2. Journals & Books

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    Designing a Presumptive Income Tax Based on Turnover in Countries with Large Informal Sectors
    (International Monetary Fund, 2023-12-22) Feng Wei; Jean-François Wen
    Turnover (sales) is frequently used in developing countries as a presumptive income tax base, to economize on the costs of tax administration and taxpayer compliance. We construct a simple model where a size threshold separates firms paying turnover tax from those paying profit tax (regular income tax), and where firms have the option of producing in the untaxed, informal sector. The optimal turnover tax rate trades off two policy concerns: reducing informality and avoiding strategic reductions in sales by firms seeking to remain below the threshold for the profit tax. We provide analytical results and calibrate the model to compute the optimal policy using realistic parameter values. The optimal turnover tax rate for countries with large informal sectors is found to be around 2.5% across most scenarios, while the threshold separating the turnover tax regime from profit tax lies for the most part between $65,000 and $95,000. Introducing an optimally designed turnover tax reduces the rate of informality of businesses by about 12 percentage points in the calibrated model.
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    Kenya
    (International Monetary Fund, 2024-01-17)
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    Tax Evasion from Cross-Border Fraud
    (IMF, 2020-11-13) Emmanouil Kitsios; João Tovar Jalles; Genevieve Verdier
    How can governments reduce the prevalence of cross-border tax fraud? This paper argues that the use of digital technologies offers an opportunity to reduce fraud and increase government revenue. Using data on intra-EU and world trade transactions, we present evidence that (i) cross-border trade tax fraud is non-trivial and prevalent in many countries; (ii) such fraud can be alleviated by the use of digital technologies at the border; and (iii) potential revenue gains of digitalization from reducing trade fraud could be substantial. Halving the distance to the digitalization frontier could raise revenues by over 1.5 percent of GDP in low-income developing countries.
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    Gender and Economic Growth in Uganda
    (World Bank, Washington, DC, 2005) Ellis, Amanda; Manuel, Claire; Blackden, C. Mark
    Uganda is a leader in Sub-Saharan Africa, in recognizing linkages between economic growth and gender issues. These linkages are critical for achieving the Millennium Development Goals. The study assesses the legal and administrative barriers faced by women, as identified by the Bank's Foreign Investment Advisory Service (FIAS) and the International Finance Corporation's (IFC) Gender-Entrepreneurship-Markets Unit. The structure of the report mirrors that of the FIAS 2003 Administrative Barriers to Investment Report, and is designed to highlight the gender dimensions of that research to encourage further replication. The findings of this report indicate the considerable potential for economic growth that exists, if Uganda is to unleash the power of women, and support their full economic participation in the private sector. This assessment considers the relationship between gender and economic growth in Uganda in the context of promoting women's participation in business and entrepreneurship. Men and women both play substantial, albeit different, economic roles in the Ugandan economy. Each contributes about 50 percent of GDP, and women represent 39 percent of businesses with registered premises.
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    Uganda's Recovery
    (World Bank, Washington, DC, 2001-03) Reinikka, Ritva; Collier, Paul
    This book consists of series of studies written by a range of specialists who analyze the responses of private sector agents--households, farms, and firms--and of the government of Uganda itself, to the macroeconomic and structural reforms implemented since the late 1980s in a society recovering from a traumatic civil conflict. The importance of this line of inquiry cannot be underestimated because the success or failure of market-oriented reforms depends crucially on just how private sector agents are able to respond to incentives and opportunities created by the reforms. The analysis in this book draws on quantitative data derived from a series of household surveys and from surveys of firms conducted in the 1990s and more recently in 1999/2000. The household surveys permit analysis of the evolution of income, expenditures, and poverty during this period. The impact of reforms on rural factor markets, on crop and livestock production decisions, and on firms' investment decisions are also among the issues researched in this report. While this report praises Uganda's achievements where warranted, it provides an objective assessment of the reforms and does not shy away from identifying areas where policy mistakes were made. It points out where major weaknesses still exist, notably, public sector corruption, the still poor enforcement of contracts, and the deficiencies in the physical infrastructure.
