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This study aims to examine the effect of foreign direct investment (FDI) inflows on tax revenue in 34 developed and developing countries from 2006 to 2020.
Abstract
Purpose
This study aims to examine the effect of foreign direct investment (FDI) inflows on tax revenue in 34 developed and developing countries from 2006 to 2020.
Design/methodology/approach
Feasible generalised least squares (FGLS), a dynamic panel of a two-step system generalised method of moments (GMM) system and a pool mean group (PMG) panel autoregressive distributed lag (ARDL) approach were used to compare the developed and developing countries. Basic estimators were used as pre-estimators and diagnostic tests were used to increase robustness.
Findings
The FGLS, a two-step system of GMM, PMG–ARDL estimator’s results showed that there was a significant negative long and positive short-term in most countries relationship between FDI inflows and tax revenue in developed countries. This study concluded that attracting investments can improve the quality of institutions despite high tax rates, leading to low tax revenue. Meanwhile, there was a significant positive long and negative short-term relationship between FDI inflows and tax revenue in the developing countries. The developing countries sought to attract FDI that could be used to create job opportunities and transfer technology to simultaneously develop infrastructure and impose a tax policy that would achieve high tax revenue.
Originality/value
The present study sheds light on the effect of FDI on tax revenue and compares developed and developing countries through the design and implementation of policies to create jobs, transfer technology and attain economic growth in order to assure foreign investors that they would gain continuous high profits from their investments.
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Abubakar Musah, Peter Kwasi Kodjie and Munkaila Abdulai
This paper examines the short- and long-run effects of foreign direct investment (FDI) on tax revenue in Ghana.
Abstract
Purpose
This paper examines the short- and long-run effects of foreign direct investment (FDI) on tax revenue in Ghana.
Design/methodology/approach
The paper adopts the autoregressive distributed lag approach to estimate FDI’s long-run and short-run effects on tax revenue. The study uses time-series data from 1983 to 2019 for Ghana, mainly obtained from The Bank of Ghana, the World Bank and the IMF.
Findings
The results show that, in the short-run, FDI has no significant effect on direct tax revenue and total tax revenue but significantly hurts indirect tax revenue. In the long run, however, the results show that FDI has significant positive effects on indirect tax revenue and total tax revenue but no significant effect on direct tax revenue.
Originality/value
Empirical studies often fail to analyse the short-run and long-run effects of FDI on tax revenue. This study contributes to the mixed literature by analysing the short-run and long-run effects of FDI on tax revenue in an emerging market context. Additionally, this study employs three tax revenue measures in analysing the nexus.
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Jana Janoušková and Šárka Sobotovičová
It is important to consider economic and political factors when designing the tax mix and setting the level of corporate taxation. Increasing corporate taxation can be seen as an…
Abstract
It is important to consider economic and political factors when designing the tax mix and setting the level of corporate taxation. Increasing corporate taxation can be seen as an inefficient way to raise revenue for the state, as it can have a negative impact on investment and the competitiveness of firms. However, lowering corporate taxation can encourage investment and job creation, but it can also be perceived as supporting large corporations. The aim of this chapter is to evaluate corporate taxation, its position in the tax mix and its potential impact on economic growth. The revenues of corporate income tax (CIT) have an increasing tendency even though the tax rate was reduced from 41% to 19%. Revenues are influenced by both legislative changes and economic cycles. The level of taxation is also influenced by deductions, which include asset depreciations, research and development expenses, or loss deductions. The Pearson Correlation Coefficient was used to examine the correlation between the selected factors. A moderately strong positive correlation was found between GDP growth and CIT as a percentage of total taxes, as well as between GDP growth and CIT as a percentage of GDP.
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Usama Alqalawi, Ahmad Alwaked and Anas Al Qudah
This paper aims to determine the tax potential of G20 countries and estimate the tax revenue they could generate. The study evaluates the effectiveness of tax revenue collection…
Abstract
Purpose
This paper aims to determine the tax potential of G20 countries and estimate the tax revenue they could generate. The study evaluates the effectiveness of tax revenue collection for G20 nations from 2008 to 2020 and investigates the relationship between tax collection efficiency and tax evasion. The study also examines the link between tax collection efficiency and a proxy for tax evasion through anti-corruption efforts.
Design/methodology/approach
The study assumes that tax collection is a function of gross domestic product (GDP), population, imports and price level. The study uses a stochastic frontier analysis to calculate the efficiency of tax collection. It estimates the loss in total tax collection due to inefficiency by comparing actual and best-practice tax collection.
