Revenue-productive Income Tax Structures and Tax Reforms in Emerging Market Economies: Evidence from Bulgaria

No AccessPolicy Research Working Papers21 Jun 2013Revenue-productive Income Tax Structures and Tax Reforms in Emerging Market Economies: Evidence from BulgariaAuthors/Editors: Fareed M. A. HassanFareed M. A. Hassanhttps://doi.org/10.1596/1813-9450-1927SectionsAboutPDF (0.1 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:Any consideration of alternative tax systems must consider underlying levels and distributions of income. But broader, simpler tax bases would facilitate administration, increase revenues, and reduce opportunities and incentives for tax evasion. Using a household budget survey for 1992, Hassan shows the poor revenue performance and distributional impact of Bulgaria?s personal income tax system. He explores the implications for revenue and income distribution of two alternative tax systems-a flat tax and a progressive but simpler three-brackets tax system. He demonstrates that simpler tax structures with lower tax rates could achieve at least equal revenue and distributional objectives and are superior in terms of efficiency and equity. (The findings are robust when Bulgaria?s significant tax evasion is included.) But tax changes since 1992 have, if anything, moved Bulgaria even further from a simple income tax system: the number of rates and brackets increased from 7 to 10, and the levels of exemption remain unchanged. (Complex, higher rates complicate administration and enforcement and provide incentives for tax evasion. And in the alternative systems Hassan explores, the poor are protected with higher exemptions.) Fortunately, the country?s personal income tax structure began to move toward less nominal progressivity after Bulgaria?s 1997 tax reform program. The tax rate in the top income bracket was reduced from 52 percent to 40 percent, the number of tax brackets was halved, and the exemption level was increased 20 percent (reducing tax burdens on the poor). This paper-a product of the Poverty Reduction and Economic Management Sector, Europe and Central Asia Region-is part of a larger effort in the region to analyze the social and revenue dimensions of tax reforms in transition economies. The author may be contacted at [email protected] Previous bookNext book FiguresreferencesRecommendeddetailsCited byBulgarian Households Income Redistribution: Feasible Estimates of Main Tax-Benefit Redistribution Indices for 2003SSRN Electronic JournalReforming Tax Systems: Experience of the Baltics, Russia, and Other Countries of the Former Soviet UnionIMF Working Papers, Vol.03, No.173Investment opportunities and leverage: some Australian evidence on the role of board monitoring and director equity ownershipManagerial Finance, Vol.28, No.3 View Published: June 1998 Copyright & Permissions Related RegionsEurope and Central AsiaRelated CountriesBulgariaRelated TopicsFinance and Financial Sector DevelopmentLaw and DevelopmentMacroeconomics and Economic GrowthPrivate Sector Development KeywordsCORPORATE INCOME TAXCORPORATE TAXINCOME TAXMARGINAL TAX RATESPERSONAL INCOME TAXTAX BRACKETSTAX CHANGESTAX EVASIONTAX LAWTAX POLICYTAX RATETAX RATESTAX REFORMTAX REFORMSTAX STRUCTURESTAX SYSTEMTAX SYSTEMSTAXATIONTURNOVER TAXVALUE ADDED TAX PDF downloadLoading ...