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UK Pension Transfers Guide For Dummies
Well over 2 million British people currently live overseas, even more are joining them since the new higher tax rate bands were introduced. Most have built up sizable pots of cash held within UK pension schemes. There are millions of others that have worked within the UK and had to invest in UK pension schemes. All these people were inhibited on what they could invest in and on how to move cash out. These pension pots are frozen, unlikely to perform as well as free market schemes.
Typically the pension funds use a very limited range of funds, this is due primarily to the UK government imposing strict rules on where this pension cash can go, no matter what age the person in the scheme it is only possible to invest in equities, certain property, gilts and cash- As a consequence when the equity markets dive, or property values fall then the pension pot also falls, not exactly the best way forward in these volatile times.
Since there were tax incentives to invest in UK pensions the government insists this pension pot is used to purchase an annuity- in effect a monthly income of a set amount for a specific time frame, all based on your age and morbidity tables, should the pensioner die mid stream any balance is then lost to either the government or the scheme provider Not any more, in April 2006 Freedom in the form of new QROPS legislation:, this article confines itself to the benefits, not the actual document which is frankly long winded and hard to grasp.
There are several benefits in transferring your existing frozen pensions to a new International SIPPS or QROPS. Assets are held under a Pension trust and all the assets whilst in the new pension are free of income tax, capital gains tax, wealth tax (IHT) and can be passed onto successors free of any tax including Inheritance tax. You have access to a full spectrum of investment opportunities, all tailored to your risk appetite. These can include equities, property, bonds, fixed deposit, commodities and alternative investments all of which can be managed by investment specialists. You can place monies into cash accounts to meet liquidity requirements or a very low risk investment profile. As your life circumstances change it is a simple matter to switch between investment strategies. Income and capital gains arising from the investments held within the Plan, or benefits paid by the Plan, are not subject to UK tax.
In addition, tax authorities internationally, including Spain, treat Retirement Schemes and annuity income derived from them favourably with typically only the income element of annuity payments attracting income tax. In most cases this reduces significantly the amount of tax on income. The schemes can provide a regular income that can enhance your personal cash flow requirements.
In addition early lump sum capital payments (25% at age 55) can assist in a variety of scenarios from paying off a mortgage to purchasing a major asset.The schemes meet the different requirements of pension legislation in many countries from around the world. This means they will not become obsolete should you move between jurisdictions, and you will not face the hassle of moving assets between providers in order to ensure savings remain tax efficient. The schemes are usually domiciled in The Channel Islands a very favourable jurisdiction both from a political and tax perspective.
For more pensions advice resources, visit our IFA Middlesex website or some of these great sites below;
First of all, What is a 401(k) I will try and give you a shortened version. A 401(k) is an employer sponsored retirement plan run under section 401(k) of the Internal Revenue Code. A 401(k) lets an employee save for retirement, and at the same time defers taxes on his savings and the earnings associated with them, until he retires. One thing worth mentioning is the capability to have a self directed 401(k). Though this sounds quite like a self directed IRA it is not. There is still limits to what you can invest in with a 401(k). Some companies put limits on what portions you can put into the self directed part of the plan.
For instance the company might allow a quarter of the account to go into the self directed part of the plan, and the remainder has to go into the standard 401(k). This cuts down on your control of your own money, and makes things more complex than they need to be. As well all 401(k) plans are tied to your employers corporation, the corporation may make changes unfavorable to the 401(k) holders, they, the corporation may change plans etc.
I will tell you a little story about a lady who was about forty, and her money was in a 401(k). She asked her employer about investing 401(k) money in real estate, but her boss told her she could only invest 25% of her savings in a self directed 401(k). She never bothered after that, as her employer had her money invested mainly in the companies stock. Well one year, her 401(k) lost 10% and that was that, she spat the dummy. She rolled over her 401(k) into a self directed IRA, and started investing in real estate, she hasn't looked back. She told me, she wished she had changed over a lot sooner.
If you are thinking of investing 401(k) money in real estate, rolling your 401(k) over to a self directed IRA is preferable, because then you can choose who is to be the custodian of your account. You can invest your money in real estate. or whatever else you desire, as long as you follow the IRA rules, you can invest in almost anything you like. You can buy houses, apartments, you can lease equipment out, you can invest in Tax liens from the county, you can invest in so much more with a self directed IRA. Self directed IRAs are better as they allow you to retain full control of the money in your account.
A mistake commonly made by first time real estate investors, is buying property in the wrong location. Given the huge amount of property on the market, it is not hard to understand why some people end up buying in the wrong location. A first time investor can hardly be expected to know where all the choice locations are. Another mistake first time investors are likely to make, is simply paying too much for a property. Inexperience and a volatile market place have oft made many a strong man cry.