Findings
The findings indicate that anti-corruption measures and technological advancements positively impact tax collection efficiency. Great Britain is identified as the most efficient country in tax collection, whereas Saudi Arabia is the least efficient. Germany has the highest losses in tax collection due to inefficiency, while Australia experiences the lowest losses in tax collection.
Originality/value
This study suggests several practical implications. For example, legislators and policymakers should pay more attention to anti-corruption policies. Also, tax agenesis should focus on better understanding variations in tax collection efficiency between countries and how they relate to tax evasion.
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Ram Al Jaffri Saad, Aidi Ahmi, Norfaiezah Sawandi and Norazita Marina Abdul Aziz
This study aims to identify the inputs from zakat administrators and experts needed for more efficient and effective zakat revenue generation.
Abstract
Purpose
This study aims to identify the inputs from zakat administrators and experts needed for more efficient and effective zakat revenue generation.
Design/methodology/approach
Face-to-face interviews with zakat executives, administrators and experts are conducted to collect data.
Findings
The findings show three components of input required in the zakat transformation: environment, resources and history. The environmental component comprises five sub-components: companies, banks, zakat recipients, individual zakat payers and the legislative, while the resource sub-components comprise tangible and intangible resources. For history, two components, namely, achievements and challenges, need to be taken into account by the zakat administration.
Research limitations/implications
This study’s main implication is that the components proposed in this study can serve as the basis for developing new strategies for improving zakat collection and distribution management to achieve a more efficient and effective level.
Practical implications
This study will be helpful for policymakers, especially zakat authorities, on how to enhance their administration.
Originality/value
The model developed in this study will help the zakat administration to reform and enhance zakat compliance and zakat revenue generation.
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Baba Adibura Seidu, Yaw Ndori Queku and Emmanuel Carsamer
This paper focused on financial constraints scenario and tax planning activities of banks in Ghana. The study explores how financial constraints could motivate the banks to pursue…
Abstract
Purpose
This paper focused on financial constraints scenario and tax planning activities of banks in Ghana. The study explores how financial constraints could motivate the banks to pursue tax planning mechanism and the implication on tax revenue mobilisation.
Design/methodology/approach
The paper followed generalised method of moments and fixed effect estimators to investigate the financial constrained-tax planning activity nexus. Simulation approach is adopted to provide financially constrained bank scenario. Besides contemporaneous analysis, sensitivity analysis is conducted to determine time varying effect. Data from all the 20 commercial banks which have operated from 2008 to 2018 were used.
Findings
The paper found that when banks are faced with financial constraints, they exhibit lower cash-effective-tax-rate. The decomposition analysis also revealed that financially constrained banks are likely to take on both short- and long-term tax planning opportunities. The paper also found evidence of persistence in the tax planning activities under financial constrained scenario.
Originality/value
This paper is one of the few studies which have extended the tax planning literature to the Ghanaian banking sector. Further novelty is seen from the development of financial constraint scenario from liquidity and solvency. Liquidity and solvency are the anchors for continuity of banking operation and sensitive to regulatory watch and sanctions. Therefore, by applying simulation approach to trigger financial constraints scenarios from these fundamental indicators reveals the extent to which commercial banks rely on tax planning opportunities to mitigate the consequence of financial constraints.
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Despite the importance of tax policy in reducing energy consumption and carbon emissions, there is a dearth of research on the environmental impact of indirect taxes. This paper…
Abstract
Purpose
Despite the importance of tax policy in reducing energy consumption and carbon emissions, there is a dearth of research on the environmental impact of indirect taxes. This paper examines the impact of indirect taxes on carbon dioxide (CO2) emissions, with an emphasis on institutional quality.
Design/methodology/approach
The study uses the Government Revenue Dataset (2021), comprising 143 countries, dividing into 114 developing and 29 developed countries, during the period between 1996 and 2019. The author adopts panel data techniques, with Driscoll–Kraay standard errors to account for the issue of cross-sectional dependence (CSD).
Findings
The results indicate that indirect tax revenues have a negative and significant impact on CO2 emissions for the total sample. The subsample analysis revealed that while indirect taxes reduce carbon emissions in developing countries, opposed results are reported for developed countries. This finding implies that most of the advanced countries have already reached a high level of taxes, at which carbon emissions increase as indirect tax increases further. Interestingly, the results revealed that institutional quality enhances the role of indirect taxes in mitigating carbon emissions for both developing and developed countries.
