Taxation Policy Evaluation

𝐇𝐨𝐰 𝐝𝐨 𝐲𝐨𝐮 𝐦𝐞𝐚𝐬𝐮𝐫𝐞 𝐭𝐡𝐞 𝐢𝐦𝐩𝐚𝐜𝐭 𝐨𝐟 𝐭𝐚𝐱 𝐩𝐨𝐥𝐢𝐜𝐲 𝐨𝐧 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭? Sounds like a simple question. But while reading and synthesizing 300+ empirical studies over the course of several years, Rebecca Lester from Stanford University Graduate School of Business and I realized that there are many answers to this question. "Investment" can mean new machines, R&D spending, an acquisition, a new factory, or new hires. Pick a different measure, pick a different dataset, and you can get a different answer to the very same policy question. That gap, between the question politicians ask and what different teams of researchers actually measure, explains a lot of the confusion and disagreement in tax policy debates. Becky and I reviewed and discuss this entire literature for the Journal of Accounting and Economics. We discussed a lot with colleagues, including giants in the field like Michael Devereux and Christoph Spengel on London Business School campus two summers ago ( 👇 ). The resulting paper is open access (link below). But we did not want to step there. Today we are releasing its companion resource, free for everyone: 🔍 measuringtaxeffects.com 📊 84+ ways researchers measure how firms respond to taxes, sorted by outcome: investment, R&D, M&A, employment, and where profits get booked. Each one with its strengths, its weaknesses, and the data behind it. 📁 51 datasets documented: what is in them, who can access them, what they cover, where they fall short. 📖 A glossary of 40+ terms for anyone entering the field. ➡️ 𝘽𝙚𝙩𝙩𝙚𝙧 𝙢𝙚𝙖𝙨𝙪𝙧𝙚𝙢𝙚𝙣𝙩 𝙢𝙚𝙖𝙣𝙨 𝙗𝙚𝙩𝙩𝙚𝙧 𝙚𝙫𝙞𝙙𝙚𝙣𝙘𝙚. 𝘽𝙚𝙩𝙩𝙚𝙧 𝙚𝙫𝙞𝙙𝙚𝙣𝙘𝙚 𝙢𝙖𝙠𝙚𝙨 𝙛𝙤𝙧 𝙗𝙚𝙩𝙩𝙚𝙧 𝙩𝙖𝙭 𝙥𝙤𝙡𝙞𝙘𝙮. For PhD students: start here instead of reverse-engineering measures from 40 different papers. Everyone else: this is what the plumbing under empirical tax research actually looks like. Both the paper and the site are meant to be a useful resource, but certainly not perfect or complete. Tell us what is missing. #Taxation #TaxPolicy #Research #taxesmatter

Tinbergen Rule & Tax Policy in India As good policy stems from sound, clear thinking, in this post, I lay out how India should be thinking CLEARLY about tax policy to enhance ease of doing business and ease of living. A rule attributed to the first Nobel Laureate in Economics, Jan Tinbergen, is imp for Indian policymakers - especially in taxation - to understand. One policy instrument can only satisfy one policy objective. IOW, trying to satisfy multiple objectives (growth and inequality) using tax policy leads to CONFUSED tax policy, and thereby dissatisfied, angry citizens. Some argue for fairness or equity in a tax system. However, using the tax system to pursue this objective creates significant economic distortions, especially by impinging on economic efficiency. Moreover, welfare programs, especially through the use of direct benefit transfers provide an economically efficient way to achieve fairness or equity. Just like policymakers will not hobble welfare programs with generating growth as well, taxation policy should not be hobbled with any other objective except economic efficiency. A simple tax system enables easy compliance by taxpayers and efficient regulation by the tax administration. Simplicity of the tax system encompasses a host of features such as simplicity of the legal language, certainty of law, uncomplicated procedures and a logical and comprehensible tax structure. Simplicity implies minimizing the cost of compliance as well as the cost to the administration. As an economically efficient tax system is simple to administer and a simple tax system is economically efficient, the two objectives are symbiotic to each other. Thus, a simple tax system follows naturally when the objective is kept clear and focused: economic efficiency. Complexity in the tax law makes it difficult for taxpayers who want to comply and easier for those who want to evade taxes. A law does not become complex merely by reason of its length in terms of number of pages or number of sections. The complexity arises from needless slabs for similar products or services, ambiguous and incomprehensible language, and a lack of certainty regarding its true scope and implementation. Reducing complexity of tax law also follows as a simple consequence of tax policy that displays a clear, focused objective: economic efficiency!

