Question

write short notes

Nature of tax design and structure, tax administration, tax evasion and avoidance, and tax reforms in developing countries

2 pages

Answer 1

Nature of tax design and structure in developig countries

Value added taxes, personal income taxation of labour income, payroll taxes are the most important sourcess of revenue in many countries. Even under the income tax ,a large fractional of personal savings in practice is tax exempt. Of course there are some deviations between the forecasts from models of optimal policy and observed government policies even in the richest countries. For example, Friedman(1969) argued that the optimal inflation rate should be negative, whereas observed inflation rates have been positive even if relatively low.

Nature of Tax Administration in Developing Countries

The traditional seperation of tax policy and tax administration is shown to break down in developing countries, where tax administrators decide in what manner complicated tax legislation should actually be applied.

Nature of Tax Evasion and Avoidance in developing countries

Tax evasion and avoidance are both phenomena that are probably as old as taxation itself. Whereever and whenever authorities decide to levy taxes, individuals and firms try to avoid paying them. Though this problem has always been present, it becomes more pressing in the course of globalization as this process extends the range of opportunities to circumvent taxation while simultaneously reducing the tax of being detected.

Tax reforms in developing countries

It follows that the challenge for taxation is to raise domestic revenues from consenting citizens in poor and increasingly economies. Elected governments in poor countries are therefore facing hard choices about taxation. These decisions will most likely have profound impacts on the future of democratisation itself and on public service provision. They will also have considerable implications for the politics and sustainibility for aid.