If this sounds too complicated or just too much trouble there is a simpler more TURNKEY approach to investing in real estate or rolling a 401(k) over, go to the url at the bottom of this article and thenceforth to my website, there you will find more information.
About the Author
Gordon Hall is an ardent reviewer of IRAs and other retirement funds. Visit his website now at http://www.double-your-ira.com to discover which retirement funds Gordon recommends after far ranging and extensive comparisons.
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Accounting software is an application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, payroll, and trial balance. It functions as an accounting information system. It may be developed in-house by the company or organization using it, may be purchased from a third party, or may be a combination of a third-party application software package with local modifications. It varies greatly in its complexity and cost. Like most small business owners, you are likely excited about your product or service and enjoy working with your customers. However, when it comes to accounting and managing the tiny details of your company, you may feel frustrated and overwhelmed. The best accounting software can help you manage the details of your small business, improve client relations and streamline routine tasks with relatively few headaches.
Accounting software is typically composed of various modules, different sections dealing with particular areas of accounting. Among the most common are:
Accounts receivable
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General ledger
Billing
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Purchase Order
Sales Order
Cash Book
There is a lot to think about when it comes to considering accounting software, but it is worth thinking about since you will be working with it every day. We have compared a wide variety of accounting software here to help you find the right one to help you run your business.
Accounting software is computer software sold to end consumers, usually under restricted licenses. Until the emergence of the Internet, retail software represented.
The most famous examples of accounting software are the products offered on the accupos.comincluding famous programs.
Accounting software is a specialized form of sales promotion that is found near, on, or next to a checkout counter (the "point of sale"). They are intended to draw the customer's attention to products, which may be new products, or on special offer, and are also used to promote special events, e.g. seasonal or holiday-time sales. POS displays can include shelf edging, dummy packs, display packs, display stands, mobiles, posters, and banners. POS can also refer to systems used to record transactions between the customer and the commerce.
The rise of the Internet and software licensing schemes has dramatically changed the Accounting software market. Users are capable of finding shareware, freeware and free software products or use Web services as easily as retail. Producers of Accounting software have shifted to providing much of their software and services via the Internet, including Google, Microsoft, Yahoo!, and Apple Inc. Software is also becoming available as part of an integrated device. This is a licensed copy of software given by the software manufacturer to a computer manufacturer to pre-install on a computer being sold to a customer. A backup copy may or may not be provided on a CD to the end user along with the computer.
About the Author
Robs Writing the Article and Press release Content Composer/producer from New Jersey. He spent 10 years as Quality of content and Marketing Research Level of the writing content Products and Nature Base Max writing
HiTech Sales, Stock and Accounts Manager Software for Accounting, Inventory
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The Effect of Monetization on Tax Buoyancy: Evidence From COMESA Using A Panel Data Analysis
Abstract
Countries in Commonwealth Market for Eastern and Southern Africa (COMESA), like many other developing nations face difficulty in raising tax revenue for public purposes. This study uses panel data analysis for nineteen countries during 2000-2009 to analyze empirically the determinants of tax buoyancy. Among the variables identified as affecting annual tax buoyancy is monetization, with empirical results confirming its importance. The results have shown that the way monetization is handled in the developing nations affects annual tax buoyancy negatively. Other variables that have been found to be affecting tax buoyancy include the growth in the agricultural and industrial sector contribution to national income, external aid growth, growth of fiscal deficit and growth of total expenditure. The determinants of tax buoyancy have been suggested following tax handle theory advice. The study yielded such results because quality dimension of tax performance have been considered, which has been neglected by many previous authors.
Introduction
The traditional function of the tax system is to bring in sufficient revenue to meet the growing public sector requirements. Common measures of the ability of the tax system to mobilize revenues are buoyancy and elasticity (Asher 1989). A desirable property of a tax system is that income elasticity and buoyancy should be equal or greater than unity. Such property ensures that revenue growth keeps pace with that of Gross Domestic Product (GDP) without frequent discretionary changes. More important, it imparts build-in stability to the tax system, hence ensuring mitigation of cyclical variations in GDP over the course of the business cycle.
Concentration of the study will be on tax buoyancy, which indicates whether the tax "keeps up" with growth in the economy. Tax buoyancy measures the total response of tax revenue to changes in national income (Begum, 2007). Year to year buoyancy measures the volatility of the tax and the ability of government to meet the demands of their constituents. As an economy grows, income of taxpayers grows and the demand for public services tends to increase. If tax revenues grow less quickly than the economy, then the public sector will not be able to meet increased demand for better social amenities.
The Commonwealth Market for Eastern and Southern Africa (COMESA), in line with the above indicator (buoyancy), comprises of low tax performance countries with average regional buoyancy that is less than unity (Matshediso, 2004) implying that the tax system is not responsive to the income changes in the region. An effort to improve tax performance has been done over the years mainly noted by various reforms in the taxing system but no significant permanent solutions have been reaped so far. On the other hand, policies relating the monetization to tax performance have not yet received attention in the region.