Understanding the Impact of Recent Changes in Indian Taxation for #Long-#Term Capital Gains on #Real #Estate The recent Indian budget has introduced a significant change in the taxation of long-term capital gains (#LTCG) on real estate. At first glance, the reduction of the #LTCG tax rate from 20% to 12.5% seems like a beneficial move for investors. However, a closer examination reveals a crucial detail: the removal of the indexation benefit. #Indexation adjusts the purchase price of an asset to account for inflation, which can significantly reduce the taxable gain and thus the tax payable. Without this benefit, even though the nominal tax rate is lower, the effective tax burden may actually increase. For example, if you purchased a property several years ago, inflation would have significantly increased its price in nominal terms. Indexation would have allowed you to account for this increase, reducing your taxable gain. Now, with the removal of #indexation, you pay tax on the full nominal gain, which could lead to a higher tax outgo than under the previous regime. In contrast, #Dubai presents a strikingly different scenario with its zero percent tax on long-term capital gains from real estate. This tax-friendly environment has been a significant draw for global investors, contributing to #Dubai's vibrant #Realestate market. Investors must weigh these differences carefully. While India's reduction in LTCG tax rate may appear attractive, the removal of indexation could mean higher effective taxes, especially for long-term investors. On the other hand, Dubai’s zero percent LTCG tax policy offers a starkly different proposition, potentially providing a more favorable environment for real estate investments. Understanding these nuances is crucial for making informed investment decisions in the real estate markets of these two dynamic regions.

Today I had the honour of speaking at the European Parliament during the discussion on the revision of the Tobacco Tax Directive. It was a public hearing! I contributed as an independent academic, drawing on my work in public finance, health economics, and the systemic effects of public policies across Europe. The Directive goes beyond taxation. In a Europe facing demographic ageing, rising chronic diseases and pressure on public budgets, tax policy must support economic resilience, public health, and fiscal sustainability. I focused on three key areas: 🔹 1. Illicit Trade, Elasticities & Purchasing Power Illicit markets grow when price gaps widen. Data from the EU Anti-Fraud Office shows a clear correlation between higher excise levels and illicit activity. The proposal assumes low price sensitivity, yet research shows newer nicotine products are highly price-elastic (–1.6 to –2.2). Sharp tax increases risk pushing consumers toward unregulated and illegal products, not toward quitting, especially in lower-income countries. I stressed the need for a stronger PPP adjustment to ensure real harmonisation across very different Member State economies. 🔹 2. Inflation & Fiscal Stability The impact assessment estimates the Directive could raise EU-wide inflation by 0.55%. While revenue may increase by €14bn, the EU’s public debt (≈€15tn) means higher inflation could raise interest payments by €12–16bn per year, offsetting most gains. Inflation also reduces household purchasing power and slows recovery. 🔹 3. Health Risks, Scientific Evidence & Recital 36 Independent evaluations by BfR, SHC, the UK Committee on Toxicity, and the US FDA confirm that newer nicotine products are significantly less harmful than cigarettes. Equal taxation for products with unequal risk contradicts EU principles used in alcohol, sugar, and energy taxation. My research shows that a 1% fall in smoking rates leads to 13 fewer hospital discharges per 10,000 people and €331m in annual savings (Italy). If half of smokers switched to lower-risk products, direct savings could exceed €700m per year. A stable, risk-proportionate tax framework can support harm reduction and generate major health and fiscal benefits. I am grateful to the European Parliament for the invitation and for today’s constructive discussion. Evidence-based policymaking remains essential for a healthier and economically stronger Europe. In this link you can find more info https://lnkd.in/dH-uvttp Brunel University of London Brunel Business School Brunel Public Policy Università Ca' Foscari Venezia Press-office Brunel #EuropeanParliament #TobaccoTaxDirective #PublicHealth #HealthEconomics #TobaccoControl #IllicitTrade #RiskProportionateRegulation #FiscalPolicy #EUHealth #TaxPolicy #Prevention #PolicyMaking #EvidenceBasedPolicy #Sustainability

