1 / 10

Collecting Taxes

Learn about the importance of effective tax collection, reasons people and businesses pay taxes, and strategies for designing a robust tax collection system. Explore methods for increasing compliance and measuring tax collection effectiveness.

mmarasco
Download Presentation

Collecting Taxes

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PA 546 Constantine Hadjilambrinos Collecting Taxes Lecture 10 November 8, 2005

  2. PA 546 Constantine Hadjilambrinos An effective tax collection system is extremely important. • Noncompliance means lost revenue. • Noncompliance produces a distribution of the cost of government different than what is intended—fairness and equity problems. • Competitive advantage of cheaters—inducement for others to cheat.

  3. PA 546 Constantine Hadjilambrinos Why do people (and businesses) pay taxes? • Withholding works! Tax collected by employer. • Reporting also works! (Interest, dividends, non-salary compensation, etc.) • Overestimation of probability of detection. IRS has fearsome reputation. • Low marginal rates—less incentive to cheat. Also makes paying less “painful.” • Consensus on value of government services. Agreement with government spending priorities • Institutional tradition of payment/compliance.

  4. PA 546 Constantine Hadjilambrinos Designing a tax collection system Taxpayer Active: Taxpayer responsible for calculating tax owed. • Lowers cost of tax collection. • Miscalculation as likely to be to advantage of government. • Increases possibilities for cheating.

  5. PA 546 Constantine Hadjilambrinos Designing a tax collection system Taxpayer Passive: Tax collector responsible for calculating tax. • Greater cost to tax collector. • More likely to be accurate. • Less likely to encourage cheating. • Requires a lot of information be known by tax collector. • Requires a good appeals system.

  6. PA 546 Constantine Hadjilambrinos Designing a tax collection system • Up-to-date roster of taxpayers. • Taxpayer ID system (Social Security Number, Taxpayer ID number, Parcel cadastre). • Standard forms—often with important information pre-filled. • Information services. • Appeals process.

  7. PA 546 Constantine Hadjilambrinos Designing a tax collection system

  8. PA 546 Constantine Hadjilambrinos Enforcement Delinquency control, compliance, and collections • Tax owed by taxpayer. • Large number of individual compliance—selective enforcement, obligatory tax returns. • Tax collected by others on behalf of taxpayer. • Nonpayment may signal business trouble. • Balance quick action with expense and trouble of unnecessary action.

  9. PA 546 Constantine Hadjilambrinos Methods for increased compliance • Audit—Selective review of tax returns. • Appeal or Protest—Assure nondiscriminatory application of tax system. Make voluntary compliance more likely. • Enforcement—Collects tax from those who fail to pay.

  10. PA 546 Constantine Hadjilambrinos Measuring Tax Collection Effectiveness • Measure total amount of tax collected. • Measure total costs of collection. • Include costs of collection borne by government as well as costs borne by taxpayers. • Measure level of compliance. • Determine distribution of tax burden.

More Related