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    Customs Modernization Initiatives
    (World Bank, Washington, DC, 2004) De Wulf, Luc; Sokol, José B.
    This volume presents case studies of customs modernization initiatives in eight developing countries: Bolivia, Ghana, Morocco, Mozambique, Peru, the Philippines, Turkey, and Uganda. The purpose of these case studies was to obtain a firsthand view of how these countries undertook customs reforms and to assess their success. The overall lessons learned from these studies are presented in chapter 2 of the Customs Modernization Handbook (World Bank forthcoming), a companion volume that provides policymakers, practitioners, and project managers from development agencies with an overview of the key issues they need to address in preparing and implementing customs modernization initiatives. The audience for the Customs Modernization Handbook is customs officials who are called on to design and implement customs reform and modernization strategies, as well as staff members of the World Bank and of other multilateral and bilateral development agencies who support developing countries in implementing such strategies. All the case studies except for the one on Ghana were prepared using basically the same methodology, which aimed at identifying the origins of the reforms, the main drivers, and the outcomes. The Ghana case study is somewhat different, because it focuses on how the automation of trade and customs processes took the lead in the trade facilitation and customs reform.
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    Private Solutions for Infrastructure in Rwanda
    (World Bank, Washington, DC, 2005) Private-Public Infrastructure Advisory Facility
    This report aims to provide an objective assessment of the condition of Rwanda's infrastructure sectors and of the institutional and policy frameworks that are associated with them. It also provides a clear route map for infrastructure sector reform, as well as highlighting both the opportunities that exist for the private sector and the role that the donor community can play in assisting the Government with establishing priorities in infrastructure.
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    Budgeting for Effectiveness in Rwanda
    (World Bank, Washington, DC, 2010-10-01) World Bank
    The overall objective of this comprehensive report is to consider Rwanda's budget support in the context of its overall public expenditure and resources to: (a) provide an overview of Rwanda's experience with budget support, reform measures, and its progress of budget harmonization, (b) provide the first comprehensive assessment of all of Rwanda's overall public expenditures and resources between 2004 and 2007, and (c) provide the first summary of public expenditure reviews and related analytical work undertaken in priority sectors, covering varying periods between 2000 and 2007. Following this introductory chapter, chapter two reviews: (a) general budget support relevance, rationale, and outstanding challenges in the context of Rwanda by providing a historical background of budget support; (b) Rwanda's progress in budget support- related processes and practices; (c) economic and structural reforms to date; and (d) budget support predictability trends. Chapter three then assesses the net resources available to the government of Rwanda and how these resources were spent. In this chapter, resources are broken down by domestic revenue (tax revenue, nontax revenue, and other sources), external funding (grants and loans), and other financial resources; expenses are broken down by recurrent expenditures (operational expenditures, interest and commission, reimbursement of public debt, and subsidies and recurrent transfers), capital expenditures and net lending, and arrears. Chapter four follows with a detailed review of resource allocations and spending among the government's ministries, including its transfers to districts. Public expenditures are broken down according to the structure of the Organic Budget Law, considering recurrent and development spending by ministry and economic classifications. Chapter five reviews all sectors-not only ministerial expenditures, but also other sector?related spending across ministries and other expenditures that contribute to a sector but are not part of central?government spending. Chapter six summarizes the report, addresses outstanding challenges, and offers concluding remarks.