The recent announcement that capital gains tax will now apply on all share disposals in Malawi – regardless of how long the shares have been held – marks a significant shift in our investment environment. Previously, investors who held shares for more than one year were exempt from capital gains tax. This encouraged long-term investment on the Malawi Stock Exchange and supported patient capital for local companies. With that exemption now removed, every profit made from the sale of shares will be subject to tax. From Government’s point of view, this is about fairness and revenue generation, particularly at a time when trading in shares has become a meaningful source of income for individuals and institutions alike. However, the bigger question is: How will this affect long-term investment and market growth in Malawi? If taxation is set too high or implemented without supportive incentives, it may discourage local participation in the stock market, reduce liquidity, and make it harder for Malawian companies to raise affordable capital for expansion and job creation. Capital may shift towards property, cash holdings, or offshore markets. That said, if this policy is applied with moderate rates, clear thresholds, protection for small investors, and incentives for long-term and productive investment, it could contribute to a stronger, more transparent and mature capital market. In an economy that urgently needs private sector growth, jobs and innovation, tax policy should not only aim to collect revenue, but also to stimulate confidence, encourage investment and deepen markets. The key is not simply taxing capital gains — it is designing the system in a way that grows the very base it seeks to tax.

Government Revenue-Nepal   Tax Revenue Trends: - Value Added Tax (VAT): While VAT revenue shows a consistent increase, it may also indicate a higher burden on consumers, possibly due to inflation or limited alternatives, rather than reflecting robust economic activity.   - Excise Duties: Although excise duties exhibit a steady upward trend, it could signify a heavier reliance on consumption of excisable goods, raising concerns about potential health and social implications.   - Income Tax: Fluctuations in income tax revenue might signal inconsistent income levels among taxpayers, reflecting economic uncertainties and challenges in sustaining employment and income stability.   While total tax revenue shows growth, it has be driven more by increased tax rates or enforcement rather than genuine economic expansion, suggesting a heavier tax burden on individuals and businesses.   Reevaluation of Tax Policies: The government of Nepal should reassess tax policies to prevent excessive burden on taxpayers, particularly amidst economic uncertainties. Adjustments may be necessary to ensure fairness and alleviate strain on households and businesses.   Diversification of Revenue Streams: There's a critical need to diversify revenue sources beyond traditional sectors. By reducing reliance on volatile imports, the government can mitigate risks associated with sectoral fluctuations and potential revenue shortfalls.   Structural Reforms and Investment: Achieving greater revenue diversification requires significant structural reforms and investment. GoN must prioritize initiatives aimed at broadening the revenue base and enhancing fiscal resilience through sustainable economic strategies.   In conclusion, while the revenue data indicates growth, policymakers must address underlying challenges and risks to ensure the long-term fiscal stability and economic resilience of Nepal. This entails a balanced approach focusing on tax policy adjustments, diversification of revenue streams, and strategic investments in structural reforms. #budget202425