The study attempts to examine the determinants of tax buoyancy, paying particular attention on the effect of monetization on tax buoyancy. The tax performance analysis aims at finding out whether there is a possibility of increasing tax revenue in developing nations through the monetary policy. Taxation is an important instrument for attaining a proper pattern of resource allocation, income distribution, and economic stability, in order that the benefits of economic development are evenly distributed.
Tax systems should be adequately stable and buoyant in order to enable a country to meet its increasing financial commitments as its gross domestic product (GDP) grows. If the tax revenue of a country is stable and buoyant, there is a high probability that its public expenditure needs will be adequately met over time. If GDP is growing more than tax revenues then it could be one policy indicator that the tax structure needs reform. The study of tax buoyancy is of much importance because it is both a quality and quantity measure of tax performance. Tax buoyancy can also be used to summarize revenue growth over time, (Zolt, 2003:8). Finally, it shows the strength of the tax system in the country when they are subjected to certain environments for example when a certain sector is declining.
The manner in which different countries raise taxes differs as widely as do the amounts they raise. The pattern of taxes found in any country depends upon many factors such as its economic structure, its history, and the tax structures found in neighbouring countries (Bird and Zolt, 2003: 7). According to Zolt (2003:1), developing countries are no different: ideas, interests, and institutions play a central role in shaping tax policy. Basing on this argument the study will be focusing on COMESA countries since they are close to each other and belong to a community. Countries no longer have the luxury to design their tax systems in isolation.
The research problem is derived from the fact that public services in the past years in developing nations have been deteriorating. The level of revenue being raised from taxation is very low in these nations as compared to the tax base which shows their tax potential. Rapid expansions in expenditure and declining or low revenue levels have been the main cause of fiscal imbalances in COMESA countries over the years (Ghura, 1998).
Tax revenues appear to be highly volatile relative to GDP, the tax base (Ghura, 2004; Greenaway, 2005). According to Ghura(2004), the changes include the effects of changes in tax rates, deductions and compliance. Developing countries are characterized by high tax rates (exorbitant tax rates, Matshediso 2004) as compared to developed nations, the obvious effect being decreasing tax revenues collection due to the increased informal sector activities and hence the governments are not able to meet public demand of public goods. The existing persistent budget deficits in developing nations suggest that the tax system is not revenue productive, and in such situations increasing revenue should be the main objective of tax policy.
On the other hand money supply in the COMESA economies has been growing at high levels but has been named inflationary. There are high levels of tax erosion, due to high growth of money supply (RED, 2006). Given the continuous reforms (leading to uncertainty and loss of credibility) that have been happening in the taxing system of developing nations, it still remains a wonder why tax performance is still low and even declining in some countries. The monetary sector has not received attention as far as taxing policies are done in these nations and hence its emphasis should be brought about, since some studies have proposed its importance.
The objective of the study is to establish the main determinants of tax buoyancy in developing countries with special attention to the effect of monetization on the tax buoyancy. The General and Specific research questions of the study can be stated consecutively as follows: What are the main determinants of tax buoyancy in developing nations? How does monetization affect tax buoyancy? The main hypotheses to be tested in this study are that: Monetization have a positive relationship with tax buoyancy. Growth of the industrial sector and agricultural sector, fiscal deficit, external debt, level of economic development, total expenditure and trade openness increases tax buoyancy. Growth in external aid and the concentration of population reduces tax buoyancy.These hypotheses are tested by determining the significance of the regression coefficients of relevant regression equation that will be estimated.
Countries no longer have the luxury to design their tax systems in isolation due to current wave of globalization and regionalization (Bird and Zolt, 2003). With dramatic reduction in trade barriers over the last two decades, taxes have become a more important factor in location decisions. There is increased tax competition for portfolio investment, qualified labor, financial services, business headquarters and foreign direct investment. This means that taxes do matter, and any country with a tax system that differs substantially from other countries, particularly its neighboring countries, may suffer. From this idea, analysis of determinants of tax buoyancy in the SADC region can be undertaken, since the countries trade with each other, share labor services and share national borders.
The previous studies (Harley(1965), Lotz and Morss(1967), Raja(1971), Raja et al.(1975) and Roy(1979)) of tax performance have been dwelling much on quantitative measures of tax performance such as the tax ratio. There is a need to incorporate both a quality and a quantity measure of tax performance, in this case tax buoyancy. There are few studies (for example Teera, 2002 and, Bird and Zolt, 2003) carried out in this area especially for African countries. It is a new area which needs further investigation around the regions of the world. Also the study involves the determination of yearly buoyancy, of which several studies (Quazi(1994), Begum(2007) and Teera(2002)) have been involved in the use of single averages over a period. The main base of this study's approach is that tax buoyancy changes over time even annually because of many factors (discretionary changes) which may include the political environment among others.
