed the results (see Exhibit 7). The percentages follow:

The team described how total tax at $100,000 in income (i.e., $3,532) measured against $6,447 in taxable income generated an artificially high rate of 54.79%.

The team attributed the decline or absence of AMT at upper income levels to a simple comparison on Form 6251, Alternative Minimum Tax—Individuals , of tentative minimum tax (i.e., alternative minimum taxable income less an AMT exemption amount, multiplied by either a 26% or 28% statutory rate) to the regular tax liability, reflected on Form 1040, line 44. The team noted that at income levels equal to or greater than $800,000, the regular tax liability exceeded tentative minimum tax and allowed the taxpayer to avoid AMT.

For investment-related expenses, the team determined, for both the Base and Max scenarios, that Form 8960 expenses exceeded Schedule A expenses by a deduction for state income taxes. More specifically, the team concluded that Form 8960 allows a deduction for the portion of state income taxes allocated to investment income. The team also observed that the Max scenario expenses exceeded the Base scenario expenses on both Schedule A and Form 8960 by the amount of investment income elected to be included on Form 4952 to maximize investment interest expense.

For investment income, the team observed that income on Form 8960 equaled the total income on Form 1040, line 22 less any salary and Schedule C income.

The team’s conclusions for investment-related expenses for both the Base and MP scenarios did not change. From an income perspective, however, the team noted that the MP scenario’s income on Form 8960 was less than total income on Form 1040, line 22 (less any salary and Schedule C income) by the amount of recharacterized Schedule E income. In other words, the team concluded that once the Schedule E income is treated as active, it is no longer subject to the net investment income tax on Form 8960.

The team concluded that the taxpayer should pursue material participation status, all other things being equal, because doing so would prevent the Schedule E income from being included on Form 8960 and would lower both the net investment income tax and regular tax liability. The team ignored, however, that pursuing material participation at the $300,000 income level would cause total tax liability to increase.

The team determined that net investment income tax is less in the Max scenario than in the Base scenario at income levels equal to or greater than $400,000 because investment interest expense is maximized. At $300,000, however, the team noted that the tax is the same in both scenarios, as it is based on the lower of (1) net investment income or (2) modified AGI above a $250,000 threshold for joint filers. Despite a difference in net investment income, the lesser figure in both scenarios is the same: modified AGI above the threshold.

Question 10

The team concluded that moving from the Base scenario to the MP+Max scenario was ineffective at $100,000 in income because self-employment tax represented the only tax faced by the taxpayer. By characterizing the Schedule E income as nonpassive, the taxpayer triggered additional self-employment tax.

After changing the income allocation percentages, the team generated two additional spreadsheets (see Exhibit 8 and Exhibit 9 ) and concluded it would not pursue the strategy. The decrease from the Base scenario’s regular tax liability was more than offset by an increase in self-employment tax.

The assignment described above could be modified or extended in several ways. Listed below are a few possibilities that instructors might consider:

  • As the input spreadsheet allows students to modify income allocation percentages for the 10 income categories, instructors could assign unique percentages to various student teams. Students could then compare and contrast resulting taxable income, taxation, graphs, and planning strategies in class.
  • Schedule E income could relate to an interest in an S corporation, highlighting, for example, significant differences in self-employment tax relative to a partnership interest.
  • Schedule E income could also relate to various rental real estate activities, shifting the assignment's focus to an enhanced student understanding of material participation, active participation, passive loss rules, and the related impact on the net investment income tax.
  • Expenses related to Schedule C and Schedule E activities could be introduced to emphasize various limits and cutbacks.
  • Instructors could incorporate various loss amounts into the input spreadsheet categories. Net operating losses, capital losses, and ordinary partnership losses, for example, would help illustrate relative tax effects.
  • Rather than analyzing various income levels within a particular tax year, the assignment could focus on income levels earned over a period of years. Income progression could illustrate how a taxpayer uses various carryover deductions and credits.
  • Technical Explanation of the Tax Reform Act of 2014: A Discussion Draft of the Chairman of the House Committee on Ways and Means to Reform the Internal Revenue Code: Title I—Tax Reform for Individuals , available at ; and
  • Technical Explanation of the Tax Reform Act of 2014: A Discussion Draft of the Chairman of the House Committee on Ways And Means to Reform the Internal Revenue Code: Title II—Alternative Minimum Tax Repeal , available at .
  • Instructors could incorporate assumptions regarding taxpayer contributions to various qualified retirement plans (e.g., Sec. 401(k), Sec. 403(b), and traditional/Roth IRA contributions) into the input spreadsheet categories.
  • Depending on time constraints, instructors might consider reducing the number of income scenarios. Employing four or five income levels rather than 10, for example, would preserve most of the assignment's tax policy and sensitivity analyses and still ensure that students understand how to use tax-compliance software. Alternatively, instructors could assign the $100,000 to $300,000 range to one-third of the student teams, the $400,000 to $700,000 range to another third, and the $800,000 to $1 million range to the remaining third. Selected teams within each income grouping could then report findings in class.

