Portal de Periódicos da CAPES

Presumptive Taxation: Lessons from Bulgaria

2006; Taylor & Francis; Volume: 18; Issue: 4 Linguagem: Inglês

10.1080/14631370601008456

1465-3958

Konstantin Pashev,

Corruption and Economic Development

Abstract This article draws on the experience of Bulgaria with two forms of presumptive taxes—the patent (licence) tax and the minimum social insurance income thresholds. It argues that there is an inevitable trade-off between efficiency and equity, which may drive presumptive taxation away from its initial objectives of simplicity and lower compliance and enforcement costs. Therefore presumptive taxes should not be overloaded with equity objectives, or used as tax incentives, but rather assigned to enhance collection efficiency and reduce the cost of voluntary tax compliance of the small business. The study concludes that their optimal use might be as licence taxes on micro-businesses and the self-employed levied by local governments rather than as central taxes on small business income. Notes Dr Konstantin V. Pashev, Associate Professor of Public Finance, Centre for Public Administration, New Bulgarian University and Senior Fellow, Economic Programme, Centre for the Study of Democracy, 5 Alexander Zhendov Street, 1113 Sofia, Bulgaria. Konstantin.pashev@online.bg. 1. Ehtisham Ahmad & Nicholas Stern, The Theory and Practice of Tax Reform in Developing Countries (Cambridge University Press, 1991), p. 276. 2. Efraim Sadka & Vito Tanzi, 'A Tax on Gross Assets of Enterprises as a Form of Presumptive Taxation', IMF Working Paper 16, 1992. On the early history of presumptive taxation see also Vito Tanzi & Milka Casanegra de Jantscher, 'Presumptive Income Taxation: Administrative, Efficiency and Equity Aspects', IMF Working Paper, 54, 1987. 3. Special tax regimes for small business in transition and acceding countries are reviewed annually in European Commission, 'Implementation Report on the European Charter for Small Enterprises in the Candidate Countries' and related National Reports, http://ec.europa.eu/enterprise/enterprise_policy/charter/reports.htm. 4. For more on this see James Alm, Jorge Martinez-Vazquez & Friedrich Schneider, ' "Sizing" the Problem of the Hard-to-Tax', in James Alm, Jorge Martinez-Vazquez & Sally Wallace (eds), Taxing the Hard to Tax: Lessons from Theory and Practice (Elsevier, 2004), pp 33–44. 5. Jorge Martinez-Vazquez, 'Who Benefits from Tax Evasion? The Incidence of Tax Evasion', Public Economics Review, 1, 2, 1996, pp. 105–135. 6. For an overview see also Kenan Bulutoglu, 'Presumptive Taxation', in Parthasarathi Shome (ed.), Tax Policy Handbook (IMF, 1995); and Victor Thuronyi, 'Presumptive Taxation', in V. Thuronyi (ed.), Tax Law Design and Drafting (IMF, 1996). 7. Victor Thuronyi, 'Presumptive Taxation of the Hard-to-Tax', in James Alm et al. (eds), Taxing the Hard to Tax: Lessons from Theory and Practice (Elsevier, 2004), p 112. 8. For a detailed discussion of the tachsiv see Arye Lapidoth, 'The Israeli Experience of Using the Tachsiv for Estimating the Taxable Income', Bulletin for International Fiscal Documentation, 31, 1977, pp. 99–106. 9. A. Gancheva, 'Minimalen osiguritelen dokhod na naetite litsa za 2005 g.', Byuletin na NOI, 2004, 3, pp 8–9. 10. This threshold has usually been set at the level of the VAT threshold, except for 2003, when the VAT threshold was reduced to BGL 50,000 while the patent tax threshold remained at the old level of BGL75,000, thus obliging VAT-registered companies with double-entry bookkeeping to pay patent tax if their turnover was between BGL 50,000 and BGL 75,000. 11. Tax incentives for small business constitute a large topic in itself, which is outside the scope of this study. 12. Seth Terkper, 'Managing Small and Medium-Size Taxpayers in Developing Economies', Tax Notes International, 13 January 2003, pp. 211–234. 13. Such a distinction is feasible only in principle. In practice a distinction between those who evade taxes 'because of need' and those who evade taxes 'because of greed' implies a high degree of value judgment and can hardly be applied objectively in individual enforcement. 14. See for instance Thuronyi, 'Presumptive Taxation of the Hard-to-Tax'. 15. Parthasarathi Shome, 'Tax Administration and the Small Taxpayer', IMF Policy Discussion Paper, 2, 2004. Additional informationNotes on contributorsKonstantin V. Pashev Dr Konstantin V. Pashev, Associate Professor of Public Finance, Centre for Public Administration, New Bulgarian University and Senior Fellow, Economic Programme, Centre for the Study of Democracy, 5 Alexander Zhendov Street, 1113 Sofia, Bulgaria. Konstantin.pashev@online.bg.