The effect of monetization on tax buoyancy is a crucial issue to consider when making tax performance decisions. This is because policy makers have to critically administer the optimal level of money supply in the economy that will not have adverse effects on economic agents. If money supply grows faster than the growth of the economy, inflation arises and the problem of tax erosion occurs since there is a gap between the time tax are to be paid and when they are actually paid. Increased documentation of the economy can also arise as monetization increases and hence this facilitates the collection of both direct and indirect taxes. From this idea the impact of monetization on tax buoyancy has to be analysed. The results will be used to give necessary policy advice on the link between monetization and tax performance. The incorporation of money supply in taxing decisions of governments is also a contribution, the variable have been left by many authors without any justification.
The study will contribute to existing literature on tax buoyancy for developing nations, this helps in the continuous debate of the effects of various determinants. Analyzing the determinants offers a guide to policy makers on which areas to put more emphasis. According to Teera (2002), a poor tax performance, in terms of raising revenues can mean either deficiencies in tax structure policy or an inadequate effort to collect, on the part of government, both of which are influenced by various factors. Hence the study concentrates on finding factors that affect tax performance.
Therefore there is need for more empirical input and guidance to carry out rational economic decisions. To formulate strategies for achieving sustained increase in tax buoyancy relevant information is necessary. Therefore examining determinants of tax buoyancy is an appropriate way of finding where policies can rightly respond to those issues and as such we would gain better understanding about the determinants. Knowledge of the determinants of tax buoyancy in SADC will help preclude policy makers from (over) emphasizing only few variables to neglect of other important ones in promoting tax performance.
Theoretical and Empirical Literature Review
Theoretically and empirically tax buoyancy can be calculated using the Constant Structure rate, Dummy variable method, Divisia Index and the proportional method. However this study due to its nature will use annual tax buoyancy, as the above methods refers to periodical buoyancy.
The normative bent of the literature on tax policy deals with the questions of why a country develops a particular tax structure and why this tax structure differs among countries and changes during the process of economic growth. This strand of tax literature not only recognizes the importance of administrative constraints on tax policy, but in contrast to the normative literature places administrative factors at the forefront.
The "tax handle" theory offers a sweeping historical explanation of tax structure change. It argues that low-income economies are forced to collect revenue from easy-to-administer taxes (or tax handles), but that this administrative constraint lessens as countries develop and become able to choose "better" taxes as defined by the normative objectives discussed above. Measures of tax handles typically include per capita income, trade taxes and the proportion of people living in urban areas (Liebaman, 2003).
The optimal tax theory, the reigning normative approach to taxation combines information on a country's economic structure, the set of available taxes to the government and the objectives of tax policy to make recommendations on tax mix, structure and incidence (see Slemrod, 1990; Burgess and Stern, 1993). Optimal taxes are those that raise a desired amount of revenue with the lowest marginal efficient cost, with few distortions and that promote the desired amount of wealth. While optimal tax theory tackles the trade off of different taxes, it does not explain the structure of government revenues.
The Ricardian equivalence theory is based on the opinion that when the government borrows instead of levying taxes to finance budget deficit the current generation is under taxed, they are rational and will realize that the loan will have to be repaid from income tax at some time in the future; debt finance is therefore a postponement of the tax burden which will fall on the future generation. The importance of this theory to tax performance is now questionable given the continuous borrowing done in developing nations and continuous budget deficit in the economies. The theory suggests discipline in the monetary sector and also effective borrowing which does not affect generations to come.
Quazi (1994) carried out a study of the determinants of tax buoyancy in developing nations using 35 countries for a period of ten years. The countries were chosen at random all over the world but based on the level of national income. Zambia and Zimbabwe are the only COMESA countries that managed to be selected. He used the ordinary least squares method in the regression of tax buoyancy and its suggested explanatory variables. The model includes average growth of money supply (monetization- M2), import sector output, industrial sector output, service sector output, agricultural sector output, deficit, grant and Gross Domestic Product (GDP). He found monetization to be positively related to tax buoyancy, he commented that an increase in monetisation increases the documentation of the economy which increases tax collection. His conclusion was that increase in the level of monetization through increase in documentation also facilitates the growth of taxes. Other variables found to affect buoyancy include growth of industrial sector, growth of imports and growth of grants.
A study by Begum(2007) of the determinants of tax share and revenue performance (buoyancy) is worth noting. The study of Bangladesh along with ten other developing countries through a panel data analysis span for fifteen years. The results obtained suggest international trade, broad money, external debt and population growth to be significant determinants, with expected signs of the estimated coefficients. The study identifies Bangladesh as the lowest tax effort country in the sample, with an average tax effort index of 0.493. This has important policy implications that Bangladesh and other countries having low tax effort (less than unity) are not utilizing their full capacity of tax revenue, and therefore, have the potential for financing budgetary imbalance through raising tax revenue.