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  • Legal Marijuana Market Analysis and Taxes Impact Consequently, the primary goal of this paper is to understand the impact of taxes on the financial stability of the market for legal marijuana with the help of the law of supply and demand and […]
  • Business and Economics: The Income Tax Citizens started to shift their opinions about the president’s strength and what the national government should do as the presidency changed during the Progressive Era. Between 1901 and 1921, Roosevelt, Taft, and Wilson served as […]
  • Addressing Tax Challenges by Introducing a Reform A major obstacle to the growth of the economy and the sharing of revenues is tax avoidance or evasion by big businesses.
  • Tax Exemption of Churches From Tax Payments It is unfair for the government to exempt religious groups from paying taxes because this marginalizes some other groups, including LGBTQ and atheists.
  • “Windfall Taxes on Energy Are All the Rage They Shouldn’t Be” by Mintz As such, the editors expound that the Russian invasion of Ukraine has led to governments from Europe to the United States grappling with energy alternatives due to its scarcity.
  • Aspects of Tax Research Problem According to the Internal Revenue Commissioner’s decision, the installments made throughout the years to the Kellogg Company, deductions from regular earnings, and basic expenses did not happen.
  • Poor Segments of Population: Tax Cuts Effects In this context, the reduction of after-tax incomes of low-income families tends to be much more profound, which contributes to the disparities in income and overall wealth inequality.
  • Autoethnography: “Black” Taxes in South Africa My brief analysis of the academic literature reveals the significance of the black tax problem, the consequence of which is the compulsion to work harder and a marked decline in the quality of life for […]
  • Blockchain and Alteryx Technologies for Tax Administration Alteryx can be considered a comprehensive platform because it is neutral in its data outputs and covers most aspects of the analytics process.
  • The Tax Transformation Technology Roadmap The use of outdated programs and tools can lead to several problems related to both the effectiveness of the work and the processes themselves.
  • Corporate Sustainability Worldview and Tax Avoidance This proposal introduces the plan of a research project devoted to the association between a company’s adherence to corporate sustainability reporting and tax avoidance trends. Define and research the concept of corporate sustainability reporting within […]
  • Transferring Tax Losses to the Future In addition, due to the availability of an estimated reserve, many people may risk opening a company and then abandoning this business.
  • Pros and Cons of Consumption Tax Over Income Tax Unlike the income tax, where the target population is low, focusing on the consumption tax gives the government access to all people, increasing revenues. With the elimination of the income tax system, people are encouraged […]
  • Value-Added Tax and Tax Morality: Legal Framework In order for the concept of tax morality to be determined, it is essential to identify the legal framework for the flat tax that consumers pay once they purchase an item.
  • The Federal Unemployment Tax Some percent of wages is retained by the employer from the employee’s pay, who then remits the funds to the government on the worker’s behalf.
  • The Federal Unemployment Tax Act Rates In conclusion, FUTA rates regulate the unemployment rates by punishing states that fail to keep their economies balanced in times of crisis, yet they are essential for preventing a decline in the job market.
  • History of Tax Morality Theory At the beginning of the 1990s, tax morale drew widespread interest and has since become a fundamental problem in the scholarly investigation of tax compliance.
  • Global vs. India Tax and Remuneration Policies Some MNCs use a standard compensation rate, while others depend on the market forces of the host country to determine the compensation of the employees.
  • The Food Tax in Oklahoma Articles This article is about the food tax in Oklahoma, one of the few states where this measure exists. In the news about the passage of the food tax ban bill, there is a brief interview […]
  • Systems of Taxes During the Era of Colonialism As a result, the history of taxes is inextricably linked to the nation’s progress and influence since the colonial period. Individuals in the UAE are not subject to income tax.
  • Exports and Excise Taxes as Critical Powers of the U.S. Congress To summarize, it should be recalled that the powers of the U.S. Among these powers, one of the most important is the administration of excise taxes and the country’s import policy.
  • Privatization, Public-Private Partnerships, and Tax Policy in San Diego In the end, the San Diego Administration Government took control of the project and has been able to operate it successfully as a component of the open road system in the County.
  • The Laffer Curve: Tax Revenue History & Reforms In the practical sense, the Laffer Curve is a simple graph, which is demonstrated below: In the chart, the far left point on the X-axis represents the 0% tax rate which would result in the […]
  • Case Study on Tax Crimes: Distributional Implications of Joint Tax Thus, the above action amounted to tax avoidance since the firm failed to pay the full amount of tax to the United States government.
  • Biden’s Push to Increase Tax on the Rich From New York Times The major reason for this news is Biden’s will to increase taxes for the rich to fund his plan of reshaping the economy.
  • The Child Tax Credit Program’s Analysis According to the creators of this bill and the research conducted, the CTC reflects the ideological idea of providing as many citizens of the country as possible with the same living standards.
  • Article Review on Carbon Tax Policy Whereas the article points out the financial implication of the Canadian government policy on climate change, it failed to appreciate the general ethical benefits that the world will gain if Canada commits to climate change […]
  • Tax Effect of Salary Dividends & Cash Withdrawal If Bob chooses to structure his venture as a corporation, it is recommended for him to receive salaries up to the IRS’s highest level.
  • Business Charitable Contributions for Tax Purposes For instance, the way a tax is imposed for a sole proprietor is different for a partner in a partnership business.
  • The Impact of the New Tax Law on Executive Compensation The latter point connects executive compensation and the issue of the new tax law, which affects several aspects of the former.
  • Taxes, Public Utilities, and Impact on Households However, despite the direct impact of the levies on the household budgets, taxes are critical in supporting governmental expenditure, including offsetting costs of delivery of public utilities and services, such as road construction and healthcare.
  • The Tax Cuts and Jobs Act (TCJA) of 2017 The 2017 tax reform ended up in the first significant changes in the field since the Tax Reform Act of 1986.
  • Researching Worldwide Tax Avoidance According to Prosser & Murray, “tax avoidance” is the legitimate use of the taxation system to decrease the amount of tax payable within a regulatory framework.
  • The Concept of Interperiod Tax Allocation Under this method, the current income tax of a specific period is considered as the income tax expense of that period.
  • Tax Consequences Advice Sue of the Above Transactions The information provided is not sufficient for one to tell if Sue has been receiving rent and if yes, she has been paying her tax.