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    Using Tax Incentives to Compete for Foreign Investment
    (World Bank, Washington, DC, 2001) Wells, Louis T., Jr.; Allen, Nancy J.; Morisset, Jacques; Pirnia, Neda
    The book contains complementary essays on the use of tax incentives, to attract foreign direct investment (FDI). The first essay presents results of the authors' original research, and explores FDI, and issues of tax incentives, in the context of Indonesia. Their results mostly support the arguments made against incentives, particularly they find little evidence that when Indonesia eliminated tax incentives, there was any decline in the rate of FDI into the country. Similarly, the second essay surveys the research of others on the same topic, and pertaining to the same issues discussed in the first essay. They show that results of other researchers, are generally consistent with the findings of the research in Indonesia, notably that tax incentives, neither affect significantly the amount of direct investment that takes place, nor usually determine the location to which investment is drawn. Nevertheless, recent evidence has shown that when factors such as political, and economic stability, infrastructure, and transport costs are more, or less equal between potential locations, taxes may exert a significant impact. This is evidenced by the growing tax competition in regional groupings (i.e., the European Union) or, at the sub-regional level within one country (i.e., the United States). Both essays provide a basis for much more sophisticated analysis by policymakers than previously, and, both are important because they question governments' institutional arrangements that create agency problems with respect to tax incentive policies.
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    Transfer Pricing and Developing Economies
    (World Bank, Washington, DC, 2016) Cooper, Joel; Fox, Randall; Loeprick, Jan; Mohindra, Komal
    Recent years have seen unprecedented public scrutiny over the tax practices of Multinational Enterprise (MNE) groups. Tax policy and administration concerning international transactions, aggressive tax planning, and tax avoidance have become an issue of extensive national and international debate in developed and developing countries alike. Within this context, transfer pricing, historically a subject of limited specialist interest, has attained name recognition amongst a broader global audience that is concerned with equitable fiscal policy and sustainable development. Abusive transfer pricing practices are considered to pose major risk to the direct tax base of many countries and developing countries are particularly vulnerable because corporate tax tends to account for a larger share of their revenue. This handbook is part of the wider WBG engagement in supporting countries with Domestic Resource Mobilization (DRM) by protecting their tax base and aims to cover all relevant aspects that have to be considered when introducing or strengthening transfer pricing regimes. The handbook provides guidance on analytical steps that can be taken to understand a country’s potential exposure to inappropriate transfer pricing (transfer mispricing) and outlines the main areas that require attention in the design and implementation of transfer pricing regimes. A discussion of relevant aspects of the legislative process, including the formulation of a transfer pricing policy, and the role and content of administrative guidance, is combined with the presentation of country examples on the practical application and implementation of the arm’s length principle and on running an effective transfer pricing audit program. Recognizing the importance of transfer pricing regulation and administration for the business environment and investor confidence, this handbook aims to balance the general objective of protecting a country’s tax base and raising additional revenue with investment climate considerations wherever appropriate.
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    The Distributional Impact of Taxes and Transfers
    (World Bank, Washington, DC, 2017-08-24) Inchauste, Gabriela; Lustig, Nora
    The World Bank has partnered with the Commitment to Equity Institute at Tulane University to implement their diagnostic tool—the Commitment to Equity (CEQ) Assessment—designed to assess how taxation and public expenditures affect income inequality, poverty, and different economic groups. The approach relies on comprehensive fiscal incidence analysis, which measures the contribution of each individual intervention to poverty and inequality reduction as well as the combined impact of taxes and social spending. The CEQ Assessment provide an evidence base upon which alternative reform options can be analyzed. The use of a common methodology makes the results comparable across countries. This volume presents eight country studies that examine the distributional effects of individual programs and policy measures—and the net effect of each country’s mix of policies and programs. These case studies were produced in the context of Bank policy dialogue and have since been used to propose alternative reform options.
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    Leadership, Policy Making, Quality of Economic Policies, and Their Inclusiveness
    (World Bank, Washington, DC, 2008) Thomas, Rusuhuzwa Kigabo
    This paper analyzes the role of the leadership in the economic growth in Rwanda, a country that was seriously affected by civil war and the 1994 genocide. It appears that the will and the clear vision of the leadership in Rwanda were one of the central pillars of the very good economic and social performances in Rwanda. This is particularly important because the country has almost no natural resources and the economy and its fundamentals were completely destroyed by the 1994 genocide. This paper thus helps enrich the various economic growth models by stressing the importance of the quality of leadership.