A study carried out by Teera (2000) found that the results of the dynamic measure of tax performance (tax buoyancy) indicate that the high-income OECD group has the least percentage number of countries with a buoyancy ratio below unity, followed by the lower middle-income group. This implies that the lower income groups have made less effort to increase tax revenues over the period as compared to the higher income groups. He mainly hammered on the tax evasion variable. In his regression he included variables like total expenditure and also time trend.
Methodology and Data Analysis
In the hope to improve tax performance COMESA countries have been undertaking several reforms either individually or collectively. The shift from Sales tax to Value added tax (VAT) has seen many countries improving their tax collections and reducing tax burdens of the tax payers. During the period under study VAT has dominated Sales tax and is in use. Furthermore nations have launched Autonomous and semi-Autonomous Revenue authorities (SARAs) to have the duty to collect revenue on behalf of the government. This was done to separate political influence and revenue collection. However the efficiency of these SARAs is debatable, revenue have been seen rising in the few years of introduction of SARAs then they decline.
Panel data methodology is used in the analysis since cross-sectional and time series are combined. The methodology is more common for the comparison of different countries. Nineteen countries in the COMESA region are considered over a sufficient period. Data for analysis is obtained from the African Development Indicators various publications and World Bank/IMF publications. The advantage of these sources is that they allow international comparisons to be made.
Using various theoretical literature and empirical literature many variables have been identified as affecting tax buoyancy. The main variables to be used in the study include monetization, level of economic development, structure of the economy (contribution of agriculture and industrial sectors to GDP), external aid growth, debt, population size, expenditure growth and trade openness.
The following results have been found after regressing tax buoyancy against its determinants using STATA econometric software. Multicollinearity and homoskedasticity have been checked. Panel tests have been done and the best model was the pooled Ordinary least Squares (OLS) and time effects have been taken into account.
Specific Pooled OLS Model [Dependent Variable BUOY]
BUOY Coef. Std. Err. P>|t|
ECON .0055117 .0040867 0.179
AGR .0188142 .0071365 0.009***
IND .0219473 .0067639 0.001***
MS -.0043354 .001639 0.009***
AID -.7558855 .1211132 0.000***
DF -.0165895 .0064552 0.011**
XM .0056362 .0044746 0.210
EXP .8653563 .3776645 0.023**
Trend -.074938 .035562 0.037**
_cons 150.7422 71.12115 0.036**
R-squared = 0.4063 Adj R-squared = 0.3725
F = 12.01 Prob > F = 0.0000***
* denotes statistical significance at 10%, ** at 5% and ***at the 1% level
Discussion of Results
The F statistic 12.01 (0.0000***) shows that the model is correctly specified and that the null hypothesis of variable inclusion is rejected at the 1% level of significance and we therefore conclude that at least one of the variables in the model explain the magnitude of annual tax buoyancy in COMESA economies.
The coefficient of monetization (MS) has a negative value and significant at the 1% level indicating that growth of money supply (M2) seems to negatively affect the tax buoyancy of COMESA states. The results are not in line with the tax handle theory which poses for a positive sign. This means that the growth of money supply does not facilitate the documentation of the economy so as to improve tax administration. The reasons why monetization has a negative influence on tax buoyancy in the COMESA region might be due to the lack of capacity within the tax administrators to take advantage of the growing supply of money to facilitate the tax collection of each tax, over relying on printing money to finance government activities rather than generating revenue elsewhere, the presence of distortions such as trade barriers, weak legal and financial systems. Some COMESA financial markets are not well developed. The region has a narrow range of intermediaries and offers a limited number of financial instruments. This finding is not in line with the result obtained by Quazi (1994) who found a positive and significant effect of monetization and tax buoyancy for a sample of 35 developing countries in a period of 10 years. Begum (2007) obtained a positive significant coefficient for Bangladesh which is a developing nation, the reason being that there is utilization of growing money supply to facilitate the documentation of the economy.
The coefficient of growth of the agricultural sector (AGR) is .0188142, with a p-value of 0.009 showing that the coefficient of domestic investment was positive and significant at 1% level. Thus countries that are able to maintain and improve their agricultural sector will experience an increase in their tax performance.
Growth of the industrial sector (IND) has a positive and significant impact on tax buoyancy at all levels of significance. This shows that it is one of the major variables that explain how the tax system is performing in developing nations. This is in line with the tax handle theory which predicts a positive impact. The possible reason for such results is that the sector is easy to tax, companies keep records of transactions and many are located in urban areas which reduces costs of tax collection. Industry includes mining companies which are very large and also few and hence easy to monitor and audit for tax payment.