  • Double Tax Convention Between Kenya and the United Kingdom of Great Britain and Northern Ireland 5 Stefan, who is responsible for the daily activities of the company, will receive management fees arising from the operations in Kenya will be taxed in Kenya inline with Article 14 of the agreement that […]
  • Tax Research Problem: Mr. Smith Medical Case Study He also incurs maintenance expenses of the pool and other medical expenses, while the existence of the pool increases the value of the home to some extent.
  • The Supreme Court’s Internet Sales Tax Decision The added input leads to an increase in products’ prices, making it hard for e-commerce startups to compete with other large-scale retailers and wholesalers.
  • The Sale Tax Legislation of Hong Kong This study also explained the provisions of the IRD that relate to the Goods and Services Tax in Hong Kong. Tax administration of a particular country is a significant concern as the issue of development […]
  • Estate and Ownership Transfer Tax Policy and Regulations in Connecticut Fairfield Therefore, estate owners should considerably reduce their property taxes according to the tax laws to ensure that those who inherit the estates remain comfortable in the future.
  • Specific Tax Measures to Digitalized Economy The formation of the digital economy determines the need for appropriate development and improvement of the processes and mechanisms of state regulation.
  • Analysis of Federal Tax Policy According to Page, “Implications of Federal tax policies of significance to farmers are particularly notable in tax burdens, land prices and the ownership of capital assets, the cost of capital relative to labor, the size […]
  • Taxation: CPA Tax Software The implementations of the income tax law require the political and legal willpower of those who are in the leadership positions.
  • Tax Return Process Analysis Form 1040 is the form of the US Individual Income Tax Return. The next section of form 1040 gives the amount of tax and credits.
  • Taxation Law: UK Inheritance Tax For example, in the UK inheritance tax is a tax levied on the assets of the dead and therefore estate tax and inheritance tax are more of the same.
  • Tax Research: Ed and Whitney case The taxability of the elemental document that was discovered by use of CCH remedies will be dependent on manifold concerns, encompassing: whether there is a taxable income that is associated with this document and if […]
  • Accounting: The Payment of Taxes The payment of taxes for both Rigas and Adelphia with one Adelphia check and the outrageous spending of the company could also be used as a recommendation for the discovery of the case.
  • Working Income Tax Benefit in Canada Several measures have been enacted to address the issues of income inequality in the tax system, including the changes in the treatment of capital income, changes in unemployment and the structure of the labor market, […]
  • Property Taxes Herb Construction Company This is because the taxes of the property are directly due to the development of the property. Therefore, Herb Construction Company should capitalize interest and property taxes of the hotel under construction.
  • Tax Consequences: Result of Selling The tax implication on the shares that Amy intents to dispose depends on two issues: First, whether Amy sells her shares to Beth and Meg or to either Beth or Meg, and secondly, whether she […]
  • Deferred Tax Assets and Liabilities This paper seeks to examine whether deferred tax assets and deferred tax liabilities satisfy the definition and recognition criteria for assets and liabilities according to the AASB framework for the preparation and presentation of Financial […]
  • Bylaw No. 8370: Downtown Revitalization Tax Exemption The council of the City of Prince George is charged with the mandate of providing a variety of services to residents and inhabitants of the area.
  • Australian Income Tax Law Reform on Education Expenses Under the prevailing Australian federal income tax law, stipulated in the provisions of the income tax law, section 8A of the Income Tax Assessment Tax 1936 refutes deductions exceeding $250 of expenses incurred on self-education.
  • Progressive Consumption Tax A consumption tax is a duty on goods and services spent by a household. Third, consumption taxes have a wider base, easier to implement as all consumption levels are taxed and it is considered a […]
  • Taxation: Income and Corporation Tax in UK In 2006 for example, the percentage of the national income absorbed by tax in the UK averaged those of the developed countries.
  • The Role of Offshore Tax Havens This particular scenario was seen in the aftermath of the 2008 financial crisis wherein despite the bailouts provided by the government there was still a certain degree of hesitance on the part of banks to […]
  • New Tax Proposals: Perry Tax Plans Indeed, one of the outstanding attributes of this tax plan is that it attempts to level down all major tax deductions. The good element in this tax plan is that it brings about total change […]
  • Factors That Should Take Into Account When Designing a Tax System to Finance Public Expenditure The tax collected is principally used to finance the expenditure of the government, for instance, paying of government officials and provision of essential services to the residents of the country.
  • Tax Treatment of Attorney Fees During the pendency of her appeal in the court of law, the Texas County changed the zoning law permitting two residences per acre as against the original law of only one residence per every two […]
  • Legal Costs of Acquiring a Capital Asset: Tax Problem Analysis In 2010, she appealed the decision to the Texas County Board of Supervisors challenging the County’s zoning law. Is the attorney fee incurred in the process of challenging the appraisal of the land tax deductible?
  • Taxable Events and Complexity of the Tax System Arguments in favor of corporate formations as taxable events: Taxable events refer to financial transactions that are likely to lead to tax consequences.
  • Taxation Law: Tax and Fees Paid to the Attorney The tax of the $11,000 fees paid to the attorney by Sarah is a fixed amount hence no deductions will be made on the value.
  • China Looks at Introducing Tax on Foreign Currency Transactions Even though the overall outflow of foreign capital slowed down, there is still the danger to the economic wellbeing of the country.
  • Tax Eligibility and Disability Payment Another reason is that the injury he suffers occurred during his service in the army as an employee of the state.
  • Individual Income Tax & Home Mortgage Interest Deduction To ease the burden of taxation on the citizens, the United States Congress included the deduction for home mortgage interest in the internal revenue code.
  • Tax Research Memorandum for Lunar Corporation Further, Mo wants to write off the loans as a bad debt expense on the returns for the personal tax. Mo is a shareholder and an employee of the company.
  • Taxpayers’ Reaction to Payment of Tax Thus, taxpayers’ reaction to payment of taxes should focus on tax compliance and tax evasion in order to understand underlying behaviours that influence tax payment and evasion and get insights on such reactions.
  • Trade Groups Identifies Medical Device Makers Passing on Federal Tax If higher pricing is illegal in the context of the new taxation policy for all organizations and importers of medical devices, it implies that they need to look for alternative ways of recovering the costs.
  • Offshore Tax Structures and Foreign Exchange Regulations In this paper, the researcher seeks to determine the offshore tax structures and foreign exchange regulations that will affect the decision to take the Venezuelan boulevards into the international market.
  • American Tax Code Analysis Throughout the article, the authors revolve around the desire to push the conversation forward bearing in mind that it is long overdue. The energy sector is the latest target in the proposed White House budget […]