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    Entrepreneurship Education and Training
    (Washington, DC: World Bank, 2014-06-17) Robb, Alicia; Valerio, Alexandria; Parton, Brent
    This report summarizes the key themes and findings from three in-depth case studies of EET programs in Ghana, Kenya, and Mozambique. Each case study produced rich information on the programs context, the landscape of programs in each country, and the qualitative insights from local EET stakeholders. This report synthesizes information from across the case studies to analyze the extent to which these countries programs are meeting the needs of local entrepreneurs. It also introduces findings from global EET research to show how programs in the case-study countries relate to what is known about global practice in EET. From this synthesis, the report presents a set of key findings intended to illuminate how EET programs can be better aligned with local needs and promising EET practices globally.
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    Sin Tax Reform in the Philippines
    (Washington, DC: World Bank, 2016-07-06) Kaiser, Kai; Caryn, Bredenkamp,; Roberto, Iglesias,
    Excise taxes on tobacco and alcohol products can be an effective instrument for promoting public health through curbing smoking and excessive drinking, while raising significant revenues for development priorities. In 2012, the Philippines successfully passed a landmark tobacco and alcohol tax reform—dubbed the “Sin Tax Law.” This book describes the design of the Philippines sin tax reform, documents the technical and political processes by which it came about, and assesses the impact that the reform has had after three years of implementation.
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    Tax Theory Applied to the Digital Economy
    (Washington, DC: World Bank, 2021-03-02) Lucas-Mas, Cristian Oliver; Junquera-Varela, Raul Felix
    Digital technology allows businesses to operate in a country without a physical presence, which poses challenges for traditional taxation. The digital debate focuses on direct taxation and the creation of new taxing rights arising from the tax claims of market jurisdictions on income obtained by foreign digital suppliers conducting business therein without any physical presence. Tax Theory Applied to the Digital Economy analyzes the tax-disruptive aspects of digital business models and reviews current tax initiatives in light of traditional tax theory principles. The analysis concludes that market countries’ tax claims are unsubstantiated and contravene the most basic foundations of tax theory, giving rise to a series of legal, economic, tax policy, and tax administration issues that policy makers cannot overlook. The authors propose establishing a digital data tax (DDT) that is a license-type consumption tax, rather than an income tax, on the international supply of Internet bandwidth to access digital markets. The DDT can be applied either globally or unilaterally, and could become a significant source of tax revenues for market jurisdictions. It is aligned with tax principles and it does not conflict with other tax initiatives: the DDT taxes foreign digital companies as consumers, while income tax proposals tax them as suppliers. The authors also propose creating a new global Internet tax agency (GITA) under the auspices of the United Nations that would provide a neutral forum for political discussion and technical assistance in the area of digital taxation. The digital economy is a global phenomenon that requires a global solution: the creation of global taxing mechanisms and global institutions that provide technical assistance and support for successful global implementation. The book explains difficult technical concepts in plain language and contributes to the digital tax debate in a way that can be understood by anyone. Such understanding is essential to obtaining global support, achieving tax compliance, and fostering multilateral tax cooperation.
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    Innovations in Tax Compliance
    (2022) Dom, Roel; Custers, Anna; Davenport, Stephen R.; Prichard, Wilson
    Recent decades have seen important progress in strengthening country tax systems. Yet many areas of reform have remained stubbornly resistant to major improvements. Overall, revenue collection still falls short of that needed for effective governance and service delivery. Tax collection is too often riddled with high rates of evasion among large corporations and the rich and by disproportionate, though often hidden, burdens on lower-income groups. As countries around the world deal with the large debt burdens induced by COVID-19, an in-depth look at how to strengthen tax systems is especially timely. Innovations in Tax Compliance: Building Trust, Navigating Politics, and Tailoring Reform takes a fresh look at tax reform. The authors draw on recent research and experience for their new conceptual framework to guide more effective approaches to reform. Building on the achievements of recent decades, they argue for a greater emphasis on the overlapping goals of building trust, navigating political resistance, and tailoring reform to unique local contexts—an emphasis achieved by identifying the most binding constraints on reform. This focus not only can lead to greater compliance, a fairer system, and higher revenues, but also can contribute to building state capacity, sustained political support for further reforms, and a stronger fiscal contract between citizens and governments.
