An analysis of buoyancy and elasticity in the local tax systems

Early examples[ edit ] In the early days of the Roman Republicpublic taxes consisted of assessments on owned wealth and property. These taxes were levied against land, homes and other real estate, slaves, animals, personal items and monetary wealth.

An analysis of buoyancy and elasticity in the local tax systems

Volume 6, Issue 1. Tax elasticity and buoyancy estimates are the dynamic tools for measuring the tax performance. The main objectives of the study are to explore the tax system performance of Zimbabwe through the traditional tax ratio trends, dynamic measures tax buoyancy and tax elasticity. The study has applied traditional regression approach and the Dummy Variable Approach to calculate tax buoyancy.

For the study periodboth methods have yielded a tax buoyancy statistic of 1. Using the Dummy Variable Approach, the study revealed that there is no significant differences in tax performance for the Zimbabwean Dollar Era and the Dollarisation Era.

Tax Elasticity, Buoyancy and Stability in Zimbabwe - [PDF Document]

In an effort to enhance efficiency in government operations, the study has highlighted parastatals inefficiency that need immediate attention. Tax ratio trend has revealed an increase in effort over the dollarisation period.

Introduction No doubt that Zimbabwe is over-relying on tax revenue to sponsor government spending. For over the past decade tax revenue has remained the major source of domestic revenue in Zimbabwe. Themeasurement of tax elasticity and buoyancy would be very beneficial in terms of reforms in tax structure as well as revenue administration.

Tax elasticity and buoyancy can aid in identifying weaknesses in the tax structure and in formulating strategies to correct these weaknesses and improve the outturn on the fiscal accounts given the prevailing macroeconomic conditions, Cotton A desirable property of a tax system is that income elasticity and buoyancy should be equal or greater than unity, Bonga Such property ensures that revenue growth keeps pace with that of Gross Domestic Product GDP without frequent discretionary changes.

Moreover, the study of tax elasticity and buoyancy is also useful for revenue forecasting. The fiscal deficit is the core issue of most of the developing countries over the past several decades, and the reason behind the large increase in fiscal imbalance is the rapid expansion in expenditure and low revenue collection, Quazi and Sulaiman It is hypothesized that the tax revenues of a state economy would be sensitive to the macroeconomicperformance of the state economy measured in terms of inflation and the growth of real income, Dholakia and Dholakia Tax revenue may change due to a variety of factors, such as changes in income, changes in tax rate and tax base, changes in efficiency of tax assessment and collection, among others.

The responsiveness of tax revenue to such changes can be explained with the help of tax elasticity and buoyancy. There have been few empirical studies done on estimating the buoyancy and elasticity of Zimbabwes tax system.

How Buoyant is the Tax System? New Evidence from a Large Heterogeneous Panel

The distinction between the tax elasticity andbuoyancy is very useful in analyzing and evaluating whether future revenues will be sufficient to meet the resource needs without changing the rates or bases of the existingtax. Tax buoyancy is a crude measure which does not distinguish between discretionary and automatic growth of revenue.

Elasticity is a preferred measure of tax responsiveness since it controls for automatic revenue changes. If there is no change in tax rates and tax base during the reference period, buoyancy will be same as elasticity, Mishra measured using two concepts - tax elasticity and buoyancy.

While tax elasticity measures the response of revenue to income changes, net of discretionary tax measures, tax buoyancy measures the total response of tax revenue to changes in income.

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analysis is used to estimate income tax revenue elasticity which is a measure of productivity of the tax system. The estimated results show that the income tax system is responsive to its tax base (Gross Domestic. Estimating the elasticity of personal income tax to gross earnings from income tax statements in Greece: implications for tax buoyancy by ATHANASIOS O.

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Kenya’s tax reform programme, Wagacha () argues, should seek to (a) improve the efficiency and productivity of taxation, (b) improve tax collection and administration while lowering the rates, and (c) gain tax effectiveness through greater tax elasticity.

Barreix has been the source of numerous good ideas and our valued colleague in the Tax Analysis and Revenue Forecasting Program at Harvard University since its inception. Tax Elasticity and Buoyancy 35 Tax Buoyancy Tax Elasticity policy units also help ensure that tax systems are efficient, fair, and simple to.

An analysis of buoyancy and elasticity in the local tax systems

study focuses on elasticity and buoyancy for the period to estimate tax system in Bangladesh The study reveals that estimates of elasticity and buoyancy are higher for Direct Taxes followed by Sales Tax and VAT.

How Buoyant is the Tax System? New Evidence from a Large Heterogeneous Panel