  • Corporate Tax to Grind In an effort to eliminate the negative impacts associated with tax avoidance both to the corporation and the overall economy, the article highlights some of the efforts that countries are making.
  • Taxation: The Australian Carbon Tax According to Bourdieu’s school of thought, economic capital is the total sum of material objects that a person possesses. Carbon taxes indicate these costs, and they have the capacity to minimise inequalities from forms of […]
  • Financial Operation Within Tax-Exempt Country This means that the test results obtained cannot help to explain the capital structure of companies in tax-exempt countries that still developing.
  • Tax Periods and Method. Organization and Summary The main source of income / revenue in this business will be offering of SEO services to website owners. Einstein Web Solutions is committed to provision of SEO services that will raise the online presence […]
  • Tax-Deductible Losses in the United States After the end of the civil war, the need for federal revenue declined considerably, and the government officials thought that abolishing the income taxes would be a fair approach to relieve the citizens.
  • Worldwide Tax versus Territorial Tax The main distinction between the United States’ tax system and that of most countries is the manner in which the earnings that are made in foreign countries are handled when they are repatriated back to […]
  • Researching Tax in the United States The defensible strategy for the client is based on the six steps in the tax research process namely establishment of facts, identification of issues, location of the authority, evaluation of the authority, development of conclusions […]
  • Tax Effects of Various Methods of Forming a Corporation The possible methods are the distribution of the assets to the partners who are expected to contribute the assets to the corporation; the method of transferring the assets to the corporation directly; and the method […]
  • Individual Income Tax Gains due the cancellation or sale of a life insurance policy before the death of the insured are subject to taxation because the tax exemption on proceeds from life insurance applies upon the death of […]
  • Taxation: Tax Compliance The approach is relevant for determining the undisclosed income since it involves assessing the tax accountability by examining the financial performance of a taxpayer from assortment of sources outside the declaration of the taxpayer and […]
  • Federal Income Taxation: Tax File Memorandum It is within this layover moment that Mark takes a 4-hour nap in the ferryboat Is the cost of meals Mark purchased while on his usual rounds deductible?
  • Australia’s Car Fringe Car Tax Benefits In May 2011, the federal government implemented some changes to the income tax laws and one of the areas that was affected was the car fringe benefit calculations and the take home pay of employees.
  • Ethical Standards for Tax Professionals She is entitled for tax deduction if the equipment purchased is for producing income for the business and in this case the equipment has to be capitalized in the year of purchase.
  • Australia Corporate Tax on Income The rate on the income for the tax period 2009/2010 is 30%. Replacement value is the price to be paid in future for the stock.
  • Canadian Income Tax Return For instance, if an employee uses a motor vehicle for both corporate and private purposes, he/she should distinguish between these issues and count only the kilometers passed on business while the total amount of kilometers […]
  • Discriminatory Tax Provisions But the establishment of a uniform tax regime to implement the principle of freedom of movement of goods as one of the four fundamental freedoms for the entire region has not been smooth and the […]
  • Stock Share: Tax on Transfer Gain It is important to note that according to the Special Law for the Promotion of Venture Business, the new technology investment company is not considered registered.
  • Income Tax Deductions Issues According to Fishman, income tax is the tax levied on the incomes of businesses both corporations and other legal entities and on the income of individual citizens of a country.
  • Business Ethics: Tax Scamming Of course, in viewing the problem ethically, small business whose incomes suffer from abusive taxations, as their main goal is to justify the inputs made by investors, to produce the outputs for the customers and […]
  • Tax Planning for Low-Income Taxpayers The definition of family in the family trust selection regulations will be changed to restrict lineal successors to children or grandchildren of the test persons or the test someone’s spouse.
  • An Existing Obesity Crisis: A Sugar Tax? Tirado agrees that the problem of obesity and, particularly, the issue of excessive sugar consumption, exists but the current measures and methods do not address the root of it.
  • COVID-19 Effect on Global Tax Collections The emergence of the digital economy has caused confusion concerning how tech companies should pay their corporate taxes. The Global Tax Project of 2013 seeks to address these issues to avoid a patchwork of national […]
  • “Why Do Developing Countries Tax So Little?” by Besley and Persson The present paper offers a response to the article by discussing the major strengths and weaknesses of the arguments provided in the article and describing the implications of the findings.
  • Strategies of Tax Avoidance This paper aims to dwell upon several issues, including previously mentioned problems along with the use of the Double Irish and the Dutch Sandwich by Google, Google’s negotiation with the Internal Revenue Service, and Microsoft’s […]
  • Zero Personal Income Tax in the US Thus, the primary source of tax income for Saudi Arabia is the taxation of various types of businesses. The authors went on to theorize that the tax system in general and tax rates for both […]
  • Opioid Epidemic and Budget Losses in Tax Revenue The authors provide the estimates of the budget losses in tax revenue associated with opioid use disorder. The authors also claim that the investment in the prevention and treatment of substance abuse disorders can mitigate […]
  • Snack Tax as an Effective Food Policy This is because the Massachusetts Food Policy Alliance abides in the contents and provisions of the Toronto Food Policy. In conclusion, I strongly believe that effective food policy can impact the abilities of governments to […]
  • Border Tax Adjustment and Greenhouse Gas Emissions With regards to this, the short-term effect of the BTAs is that they will create equal competition conditions in the world market, while the long-term one is that the BTAs will contribute to the achievement […]
  • Reasons Why Countries Give Credit for Taxes Paid on Foreign Source Income The objective of this paper is to describe foreign tax credit and explain the reasons why countries give a tax credit to non-citizens.
  • Tax Money Usage on Military Spending Issue The fact that America won the Cold War and defeated the Soviets is taken as a vindication by the American leaders of the need to continue military spending.
  • Obama’s Tax Relief Plan Analysis The following graph outlines the proposed tax cut relief plan in detail and it would be analyzed in terms of the effect that it has had on the economy and it’s bearing on the American […]
  • Efficacy of the Taxes Act 2003 This paper critically examines the efficacy of the Taxes Act 2003, passed by former President Bush by cutting personal taxes and depreciation rates, in order to create more incomes and thus increase consumer spending, leading […]
  • President Bush’s Tax Cut Policies The impact of the tax cuts on the high-income households, the middle-income households and the low-income households have been assessed. Taylor argues that the tax cut policies of President Bush have minimized the amount of […]