Originality/value
To the best of the authors' knowledge, this is the sole study using the newly developed tax data by the United Nations University, World Institute for Development Research (UNU-WIDER) to investigate the impact of indirect taxes on carbon emissions, with an emphasis on institutional quality. The existing literature focuses on specific taxes, like carbon taxes, with no comprehensive research on the link between indirect taxes and carbon emissions.
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Rida Belahouaoui and El Houssain Attak
This study aims to understand the interaction between tax fairness perceptions, equitable tax burden distribution and tax compliance within Morocco’s unique socio-economic…
Abstract
Purpose
This study aims to understand the interaction between tax fairness perceptions, equitable tax burden distribution and tax compliance within Morocco’s unique socio-economic context, with the goal of uncovering strategies to enhance tax compliance.
Design/methodology/approach
Using the Delphi method, this study engaged tax experts in the Moroccan context to explore the impact of taxpayers’ perception of fairness, tax rates and tax burden on compliance. Their responses were gathered and analyzed with the aid of IRaMuTeQ software, which helped the authors identify themes relevant to the research question.
Findings
The preliminary results indicate a positive correlation between perceptions of tax fairness and compliance behavior, corroborating earlier studies conducted in different contexts. Notably, a substantial majority of Moroccan taxpayers perceive the current tax system as inequitable, deeming tax rates too high and the tax burden unfairly distributed among various taxpayer categories. This perception potentially influences their voluntary tax compliance behavior.
Practical implications
The findings have significant policy implications for the Moroccan Government and stakeholders. They suggest that by improving tax fairness, particularly by aligning tax assessment and payment modalities for employees, civil servants and small to medium enterprises, policymakers can encourage higher voluntary tax compliance, thereby potentially enhancing the efficiency of the Moroccan tax system.
Originality/value
This study adds to the existing body of knowledge by exploring the dynamics of tax fairness and compliance behavior in Morocco, a context which has been significantly understudied.
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Precious Muhammed Emmanuel, Ogochukwu Theresa Ugwunna, Chibuzor C. Azodo and Oluseyi D. Adewumi
The purpose of this study is to empirically analyse the fiscal revenue implications for oil-dependent African countries in the face of low-carbon energy transition (LET).
Abstract
Purpose
The purpose of this study is to empirically analyse the fiscal revenue implications for oil-dependent African countries in the face of low-carbon energy transition (LET).
Design/methodology/approach
The study combined the novel fully modified ordinary least squares, dynamic ordinary least squares and canonical cointegrating regressions estimators to analyse secondary data between 1990 and 2020 for the three major oil-dependent African Countries (Algeria, Angola and Nigeria).
Findings
The result shows that LET reduces oil revenue and non-revenue for specific countries (Algeria, Angola and Nigeria) and the panel, suggesting that low-carbon energy transiting is lowering the fiscal revenue of oil-dependent African nations.
Research limitations/implications
The seeming weakness of this study is its inability to broaden the scope to include all oil-producing African economies. However, since the study selected Africa’s top three oil-producing states, the sample can serve as a model for others with lesser crude oil outputs.
Practical implications
Oil-dependent African countries must urgently engage in sincere economic diversification in sectors like industry and manufacturing, the service sector and human capital development to promote economic transformation that will enhance fiscal revenue.
Originality/value
With the pace of energy transition towards low-carbon energy, it is not business as usual for oil-rich African countries (Algeria, Angola and Nigeria) due to fluctuating demand and price. As a result, it becomes worthy to examine how the transition is affecting oil-dependent economies in Africa. Also, this study’s method is unique as it has not been used in a similar study for Africa.
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The political crisis related to two main factors internal to the public revenue system, namely financial markets and the commercialisation of the state, and three related external…
Abstract
The political crisis related to two main factors internal to the public revenue system, namely financial markets and the commercialisation of the state, and three related external factors, pertaining to the pandemic, popular discontent and inequality. The emphasis on financial markets since the mid-1990s expanded the commercialisation of the state while neglecting public accountability and government oversight. The efforts to shore up public finances through the tax system is increasingly undermined by the global tax architecture, enabling financial secrecy and illicit financial flows.
The pandemic revealed the significance of women’s work, paid as well as unpaid care work. The pandemic also exposed the limitations of a domestic economy, based on export-oriented development, over-reliant on tourism and remittances from migrant workers. Combining with the on-going dengue epidemic, the pandemic highlighted the urgency of climate adaptation. Meanwhile, the popular discontent conveyed an accumulation of grievances linked with cultural discrimination, political misrepresentation as well as economic maldistribution. The participation of new middle-class segments in the protests foregrounded new tendencies significant for strengthening the labour movement as well as working-class parties in their demands for redistribution, reframing democracy as well as citizenship.
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