External aid (AID) has a negative and significant impact on tax buoyancy at all levels, indicating a major variable. Economic theory (tax handle) predicts a negative impact, which is in line with the results. The findings in this study suggest that high levels of external aid growth in COMESA have influenced the tax performance of developing nations negatively. The reason may come because an increase in foreign resources makes governments in the developing nations relaxed and due to fear of any political unpopularity the governments rely less on domestic resource mobilization. The results are in line with those of Quazi (1994), who found also that it was a major variable significant at all levels with the appropriate sign.
Fiscal deficit (DF) variable is significant at 5% with a negative coefficient of -.0165895 and a p-value of 0.011. The sign is not the expected, and this shows that as the deficit grows big it demotivates the respective authorities from improving their taxing strategies to raise revenue from taxes. The time trend coefficient (Trend) is significant at 5% with a negative sign. Implication is that tax performance is changing over time due to the presence of shocks. The variable explains the presence of time effects and hence economic shocks during the period under study. The possible reasons for such results can be explained by the presence of droughts, civil wars and political instability during the period.
Total expenditure (EXP) is significant at 5% significant level and reports a correct positive sign. This is in line with economic theory. The results for this variable are in line with what Teera (2000) obtained. The results indicate that as the total spending increases, this causes the tax system to be more buoyant, this is due to an extra effort to collect more revenue through taxation to finance the increasing spending.
Trade openness (XM) variable is not significant but has the correct sign, it has a probability value of 0.210. A positive sign was also obtained by Teera (2000) but significant at 5 % and 10% for low income group and SSA countries respectively. The possible reasons for such results include the undervaluation of imported goods which applies to most own-funds imports (Fjelstad, 1995). This is due to the fact that the importer has access to foreign exchange without going through central bank records. Administrative constraints and corruption at entry points increase the problem of undervaluation of imported goods (Basu and Morrissey, 1993: 22)
The overall model reported Adjusted R-squared of 0.3725. This tells us that approximately 37.25% variation in the annual tax buoyancy is explained by the explanatory variables included in the model. The obtained Adjusted R-squared by Begum (2007) reports a value 0.51 for total tax buoyancy regression and 0.46 for indirect tax buoyancy regression using pooled OLS, no justification was given for such results. It automatically reports to us that there are some variables that explain buoyancy that have been omitted. Some variables have been omitted such as the shadow variable (tax evasion) due to the problem of measuring it.
Conclusion and Policy Recommendation
Introduction
This chapter contains a detailed conclusion to the study and also some policy lessons drawn from the empirical results of the previous chapter. In addition, the chapter also gives possible areas of future research.
Conclusion
The study has attempted to examine empirically the determinants of tax buoyancy in the developing nations using COMESA countries information for the period 2000-2009. The motivation of the study sort to address the neglected quality dimension of tax performance leading to biased policies, low tax revenue collection against potential revenue that can be raised from national income, deterioration and shortage of public goods, continuous changes in tax rates that are also high as compared to developed nations leading to the rapid expansion of the hidden economy, persistent fiscal deficits and high growing rates of money supply.
Using a panel data, pooled OLS methodology we found out that monetization negatively affects tax buoyancy. This result suggests that monetization seem not to increase tax performance, instead it retards buoyancy levels. Possible reasons of this result may be due to the inability to utilize the growth of money supply to increase the documentation of the economies to increase the collection of each tax. The abuse of the printing of discretionary paper money to finance government activities in developing nations is a possible reason for such results. This reduces effort to raise adequate revenue from collecting taxes. Poor tax administration and also underdeveloped infrastructure may be possible reasons.
Apart from monetization, the study found that growth of agricultural sector, growth of industrial sector, external aid growth, fiscal deficit growth and total expenditure growth to be the determinants. The agricultural sector is still contributing positively to revenue generation processes despite the industrialization going on in developing nations. The industrial sector is worth to be noted, it contributes significantly to tax performance. Respective countries can increase their tax buoyancy by actively encouraging growth in the agricultural and industrial sectors; they should not undermine one sector since both have positive impacts. Fiscal deficit growth and external aid growth have indicated a negative impact on tax performance.
Impact (negative) of economic shocks to tax performance has been found in the study. Economic shocks have been shown by the presence of time effects and their significance in the regressions undertaken. The main causes have been severe droughts due to inadequate rainfall, civil wars and political instability.
Policy Recommendation
Since our findings suggest a negative relationship between monetization and tax buoyancy, maybe for COMESA countries to reap benefits from monetization they need to have strong link between fiscal and monetary sectors, improve tax administration through appropriate reforms, invest in the improvement of infrastructure to facilitate the collection of taxes and stable macroeconomic environment. A strong link between fiscal and monetary sectors facilitates the utilization of the growth in money supply to improve tax performance through increased documentation of the economy. Improvement in tax administration will produce efficient taxing systems which discourages tax evasion and the growth of the hidden economy. Most of all there should be central bank independence from political authorities, the government activities should be financed not from discretionary paper money printing rather they should use other noninflationary ways such as tax collection until the potential level of the economy has been reached.