  • Accounting for Sales Tax Revenue in Florida State The Florida State Department of Revenue has the responsibility of administering revenue laws of the state to its citizens as well as the laws that are related to the inspection of the books of accounts […]
  • Tax Law in Accounting Thus, it is not surprising to see that the higher the income of the individual the higher would be share in taxes. Similarly, difference in net income between financial accounting and tax accounting could be […]
  • Approaches of Different Tax Systems The advantage of National sales tax is that it is not a direct tax and accordingly the taxpayers may not feel that as a cut from their income is being made directly.
  • Carbon Tax in Norway & Denmark: Economic Analysis In the long term, carbon tax can make the use of alternative energy sources the new norm and set the standard in stone.
  • Tax Authority’s Effectiveness and Implications Apply the provisions of tax treaties in a fair and consistent manner; promote the fair sharing of taxing rights in tax treaties and the development of domestic laws; not promote or facilitate tax evasion or […]
  • Ecology of Commerce: Green Taxes The Ecology of Commerce is a critical analysis of the way we conduct our business and our society today. This will provide incentives for businesses to produce things in an environmentally sound way, and it […]
  • Internal Revenue Service in Tax Administration This is an analytical as well as empirical study with a view to exploring the deficiencies and impediments in the way of effective operation and management of the Internal Revenue Service.
  • Lomanno: Tax Law and Court Rulings Report The second fact is that the husband of a petitioner did not have the permission to sign her name to income tax in the years that are discussed and there was also no approval to […]
  • The Provision of the Information on Tax Treatments The complexity of this framework might be confusing for people and presuppose some difficulties with the determination of various types of payments that are obliged to do.
  • How to Tax the Digitalized Economy As such, the company has to pay fees twice, which results in a significant economic burden, increased prices to compensate for the loss and a general slowing of business growth.
  • Property Taxes Concepts Analysis To adjust this indicator, it is necessary to review the market value of the property regularly, which will be the main function of the group of market agents.
  • Property Taxes and Assessment System The government should consider not only the current value of the property in the area and state of the evaluated object but also the term of ownership to distribute taxes equitably.
  • Sweden’s vs. Ireland’s Tax Policy In this regard, it can be expressed differently, noting that in Sweden, there is no tax on the property of individuals in its classical sense.
  • Tax Policies in Sweden and Ireland The tax burden on the economy is more significant in Sweden than in Ireland, and the rules of fiscal laws are more stringent in the Scandinavian country, although its self-regulation is more advanced.
  • Microeconomics: Cigarette Taxes and Public Smoking Ban The problem of passive smoking will be minimized when the number of smokers decreases. It is agreeable that the meager incomes of such families will be used to purchase cigarettes.
  • The Political Stream: New Tax on Sweetened Beverages We delegate our rights to the government, including the local government of San Francisco, so that they can perform the measures that are beneficial to us.
  • Tobin Tax for the United Kingdom and United States The reason is that the commission has put it clear that the financial transaction tax will not only be implemented to financial institutions that are within the FTT region.
  • Swobodaville City’s Tax Revenues Most of the tax rates are imposed by either the central government or the local authority. When the income tax rates are set locally, there is a tendency for the authority to offer lower tax […]
  • Federal Government’s Tax Spending: Rules and Limits The article called “Federal employees ask taxpayers to buy them personal items” posted on The Washington Examiner news portal by Sarah Westwood discusses the areas of expenditures of the federal employees and the prohibitions concerning […]
  • International Tax Havens and Impact on Arizona and World The study will be focusing on examining the impact of international tax havens on Arizona and the world, specifically the international financial market, which in turn has the capacity to affect the agribusiness environment, its […]
  • “Tobacco Companies Elude Tax Increase” by Matt Apuzzo In this work, some economic models will be considered in order to understand the intentions of the author of the article “Tobacco Companies Elude Tax Increase” and clear up whether the information presented is reliable […]
  • Income Tax Breaks and Housing for the Elderly This policy was formulated in 2002 to cater to the elderly as it had been found that the majority of them suffered from fall-related injuries.
  • Corporate Tax Assignment in the UK and the US It is noteworthy that companies-residents of countries that have established income tax treaties with the US are only subjected to taxation “only to the extent the income is attributable to a permanent establishments in the […]
  • New Tax Reform of 2017 in the United States The paper consists of two parts: the essence of the reform and its perception by various social and political stakeholders will be summarized, and then the reform will be investigated in the context of the […]
  • Deferred Tax Assets and Future Payments Study The author also establishes the significance of the research question, explaining that determining the presence of a strong association between deferred taxes and future tax payments could be used to improve the current financial accounting […]
  • The Importance of Tax in Our Life A critical view of the tax reveals that its intention was not to boost health outcomes for the citizens of Cook County, but to help the administration in raising about $1.
  • Repealing Soda Tax: Pros and Cons The article titled “Chicago’s Soda Tax is Repealed,” published by The Economist on October 13th, 2017, celebrates the repeal of the infamous soda tax, which received large amounts of criticism from both the soft drink […]
  • Republican Tax Rewrite: Helps Some, Hurts Others The purpose of the piece is to explore the consequences of the recent tax rewrite, pushed by the Republicans. An excellent alternative to the government’s actions, in this case, would be to involve the public, […]
  • Tax Reform in the United States Furthermore, the adoption of the Consumption Tax as the foundation for the current fiscal system will encourage the residents of the United States to change their buying behavior.
  • Corporate Tax Rates and Project Valuation In this paper, the influence of corporate tax rates and the importance of project valuation, cash flows, and risk analysis will be discussed.
  • Personal Income Tax: Arguments For and Against In addition, there is a liability to a personal income tax and the responsible tax paying entity must compute, file and pay tax as per the rules of the state.
  • US Corporate Taxes Improvement and Alternatives The repatriation process will also increase the total US income; since many companies will relocate, back home and their tax revenues will benefit the country.
  • American Estate Tax, Laws and Ways of Minimization The fair market value of the estate is adjusted with the amount of related allowable deductions to obtain the value of the net value of the Estate.
  • Value-Added Tax in the United Arab Emirates The discovering of the oil sources transformed the UAE to the economically powerful country; however, the other side of the problem is that oil and gas made the UAE dependent from the sources and can […]