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    Taxing Crime
    (Washington, DC: World Bank, 2022) Brun, Jean-Pierre; Julien, Rita; Waruguru, Joy; Ndubai, Joy Waruguru; Owens, Jeffrey; Siddhesh, Rao; Soto, Yara Esquivel
    Taxing Crime: A Whole-of-Government Approach to Fighting Corruption, Money Laundering, and Tax Crimes examines how tax audits and investigations can lead to uncovering white-collar crime and how investigations of corruption can, in turn, lead to prosecutions of tax evasion or recovery of unpaid taxes. Prepared jointly by the World Bank and the United Nations Office on Drugs and Crime (UNODC) Stolen Asset Recovery Initiative (StAR) and the Global Tax Policy Center at the Institute for Austrian and International Tax Law, Vienna University of Economics and Business, this report offers analysis, case studies, examples of legal and operational frameworks, and recommendations that policy makers can use to enhance cooperation between tax authorities and law enforcement agencies at the national and international levels. This study is designed to serve as a reference and source of advocacy for policy makers, but it may be useful to other practitioners as well, including law enforcement officials, investigating magistrates, and prosecutors. Specifically, chapters present strategic considerations for establishing communication channels between tax and criminal investigative agencies; suggestions for combining tax and financial crime prosecution as part of an interagency asset recovery strategy; and approaches to developing interagency information exchange at the regional and international levels. It concludes with recommendations on ways to enhance the roles of both the tax authorities in combating money laundering and corruption and of the law enforcement authorities in recovering the proceeds of tax crimes.
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    Tax gap analysis and way of expanding tax base among micro and small enterprises in Kamukunji Jua-Kali metal in Nairobi County, Kenya
    (Kenya School of Revenue Administration, 2022-10-26) Felix, Kilonzi
    This research analysed the tax gap and way of expanding tax base among Smes in Kamukunji Jua-Kali Metal in Nairobi County, Kenya. The research study specific objectives were to: identify the effect of legislation, establish the effect of corruption, explore the effects of knowledge and to establish the effect of low income on tax gap among SMEs in Kamukunji Jua-Kali Metal in Nairobi County, Kenya. The study findings are of significance to the government, importers, exporters, researchers and scholars. This study applied a mixed methods research approach. The study targeted 4000 SMEs dealing in agricultural products, building supplies, Kitchen wares (cooking) and Electrical Appliances. Primary data was used and triangulated with secondary data in the study. Primary data was collected by the use of questionnaires and the secondary data was collected from the relevant books and journals that aided the researcher in conducting the study. Multiple regression was used to represent the relationship between the dependent and independent variables of the study. Tables and graphs were used to represent data in this study. The findings show that SMES have complied with the existing laws on taxation although majority of respondents were neutral. On whether SMEs have upheld high tax morality, majority of respondents disagree. On whether SMEs have knowledge on various taxes they should pay, majority of respondents disagreed. Majority of respondents disagreed that SMEs have been experiencing low profitability. The study concludes that, SMEs have not fully complied with the existing taxation laws thus increasing the tax gap. They have not fully complied with the existing taxation policies thus increasing the tax gap. The tax authority has not invested resources in tax education which contributed to little knowledge on various taxes that SMEs should pay, this contributes to increase in tax gap. SMEs had registered some profitability but failed to comply with taxation. They did not benefit from tax subsidies since they had not complied with the relevant taxation laws thus leading to increased tax gap. This study, therefore, recommends that SMEs need to comply with the existing laws and policies so as to reduce the tax gap. Kenya revenue authority should carry awareness among SMEs on the importance of tax morality. Stiff penalties and even jail terms should be imposed on those who colluded to engage in tax immorality. KRA should invest resources aimed at creating awareness on the importance of tax compliance among the SMEs and also come up with an effective method of measuring the profitability of SMEs to ensure that the right taxes are paid.
