Personal income taxation in the human capital development incentive

The article substantiates the opportunities for stimulating the human capital development through personal income taxation in Ukraine. The need for constant investments in the human capital for improvement of its quality has been substantiated by conceptual provisions of the human capital theory and empiric researches of its influence on economic growth. The completed analysis of theoretical concepts and practical use of income taxes worldwide allows substantiating the fact that concept of a flat income taxation can be successfully used to promote the human capital development. However, the analysis of income tax systems abroad shows that separate taxation tools for personal income, including tax allowances for education, are more efficient. This is especially typical for developing countries. In estimating investments in the human capital in Ukraine, it is found out that the share of working population with high skills increases against the decreasing actual expenses for higher education. In a meantime, foreign countries demonstrate the other economically correct dependence: the qualification level increases as real expenses to gain it increase. The analysis of real national expenses in Ukraine for one student and in the country in general also demonstrate their decrease. This proves the presence of problems in Ukraine that relate to financing the system of higher education. The methods of economic and mathematical simulation by building and parametrizing a number of functions allowed to substantiate the influence of investments in human education on the increase of the highly skilled labor, which in turn leads to the GDP growth. A scientific and methodical approach has been developed, based on the algorithm that takes into account the influence of the highly skilled labor factor (considering expenses for gaining the qualification) on the GDP level. This approach allows estimating the effectiveness of expenses on tax allowances and expediency of their use to promote investments in higher education in Ukraine. The economic consequences of the human capital development incentive by introducing tax allowances in Ukraine have been estimated. It is established that if the state increases expenses for higher education by granting allowances, the share of working population with high skills increases, thereby causing the GDP to grow by means of increasing employment level. However, it has been found out that the expenses for tax allowances are reimbursed only in the case where investments in fixed assets increase and amount no less than 25 % of the GDP.

Labor supply responses to income tax free and bracket expansions

PurposeAn important concern of economic policy analysis is how income taxes affect labor supply since this is crucial in assessing the efficiency costs of taxation and designing labor income taxation. The focus in the literature has been mostly to study the responses of high earners and women. The authors contribute to this literature by focusing more on how middle earners respond to financial incentives and whether the responses are different between men and women.Design/methodology/approachThe authors exploit substantial expansions in the level of individual income exempt from taxation and taxed at a lower marginal tax rate while the schedule of marginal tax rates remained the same. The authors adopt an empirical framework that is similar to Bosch and van der Klaauw (2012) and condition on the effects of other factors, such as inflows of foreign workers that may have affected the wages, participation and working hours of native males and females. The authors also conduct various sensitivity analyses to examine the robustness of the estimates.FindingsThe authors find robust evidence that the tax reforms increased the wages of medium and high educated married males and females significantly. They also had a positive impact on work participation that was more substantial for married women, especially the medium educated. The authors estimate significant positive own wage labor supply elasticities that are small and about the same for men and women when the authors condition on the labor outcome effects of inflows of EU and non-EU foreign workers, which changed the skill distribution of the economy and had a more significant impact on female labor outcomes. Smaller wage labor supply elasticities indicate lower disincentive effects and deadweight losses from the imposition of taxes and have implications on the design of optimal taxation of men and women.Originality/valuePrevious investigations of the labor supply responses of both men and women to a given policy change have been identified mostly by exploiting changes in joint income taxation and marginal tax rates. The authors exploit substantial expansions in the level of individual income exempt from taxation and taxed at a lower marginal tax rate while the schedule of marginal tax rates remained the same. The income effects of these reforms could be limited since the reduced marginal tax rates apply to only part of the income.

Market Power and Income Taxation

This article analyzes concerns about market power and inequality in a model with multiple sectors, heterogeneous abilities, endogenous labor supply, and nonlinear income taxation. Proportional markups with no profit dissipation have no effect on the economy, and a policy that reduces a nonproportional markup raises (lowers) welfare when it is higher (lower) than a weighted average of other markups. With proportional (partial or full) profit dissipation, proportional markups are equivalent to a downward shift of the distribution of abilities, and the optimal policy rule with nonproportional markups maximizes consumer plus producer surplus despite concerns for distribution and labor supply distortion. (JEL D43, D61, H21, H23, H24, K21, L13, L40)

International Tax Planning: China's New Regime for Taxing Expatriate Income: Tightening the Screws or Vintage Wine in a New Bottle?

Expatriates have been fundamental to China's economic growth, contributing to the country's socioeconomic development and modernization. The second-largest group of expatriates in China are North Americans. Personal income taxation concessions for expatriate workers have been an important instrument to attract and retain skilled foreign labour since China opened its doors to foreign investment and an income tax was adopted four decades ago. A recent overhaul of the law on individual income tax introduced a number of changes to expatriate income taxation, including the winding back of some preferential concessions previously offered only to expatriates. A literal reading of these changes suggests that the new regime has led to harsher tax treatment of expatriates and increased their tax liability. This article considers whether this view holds up, by closely analyzing the new system's major features relating to individual income tax as they affect expatriates. The authors challenge the literal reading of the law and argue that the recent changes have not fundamentally altered the underlying policy on expatriate income taxation. Further, an economically stronger China has not observed any diminishment of the role of personal income taxation as an instrument of government policy, despite the recent changes. A generous interpretation of the legal terms and rules, and of the application of concessions under the amended system, may encourage more lenient treatment of Canadians and other expatriates working and living in China.

THE CONCEPT OF CORPORATE REFORM INCOME TAXATION IN UKRAINE

The article examines the feasibility and relevance of reforming corporate income taxation in Ukraine. We have scrutinized scientific researches of domestic and foreign scientists. The low fiscal efficiency of corporate income tax has been investigated and a stable relationship has been detected between the level of tax payment and a set of additional factors, namely the level of corporate management, the form of ownership and public attention. The high weight of the payment of income tax in the overall structure of the top-30 enterprises of Ukraine for the payment of taxes was noted. The international experience of corporate income taxation is analyzed and summarized. The necessity of replacing the income tax with another type of corporate income taxation has been substantiated. Systemic problems of the effectiveness of the existing models of corporate income taxation in the world are noted. The negative impact of low-tax on the functioning of tax systems in a lot of countries and the creation of the effect of uneven tax burden is emphasized. Information on the practical experience of introducing a tax on withdrawn capital in the foreign countries has been systematized. The low efficiency of that concept and the inexpediency of using this concept in the modern domestic conditions have been investigated. The possibility of replacing the value added tax has been assessed and the critical dependence of the budget incomes on the tax has been established. Concept of reforming corporate income taxation was developed and substantiated by introducing 1% turnover tax in addition to value added tax and the complete abolition of income tax. The volume of tax receipts for 2010—2019 has been estimated in the case of the introduction of author's concept of corporate taxation of income instead of current taxation system. The positive consequences for Ukrainian economy have been evaluated and systematized. Strong need to form a new tax culture and philosophy of interaction between representatives of tax authorities and business was emphasized. Keywords: corporate income taxation, corporate income tax, tax on withdrawn capital, turnover tax. JEL Classіfіcatіon H25 Formulas: 0; fig.: 0; tabl.: 3; bibl.: 19.