  • Drug Legalization: Increased Taxes v Health Issues A brief analysis of the problem shows that legalisation of drugs is an efficient and even necessary measure to address the problem.
  • UAE Tax Policy Analysis Put back on the blue hat and make recommendations
  • Effects of Taxes and Economic Incentives on Business In spite of the wide array of these elements, analysts argue that taxes play the most critical role in influencing the location choices. In this paper, the author will assess the impacts of taxes and […]
  • The “Waist Banned” Article – Taxes on Junk Food On the other hand, the article describes the possibility of a failure in the projected effects of taxation on junk foods because of the likelihood of junk food addicts to forego expenditures of important foods […]
  • Taxes on Alcohol and Cigarettes as a Healthcare Costs According to the Senate Committee mandated to oversee the department of finance, the cost of managing diseases related to liquor and cigarettes in the next ten years will be over $1.
  • The Strategy of Toyota and H&R Tax Service As such, the key to success as well as prolonged existence in the market calls for the organizations to establish a tradition that ensures the development of modern initiatives, training and the application of new […]
  • Tax Shelter and Offshore: Control and Investment From this point, the long-term investment can be discussed as the effective tax shelter method to reduce the taxable income and tax payments.
  • Liberty Tax Services Company Analysis This essay describes an interview conducted to establish the reasons why the management of this company decided to ignore all norms and jokingly use phrases that seem to belittle the quality of services offered by […]
  • Federal Tax Law: Implications of Replacement The integration of the federal tax rate would improve the government’s capacity to ensure equity in the administration of the tax law. Replacing the federal income tax rate would contribute to considerable promotion in the […]
  • Increasing Sin Tax for Increasing Costs of Medical Care Should The United States Federal Government increase “sin taxes” on alcohol and tobacco to help pay for the increasing costs of medical care?
  • VAT Versus Flat Tax Versus More Progressive Tax On the other hand, progressive tax is the form of tax where tax rate varies with income. In this case, the VAT tax may reduce the level of aggregate demand in the country.
  • Need of Tax Cuts
  • University Students Should Not Pay Tax
  • Taxes and Education: A Cooperation That Went Awry
  • Hollywood Taxes for the Film Industry
  • Taxes Effects on Goods and Services
  • Property Tax Role in a Developing Country
  • Tax Law Sources: Substantial Authority and Courts
  • Organizational Change Project “Fat Tax” in Denmark
  • Effectiveness of Carbon Tax in Environmental Sustainability
  • Tax Equity in Countries Economy
  • Best Tax Preparation Office in Tampa, Florida
  • Mineral Resource Rent Tax Policy
  • Using Taxes to Address Traffic Safety Problems in Oman
  • Impacts of the Implementation of Australia’s “Carbon Tax”
  • Bush Tax Cuts Debate
  • Taxes, Capitalism, and Democracy: Karl Marx vs. Plato
  • Tax Cuts in Keynesian Economics
  • Income Taxation in Canada
  • Putting Out the Fires: Will Higher Taxes Reduce the Onset of Youth Smoking?
  • State Management of Taxes and Policies
  • Inflation Tax – Printing More Money to Cover the War Expenses
  • Australian Taxation: Minerals Resource Rent Tax
  • Carbon Tax Advantages and Disadvantages in Australia
  • The Mineral Resource Rent Tax in Australia
  • Fixing Illinois’ Taxation Mess
  • Exempted From Paying Taxes: International Students Who Are Not Working
  • Self Managed Super Fund: Superannuation and Tax
  • Tax Hikes and the 2011 Economic Collapse
  • Fraudulent Accounting and Tax Evasion
  • Legal and Illegal Tax Shelters
  • Roles of Property Tax
  • Effect of tax on Vietnamese hangers
  • Economic Effects of Tax Reform
  • Tax Evasion in Egypt
  • Tax Avoidance Legal and Illegal Ways
  • The Evaluation of Tax Reform Strategies in the United States
  • The raise of Taxes at the United States
  • We Should Use Tax Money to Enforce Mandatory Drug Treatments on Drug
  • U.S. Corporate Tax Havens
  • The Issue of Huge Taxes
  • The Internal Revenue Service Uncovers Tax Fraud with a Data Warehouse
  • Government Spending and Tax Legislation Signed by the President
  • Welfare Expenditure Reduction: Obama’s Federal Worker “Tax”
  • Relationship Between Budget Deficits and Tax Cutting
  • Tax efficient financial planning
  • Fair Tax and Laffer Curve
  • The Significance of Lower Taxes to the average Canadian Citizen
  • Budgeting in USA: Property Tax
  • How tax cuts help revive the economy
  • American Tendency of Rising Taxes
  • Australian Goods and Services Tax System
  • The Fat Tax Concept
  • Are Capital Taxes Racing to the Bottom in the European Union?
  • Does Firm Heterogeneity Impact the Effectiveness of Carbon Taxes?
  • Why Are Property Taxes Important for Local Communities?
  • Can Border Carbon Taxes Fit Into the Global Trade Regime?
  • How Do Taxes Affect Interstate Migration?
  • Who Benefits Most From Property Assessment Taxes?
  • Are Consumption Taxes Preferable to Income Taxes for Preventing Macroeconomic Instability?
  • Does Social Trust Increase Willingness to Pay Taxes to Improve Public Healthcare?
  • Can Green Taxes Save the Environment?
  • How Do Tax Policies Affect Individuals and Businesses?
  • Why Doesn’t the US Include Sales Tax in Prices?
  • Should Euro Area Countries Cut Taxes on Labor or Capital in Order to Boost Their Growth?
  • Are Differentiated Carbon Taxes Inefficient?
  • How Do Capital Taxes Harm Economic Growth?
  • Can Property Taxes Reduce House Price Volatility?
  • Would People Rather Pay Taxes or Trade Taxes to Pay for Environmental Goods?
  • Are Environmental Taxes Affected by Legislatures’ Ideological Positions?
  • How Do Major Local Taxes Affect Private Employment?
  • Can Redistributive State Taxes Reduce Inequality?
  • Are Small Business Owners More Successful in Avoiding Taxes?
  • What Is the Most Important Tax Used at the Local Level?
  • Can Taxes Drive Agglomeration While Approaching the Global Economy?
  • How Effective Are Environmental Taxes in the Petroleum Industry?
  • Are Soft Drink Taxes an Effective Mechanism for Reducing Obesity?
  • Should the Government Increase Taxes on Oil to Encourage More Public Transport Use?
  • What Are the Ways to Save Income Tax in India?
  • How Do the Wealthy Minimize Their Tax Burden in the U.S.?
  • Are Taxes Credits Effective in Developing Countries?
  • How Do Taxes Affect the Incentive to Invest in New Intangible Assets?
  • Could Higher Taxes Increase the Long-Run Demand for Capital?
  • The Impact of Taxation on Investment Rates
  • Tax Havens: Strategies and Consequences of International Taxation Avoidance
  • Evaluation of Profit Shifting in Corporate Taxation
  • Use of Tax Incentives in Promoting Adoption of Renewable Energy
  • How Tax Policy Affects Small Business Growth and Entrepreneurship
  • Tax Compliance and Behavioral Economics
  • Wealth Taxation’s Feasibility in Addressing Income Inequality
  • Global Efforts to Tax Digital Economy Transactions
  • The Laffer Curve and Optimal Tax Rates
  • Tax Treaties, Double Taxation, and Taxation Rights Between Countries
  • Green Taxation Policies and Environmental Sustainability
  • Foreign Direct Investment Inflows and Taxation
  • Value-Added Tax and Consumption Taxes: Different Models
  • Property Tax in Funding Local Services
  • The Challenges of Tax Enforcement in Developing Countries
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IvyPanda. (2024, March 1). 267 Interesting Tax Topics to Write about & Examples.