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    Effects of Taxpayer Education on Tax Compliance of Small and Medium Enterprises in Meru Town
    (Kenya School of Revenue Administration, 2022-10-26) Gitonga, Salim Juma; Felix, Kilonzi
    Governments are striving to rally greater tax revenue domestically by increasingly reaching out to inform and engage taxpayers, aiming to foster an overall culture of compliance, in which citizens understand paying taxes as an essential aspect of their connection with their government. Taxpayer education is the channel linking tax administration and citizens and a significant tool to change tax culture. Studies done on tax compliance globally revealed that the level of the SMEs tax compliance in the developed nations is higher due to tax education. in Africa, the SMEs tax compliance rate is low and majority of the revenue authorities are unable to meet the tax targets due to inadequate tax education. SMEs have the potential to produce a lot of government revenue in Kenya, but this is not the case. It poses a huge threat to the country’s growth as a whole. Against this background, the purpose of this study was to uncover the effects of taxpayer education on tax compliance in Meru Town among SMEs. In particular, the study aim was to determine the effect of electronic taxpayers, taxpayer’s awareness programs and print media education on tax compliance among small and mediumsized enterprises in Meru Town, Kenya. The theories used include Theory of Planned Behaviour, economic deterrence theory and vroom’s expectancy theory. A stratified random sampling research design was used. The target population was 2,100 licensed SMEs in Meru Town according to Meru County Revenue Board (MCRB) county licensed sme’s report 2019 statistics source; a sample size of 384 SMEs was selected. The data was distributed to administrators, compliance officers and accountants of SME companies through the use of standardized questionnaires. Using descriptive and inferential statistics, data was analysed and multiple regression model was used to assess the relationship between the research variables.The results showed an R squared of 0.683, suggesting that 68% of differences in tax compliance are explained by all predictor variables. The outcome also revealed that electronic taxpayer education (β1 = 0.242, P = .000); stakeholder sensitization programme (β2= 0.349, P =.000); and print media education (β3= 0.132, P =.014) had a positive and significant effect on tax compliance among small and medium enterprises. The study concluded that when combined, electronic taxpayer education, stakeholder sensitization programme and print media education positively and significantly impact tax compliance among the small and medium enterprises.In particular, stakeholder sensitization programme was identified as the most significant predictor of tax compliance, followed by electronic taxpayer education and lastly print media education. The study recommended the need for the KRA management to strengthen aspects relating to electronic taxpayer education including having adequate tax materials in the internet,enhancing itax system and use of tax advertisements. It should also strengthen strategies relating to stakeholder sensitization programme such as seminars, workshops and road shows.Finally, the management should strengthen aspects relating to print media education including taxpaying culture, ethical attitudes and public awareness. This study makes significant contribution to theory, policy and practice in the area of tax education and compliance.
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    Forecasting Tax Revenues, Frequency of Observation Matter.
    (Kenya School of Revenue Administration, 2022-10-26) Masoud, Mohammed Albimana; Issa, Moh’d Hemedb
    This paper intends to examine whether using higher frequency data has more power in forecasting than low frequency data. The sample size ranges from 1996 to 2016 and 2000 to 2015. Ordinary Least Square (OLS) method was used to forecast three components of tax revenues including total revenue (TR), Pay As You Earn (PAYE) and Value-added Tax (VAT). The results show that, both TR and PAYE forecasts are slightly better when using low frequency data. However, for VAT, forecasting power is slightly better when using higher frequency data. Also, the nature of the tax can have different implications in selection of data frequency.