📰 The #Ghana Revenue Authority spent nine times as much money collecting its presumptive 'Tax Stamp' than it raised in revenue from the tax. In this new International Centre for Tax and Development Working Paper, Kombat Alex and I present the first ever detailed analysis of the revenue effectiveness of presumptive taxation, with clear implications not just for Ghana but for all countries currently implementing presumptive taxes: 1️⃣ there is an urgent need to evaluate presumptive tax regimes with a view to their cost effectiveness as well as equity implications 2️⃣ higher minimum thresholds can increase revenue efficiency and protect low income earners (and yet most countries do not have any thresholds) 3️⃣ we need to examine whether the non-revenue goals of presumptive taxation (sensitisation, data collection, building future taxpayers) can be better achieved with more targeted policies The full paper is available for download here: https://lnkd.in/eTiWUPRM

This working paper was published on November 8, 2024. It examines the relationship between citizens’ perceptions of tax authorities and the governments’ efficiency in collecting VAT and CIT revenues in Africa. Drawing on data from 32 countries over 2014-2019, Telma Yamou, Alun H. Thomas, and Kaihao Cai find a negative and significant association between negative perceptions of trust in authorities (the tax department) from the Afrobarometer survey and tax efficiency for these revenue categories. A 1 percent increase in the share of citizens’ perception of little or no trust in the tax department leads to a 0.22 percent decrease in value added tax (VAT) efficiency, controlling for macroeconomic indicators. The magnitude of the effect is significantly greater in fragile compared to non-fragile states. For corporate income tax (CIT) productivity focusing on tax payments of corporates we find a significant effect only in fragile states. Perceptions about corruption in tax authorities have a similar effect on VAT and CIT tax efficiency since perceptions about trust and corruption capture the tendency to misappropriate revenues but we are unable to distinguish the two effects except for fragile states. These findings suggest that in the face of fragility, policies aimed at improving fiscal capacity should place a high importance on ensuring that citizens believe resources will be used properly, an aspect of tax policy not typically prioritized. #africa #imf #incometax #cit #valueaddedtax #vat #taxadministration #taxpolicy #taxes

𝗧𝗮𝗻𝘇𝗮𝗻𝗶𝗮 𝗧𝗮𝘅 𝗥𝗲𝗳𝗼𝗿𝗺 𝗖𝗼𝗺𝗺𝗶𝘀𝘀𝗶𝗼𝗻 𝗣𝗿𝗼𝗽𝗼𝘀𝗲𝘀 𝟮𝟴𝟰 𝗖𝗵𝗮𝗻𝗴𝗲𝘀 𝘁𝗼 𝗢𝘃𝗲𝗿𝗵𝗮𝘂𝗹 𝗦𝘆𝘀𝘁𝗲𝗺. The Presidential Commission on Tax Reforms has submitted a landmark report proposing 284 changes to overhaul Tanzania’s tax landscape. The recommendations aim to simplify taxation, expand the tax base, and shift the Tanzania Revenue Authority (TRA) from an enforcement-heavy body to a service-oriented institution. 𝗧𝗵𝗲 𝗦𝗲𝘃𝗲𝗻 𝗣𝗶𝗹𝗹𝗮𝗿𝘀 𝗼𝗳 𝗥𝗲𝗳𝗼𝗿𝗺: The Commission’s recommendations are structured into seven key areas to ensure a comprehensive transformation: • Policy and Legislation (146 proposals): Focusing on long-term stability and the creation of a National Tax Policy. • ICT Systems (41 proposals): Leveraging technology to reduce human intervention and errors. • Administration (30 proposals): Improving internal processes and efficiency. • Formalization and Base Expansion (20 proposals): Bringing the informal sector into the tax net. • Investment and Business Environment (15 proposals): Making Tanzania more competitive for investors. • Tax Dispute Resolution (14 proposals): Speeding up legal and administrative appeals. • System Management (13 proposals): Restructuring the overall governance of revenue collection. 𝗞𝗲𝘆 𝗛𝗶𝗴𝗵𝗹𝗶𝗴𝗵𝘁𝘀 𝗼𝗳 𝘁𝗵𝗲 𝗢𝘃𝗲𝗿𝗵𝗮𝘂𝗹: 1. Legislative & Policy Stability A central proposal is the creation of a National Tax Policy to prevent frequent, unpredictable changes to levies and fees. The Commission also suggests enacting a comprehensive Taxation Act to clarify revenue-sharing between central and local governments and modernizing outdated excise and stamp duty laws. 2. Digital Transformation: To enhance compliance, the Commission advocates for: • A TRA Mobile App for registration, filing, and payments. • AI and Big Data Analytics for automated tax audits. • Integration of existing digital platforms to streamline data sharing. 3. Support for Small Businesses: To encourage the transition from the informal to the formal sector, the report proposes: • A one-year tax holiday for newly established start-ups and small businesses. • The creation of a National Business Database to track economic activity accurately. 4. Cultural Shift: From "Authority" to "Service" The Commission recommends a major rebranding of the Tanzania Revenue Authority (TRA) to the Tanzania Revenue Service (TRS). This change symbolizes a move toward taxpayer support and service-oriented collection rather than purely punitive enforcement. 5. Efficient Dispute Resolution: To clear the backlog of tax legalities, the proposals include: • A mandatory 90-day window for the Commissioner General to resolve disputes. • An online system for filing tax objections. • Establishing a dedicated Tax Division in the High Court to handle complex cases. 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗜𝗺𝗽𝗮𝗰𝘁: The Commission estimates these measures could increase tax collections by approximately TSh 11 trillion within three years.