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50 Focused Taxation Research Topics For Your Dissertation Paper

Published by Ellie Cross at December 29th, 2022 , Revised On August 15, 2023

A thorough understanding of taxation involves drawing from multiple sources to understand its goals, strategies, techniques, standards, applications, and many types. Tax dissertations require extensive research across a variety of areas and sources to reach a conclusive result. It is important to be able to understand and present tax dissertation themes well since they deal with technical matters.

Choosing the right topic in the area of taxation can assist students in understanding how much insight and knowledge they can contribute and the tools they will need to authenticate their study. 

If you are not sure what to write about, here are a few top taxation dissertation topics to inspire you .

The Most Pertinent Taxation Topics & Ideas

  • The effects of tax evasion and avoidance and the supporting data
  • How does budgeting affect the management of tertiary institutions?
  • How does intellectual capital affect the development and growth of huge companies, using Microsoft and Apple as examples?
  • The importance and function of audit committees in South Africa and China: similarities and disparities
  • How taxation can aid in closing the fiscal gap in the UK economy’s budget
  • A UK study comparing modern taxation and the zakat system
  • Is it appropriate to hold the UK government accountable for subpar services even after paying taxes?
  • Taxation’s effects on both large and small businesses
  • The impact of foreign currencies on the nation’s economy and labour market and their detrimental effects on the country’s tax burden
  • A paper is explaining the importance of accounting in the taxes department
  • To contribute to the crucial growth of the nation, do a thorough study on enhancing tax benefits among American residents
  • A thorough comparison of current taxes and the Islamic zakat system is presented. Which one is more beneficial and effective for reducing poverty?
  • According to the most recent academic study on tax law, what essential improvements are needed to implement tax laws in the UK?
  • A thorough investigation of Australian tax department employees’ active role in assisting residents of all Commonwealth states to pay their taxes on time
  • Why establishing a taxation system is essential for a country’s growth
  • What is the tax system’s greatest benefit to the poor?
  • Is it legitimate to lower the income tax so that more people begin paying it?
  • What is the most significant investment made using tax revenue by the government?
  • Is it feasible for the government to create diverse social welfare policies without having the people pay the appropriate taxes?
  • How tax avoidance by people leads to an imbalance in the government budget
  • What should deter people from trying to avoid paying taxes on time?
  • Workers of the tax department’s role in facilitating tax evasion through corruption
  • Investigate the changes that should be made to the current taxation system. A case study based on the most recent UK taxes studies
  • Examine the variables that affect the amount of income tax UK people are required to pay
  • An analysis of the effects of intellectual capital on the expansion and development of large businesses and multinationals. An Apple case study
  • A comparison of the administration and policy of taxes in industrialised and emerging economies
  • A detailed examination of the background and purposes of international tax treaties. How successful were they?
  • An examination of the effects of taxation on small and medium-sized enterprises compared to giant corporations
  • An examination of the effects of tax avoidance and evasion. An analysis of the worldwide Panama crisis and how tax fraud was carried out through offshore firms
  • A critical analysis of how the administration of higher institutions is impacted by small business budgeting
  • Recognising the importance of foreign currency in a nation’s economy. How can foreign exchange and remittances help a nation’s finances?
  • An exploration of the best ways tax professionals may persuade customers to pay their taxes on time
  • An investigation of the potential impact of tax and accounting education on the achievement of the nation’s leaders
  • How the state might expand its revenue base by focusing on new taxing areas. Gaining knowledge of the digital content creation and freelance industries
  • An evaluation of the negative impacts of income tax reduction. Will it prompt more people to begin paying taxes?
  • A critical examination of the state’s use of tax revenue for human rights spending. A UK case study
  • A review of the impact of income tax on new and small enterprises. Weighing the benefits and drawbacks
  • A comprehensive study of managing costs so that money may flow into the national budget without interruption. A study of Norway as an example
  • An overview of how effective taxes may contribute to a nation’s development of a welfare state. A study of Denmark as an example
  • What are the existing problems that prevent the government systems from using the tax money they receive effectively and completely?
  • What are people’s opinions of those who frequently avoid paying taxes?
  • Explain the part tax officials play in facilitating tax fraud by accepting small bribes
  • How do taxes finance the growth and financial assistance of the underprivileged in the UK?
  • Is it appropriate to criticise the government for not providing adequate services when people and businesses fail to pay their taxes?
  • A comprehensive comparison of current taxes and the Islamic zakat system is presented. Which one is more beneficial and effective for reducing poverty?
  • A critical evaluation of the regulatory organisations was conducted to determine the tax percentage on different income groups in the UK
  • An investigation into tax evasion: How do wealthy, influential people influence the entire system?
  • To contribute to the crucial growth of the nation, do a thorough investigation on enhancing tax benefits among British nationals
  • An assessment of the available research on the most effective ways to manage and maintain an uninterrupted flow of funds for a better economy

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We hope that you will be able to write a first-class dissertation or thesis on one of the issues identified above at your own pace and submit a solid draft. If you wish to use any of the above taxation dissertation topics directly, you may do so. Many people, however, prefer tailor-made topics that meet their specific needs. If you need help with topics or a taxation dissertation, you can also use our dissertation writing services . Place your order now !