Policies aimed at developing the domestic taxing systems are beneficial. The policies should be aiming at taking special considerations of the findings in the study. Factors aimed at taking appropriate decisions on variables like fiscal deficits and external deficits since they have been found to have a negative impact on tax buoyancy. In some COMESA countries there are a few numbers of financial intermediaries and stock markets are not well developed, an effort to improve their significance will be an appropriate measure to be undertaken.
Development policies should not be biased towards the growth of one sector rather it has to be across all sectors. Both the agricultural sector and the industrial sectors have proved to be of significance in defining the level of tax performance, and hence they have to be treated without disparity.
Developing nations should however consider maintaining their taxing systems or improve them positively over time. The time trend variable have shown us that over time there is negative effect on tax buoyancy, there is actually a decline and this is to be prevented. Policies aimed at avoiding declining tax performance over time should be developed. Economic shocks like drought should be avoided through forecasting and mitigation strategies developed.
References
Begum Lutfunnahar (2007), "A Panel Study on Tax Effort and Tax Buoyancy with Special Reference to Bangladesh. Policy Analysis Unit(PAU). Working Paper Series: WP 0715. Research Department, Bangladesh Bank. Bangladesh.
Fjeldstad, O.-H. (2003). "Fighting fiscal corruption. Lessons from the Tanzania Revenue Authority." Public Administration and Development, Vol. 23, No. 2, pp. 165-175 (May).
Ghura, D. (1998), "Tax revenue in Sub-Saharan Africa: Effects of economic policies and corruption." IMF Working Paper 98/135, Washington, DC: International Monetary Fund.
Hsiao, Cheng, (1986), "Analysis of Panel Data," (Cambridge University Press).
International Monetary Fund, Government Financial Statistics, 2001.
Osoro N. E. (1993). "Tax reform in Tanzania." Paper presented at the CREDIT-CSAE Workshop on trade and fiscal reforms in sub-Saharan Africa, Oxford, 6-8 January.
Quazi Masood Ahmed (1994), "The Determinants of Tax Buoyancy: An Experience from the Developing Countries." The Pakistan Development Review. 33:4 Part II (Winter 1994) pp. 1089- 1098.
RED, (2006), "Integrated Paper on Recent Economic Development," Bank of Namibia. December 1.
Stotsky, J.G. and WoldeMariam, A. (1997), "Tax Effort in Sub-Saharan Africa," IMF Working Paper, WP/97/107, September.
Teera J. M (2000), "Tax Performance: A Comparative Study." University of Bath, Department of Economics, BATH BA2 7AY. Bath
Wawire Nelson Were H. (2000), "The Determinants of Tax Revenue in Kenya." Kenyatta University, Nairobi.
World Bank. (2006). World Development Indicators. Washington
About the Author
Bonga Wellington Garikai
MSc Economics (UZ), BSc (Hons) Economics (UZ)
Researcher/Policy Analyst/ Business Analyst/Economist
Alan Johnson's no credible VAT hike alternative (04Jan11)
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I'm thinkin about applying for a credit card, I've never had one before and don't have an overdraft or any other kind of debt. Thing is i'm planning to go travelling at the end of the year and it would be helpful for me to have a visa as my debit card doesn't work everywhere. Also i think i must have quite a poor credit rating as i've moved houses alot all my life and was refused an overdraft. I know capital one offer cards for those with poor credit but their interest seems huge! ...Not that i really understand any of it so would like know how it all works...the interest and how much i would be paying back...Its really confusing! I earn just over £800 a month minimum (sometimes am offered overtime). Any advice welcome except those that just say 'Don't do it!' ...i need some real information.
Ta! oh also...can i get cash out on all credit cards?
Hi sweets well each to their own but my personal point of view is when you spend £500 on a credit card then pay the miniumum payments of (example £15 per month) the credit card company then slap interest on top of the money you have borrowed thus causing an ever spirriling tumble towards debt. As with all credit cards the concept of having one is great as you can buy that case of Wine, pay the deposit on the holiday but remember you are paying a loan company whom charge interest. Best option is to speak with your bank whom may upgrade your existing debit card to a visa debit or switch card which can be used worldwide. Yes i have a credit card but very very rarely use exept emergency 0% owed on card means 0% interest dont get a card then start spending or if you are sure you want one Vanquish is quite good you can control your limit You can request a maximum limit of £250 untill you see fit to higher or lower the limit you can manage. Well good luck and please be careful and consider the consequenses of debt...... Debt is easy to get into but hard to get out of....
why i am a programmer
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Force Your Spouse To Answer Your Questions About Marital Assets Through Discovery
Copyright (c) 2010 Lucille Uttermohlen
It is not hard to get the short end in divorce court if you don't know everything about your debts and assets. If you don't have the documents you need to prove your case, the judge may have no choice but to make her decision from the information, false or not, she gathers from your spouse's testimony.