Tax Inequity: The Hidden Burden on Pakistan’s Informal Workers A recent Brookings analysis on taxation in lower-income countries highlights a critical truth: informal workers—especially women—carry an invisible tax burden that deepens inequality. Pakistan’s fiscal landscape reflects this challenge. The Dual Reality of Taxation Pakistan’s informal economy accounts for over 70% of employment and over 30% of GDP, yet most of it operates outside the direct tax net. This creates a paradox: while informal businesses avoid income tax, their workers—particularly women in small trades or home-based enterprises—are not escaping taxation. Indirect Tax Regressivity  Over 60% of Pakistan’s tax revenue comes from indirect taxes such as Sales Tax, Federal Excise, and withholding taxes under the garb of income tax. These are regressive, applying the same rates to rich and poor alike, which means the poor pay a far larger share of their income in taxes. The Price of Survival  Every purchase—from food to utilities to fuel—chips away at the limited income of informal workers. For women earning daily wages, this shrinks real purchasing power and deepens income inequality. Beyond the Basics: Five Critical Reforms 1. Formalization Incentives Instead of Penalties Instead of continuously widening indirect taxes, Pakistan could design incentives for gradual formalization such as simplified registration or reduced initial tax rates for small businesses joining the formal economy. This reframes taxation as a path to inclusion, not punishment. 2. Data Gaps and Measurement Challenges  The informal sector is poorly documented, making equitable taxation difficult. Building gender-disaggregated data on informal earnings, market participation, and consumption patterns can help design fairer taxes and better social protection schemes. 3. Linking Tax Policy with Social Protection  Taxes and transfers should be seen as two sides of the same coin. If women in the informal economy are indirectly taxed, the state should ensure compensating benefits through targeted subsidies, healthcare, or pension coverage for informal workers. 4. Recognition of Unpaid and Care Work  Women often subsidize the economy through unpaid labor in the areas of childcare, elder care, home-based production, etc. yet receive no fiscal recognition. Introducing care credits or deductions within the social protection or tax system can acknowledge this economic contribution. 5. Learning from Global Examples  Pakistan can draw lessons from models of Mexico & Philipines to design inclusive fiscal policies. The Bottom Line Until fiscal policy accounts for the invisible tax burden carried by informal workers—especially women—the pursuit of both revenue and equity will remain incomplete. #TaxPolicy #GenderEquity #PakistanEconomy #FiscalReform #InclusiveGrowth  https://lnkd.in/egHEfmpR