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How to find taxation dissertation topics.

To find taxation dissertation topics:

  • Study recent tax reforms.
  • Analyze cross-border tax issues.
  • Explore digital taxation challenges.
  • Investigate tax evasion or avoidance.
  • Examine environmental tax policies.
  • Select a topic aligned with law, economics, or business interests.

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Choosing the Right Tax Approach for Long-Term Temporary Assignments

tax assignment conclusion

In the world of long-term temporary assignments, two popular approaches are often used: the Home-Based Tax Equalized (also known as the "Balance Sheet") and the Host Plus (also known as "Local Plus"). Our blog series has covered the basics of each approach, how to select the right assignment approach and finally we focus on tax.

It’s important to know that expatriate assignments are not one-size-fits-all. The budget of the employer, priorities of both the employer and the employee, and the salary affinity between the home and host countries must all be considered when deciding which approach the employer will use. This decision should be based on a variety of factors: assignment length, level of employee, assignment purpose, intended assignment conclusion, and home and host location.

Tax Treatment

The Balance Sheet uses tax equalization . This is where the employer pays all the tax obligations in both home and host locations and withholds a home hypothetical tax contribution from the employee’s paycheck. The hypothetical tax is equivalent to what the average person typically pays on that compensation level and family size in the home location. Social security contributions are typically made in the home country by both the employer and the employee.

For Host Plus, the employee typically pays the host country tax obligation on their compensation . The employer will often pay any additional taxes owed on the gross-up of the benefits. Some policy decisions will need to be made as to who pays any home residual tax obligations, as well as where social security will be paid. 

Each approach has its own benefits and challenges, and it is often important to understand which is best for each of your unique scenarios.

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We asked Pat Jurgens , our Director of Global Tax, for a more in-depth explanation of the key differences between the home-based tax equalization and host-plus tax methods.

Tax Equalization

The premise of the 'Home-based Tax Equalized' methodology is to maintain the assignee's home-based salary and benefits, provide for over-base expatriate allowances and reimbursements intended to cover the differences in costs between the home and host locations, and to provide for tax support during the assignment in the form of 'tax equalization.' With this home-based approach, the employer's intent is to keep the assignee whole, maintain the assignee's purchasing power, and maintain the same ability to save.

The assignee's share of the tax cost under equalization is referred to as hypothetical tax and is deducted from payroll. This payroll deduction is based on the tax law in the home country, using their stay-at-home salary and bonus compensation. However, hypothetical tax withholding is generally not remitted to the tax authorities in the home country. Instead, the hypothetical tax withheld is used to help offset the tax costs to the company.

In exchange for deducting the hypothetical tax from the assignee's pay, the company agrees to pay actual tax liabilities associated with the international assignment. This will include any tax incurred in the host country and any home country residual tax costs.

Actual tax liabilities during the assignment will vary significantly from a stay-at-home tax, including the following key factors:

  • The host tax system may result in a higher tax rate.
  • The base salary and bonus are generally taxable in the assignment location, as well as most expatriate allowances and reimbursements.
  • The company's contribution toward the tax liability is a tax benefit. This 'tax on tax' is handled through a gross-up calculation, so the calculated tax paid is inclusive of the taxable reimbursement of the employee's tax.

Tax equalization costs are often one of the largest cost elements of a typical home-based tax equalized package.

The premise of host-based packages is that the employee is responsible for host income tax and host social security on salary and incentives because the employee is on local compensation terms and conditions, and typically is on the local payroll. The employer is responsible for actual tax and social security (primarily host income tax and host social security) on any taxable allowances and reimbursements included in the calculation.

This generally includes a 'gross-up,' as reimbursing employee taxes is also generally considered taxable. The assignee's share of the tax costs under the 'host-plus' methodology is limited to tax and social security due on salary, incentive, and allowances delivered gross, if any. The employer's tax costs will include tax gross-ups on the allowances delivered net and also will include the full amount of the employer's contributions to host country social security on all taxable compensation, including salary and incentive. Under Host-Plus, there is no expectation that the employee's purchasing power is maintained. Additionally, the employee's tax position will be subject to tax law changes in the host country.

In certain circumstances, the employee may also incur tax in their home country. For example, U.S. citizens may incur a residual United States income tax in addition to the host country tax. This residual home tax is net of double tax relief, such as the foreign earned income exclusion and a foreign tax credit. Employers may expect the employee to be responsible for this residual home country tax or assist with reimbursing this home country tax liability.

The best method for a company to use will depend on several factors, such as the tax laws of the home and host countries, the company's budget, and the employee's preferences.

Here are some additional things to consider when choosing between home-based tax equalization and host-plus:

  • Tax laws: The tax laws of the home and host countries can have a significant impact on the cost of each method. In some cases, the home-based tax equalization method may be more expensive, while in other cases, the host-based tax gross-up method may be more expensive.
  • Company budget: The company's budget will also be a factor. Typically, the home-based tax equalization method may be more expensive, but the host-based tax gross-up method may be more expensive depending on the amount of allowances provided, the country combination, family size, and income level.
  • Employee preferences: The employees' preferences should also be considered. Some employees may prefer the certainty of knowing exactly how much tax they will owe, while others may prefer the flexibility of the host-based tax gross-up method. Future plans will also be a factor as to whether the assignee intends to return to their home country. 

Ultimately, the best way to choose between home-based tax equalization and host-based tax gross-up is to work with a tax advisor to understand the specific circumstances of the company and the employee.

Pat will be presenting at our Global Tax Chat in December - subscribe to our blog to hear more!

Related Posts

tax assignment conclusion

Comparing Home-Based Tax Equalized and Host Plus Assignments

Choosing the right assignment approach: understanding compensation & allowances.

tax assignment conclusion

The Rise of One-Way Transfers: Ensuring the Right Compensation Package

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