If you are extremely rich, and haven't been married very long, it may be possible to squirrel away assets and have your spouse be none the wiser. Your frequent travels to the Cayman Islands or Switzerland may be so common as to not arouse suspicion when you are quietly transferring your vast fortune to dummy accounts under fake names. If you are that well off, chances are pretty good you'll never be one of my clients. Most of us have to work for a living, and don't have high class problems like where to get the Mercedes or Jag detailed, or whether the cook can find the specially cured caviar we enjoyed on the Riviera last season. However, this doesn't mean that spouses don't hide assets from each other. Here is what your lawyer or you can do to make sure you're not victimized by the fact that you once said "I do" to a sneak.
Ask for "discovery". When you sue someone, whether it be for damages because of a personal injury, or because your marriage contract is no longer tenable, you will have to prove what you believe by a "preponderance" of the evidence. This means that there has to be a 51% chance that what you are saying is true for the judge to declare it as fact.
Discovery is the process of formally asking for the information you need that is possessed by the other side. You can get copies of bank statements, credit card receipts, tax returns, or any other document that you need to prove your case. You can "propound interrogatories" which simply means that you can write the questions you have and force your spouse to answer your inquiries under oath. You can also "depone" your spouse. This means you can make her answer questions under oath orally, with a court reporter, to record exactly what she said. If she says something different in court, you have proof that she isn't telling the truth.
Finally, you can force people with the information you need to appear and testify at your hearing. You will have to pay them for their time if they are professional, like accountants, appraisers or counselors. You will have to reimburse them for gas and mileage no matter who they are if they aren't willing to testify for you and you have to force them to come. However, once you have issued a subpoena, they have to appear. If they don't, they are in contempt of the court, and can even go to jail for not being there when they were called.
If you think the location or value of property will be an issue in your divorce, you should hire an attorney to protect you. Your lawyer will know what documents will best make your point, and will also know what the court can do if your spouse doesn't cooperate. However, you should bear in mind that discovery adds to the cost of your divorce case, and should not be used lightly. This is to say, you don't want to pay to have your spouse provide information you already have and can prove without his help.
About the Author
Do you have a legal question? Are you looking for an answer to an important relationship concern? Ask The Law Lady. For a prompt answer, write to thelawlady@couple-or-not.com Or read about legal and relationship issues at http://www.couple-or-not.com
War on Terror, Iraq, Dahlia Wasfi, Islamophobia for Dummies
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My last question sure got an educational response out of me! According to what I read on the answers to my question I am really stupid. I suppose you have never heard the saying "the squeaky wheel gets the grease"? well that is what I was thinking when I wrote the White House. If Treason is a crime punishable by death then great that would answer one of my Prayers. I pray for a better life or Death and since my looser father killed himself I will not do that to myself! So if this "squeaky wheel" has to be removed from the machine then good for me! I asked the White House why Medicaid and Social Security prevents me from getting the help I need to keep me alive and healthy. SSDI, SSI, Medicare, Medicaid, all of this have one thing in common, helping people who CAN NOT help them selves!! I fall into that category with a disabling host of problems. All I wanted to know was why $108 stops me from getting full Medicaid. Do you think I am a criminal for asking this? Who can answer this?
NO you are not out of line with your question, i have a very rare disease and after 9 years of treatment Medicare part d is now refusing to authorize this medication for my disease, this is a death sentence with out a trial, our government does not care about people they care about revenue for them to steal, if you are disabled then you cannot contribute to that revenue and they would prefer that you die and leave them more to steal.~
Rachel Maddow - Rick Scott Cuts Florida Education
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Ok, so I started a ROTH IRA today with Ameritrade. I funded it. Now I'm at the point of trade. Keep in mind I'm a newborn to this, I was wondering if I divided my funds between 2 ETFs am I considered "Diverse" until I put more funds in to buy other securities such as bonds, cds, mutual funds(which I will probably invest less because I'm in my prime(late 20s)). I am researching through the ameritrade site and investing for dummies by the way. Any other advice for me? I'm chosing to go with the ETFs chosen by Suze Orman. My funds are equal to $3500. Thanks in Advance. I'm going to do lump sum investing, once a year.
The answer lies in how "diverse" the makeup of the ETF is. Is it in a narrow range of a certain market sector, or a broad market sector?
Narrow might mean it's an energy related ETF. Broad might mean it has holdings that are in energy, retail, housing, metals, household goods, media, manufacturing, technology. If you have narrow holdings you are more likely to have up and down swings because you are dependent on one part of our economy.
St. Patrick's Day for Dummies
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