Public Finance - Chapter 5 - Overview of Taxation

Chương 5
TỔNG QUAN VỀ THUẾ

NỘI DUNG
5.1. Khái niệm và đặc điểm của thuế
5.2. Hệ thống thuế và phân loại thuế
5.3. Lý thuyết thuế chuẩn tắc
2
TÀI LIỆU ĐỌC
▰ Chapter 18 - Gruber (2018), Public finance and public policy, 5th Ed.
▰ Chapter 17 - Stiglitz & Rosengard (2015), Economics of public sector, 4th
Ed.
3
5.1
Khái niệm
và đặc điểm của thuế
4
5.1.1. Khái niệm của thuế
STATE BUDGET
Revenue Expenditur
e
5
6

▰ How do tax affect us as:
▻ an individual,
▻ a business, or
▻ a country?
7
8

▰ Why, historically, have societies collected taxes?
11

▰ Tax liability = Tax base * Tax rate
Tax
base
Tax
Power
to tax
12

Mode of Class
The state Taxation
production differentiation
13

Karl Marx J.J. Rousseau
Versus
Class conflict Social contracts

theory theory 14

▰ Where and when did people first collect taxes?
15

▰ Tax liability = Tax base * Tax rate
Tax
base
Tax
Power
to tax
16

17

▰ Why couldn’t pre-modern leaders collect more?
18

▰ Why couldn’t pre-modern leaders collect more?
▻ There are several reasons these states could not get much tax revenue.
▻ First, the tax base is limited.
▻ Second, class power limited state revenue.
▻ Third, the demand for state spending was limited.
▻ Fourth, the capacity of the state to collect taxes was very limited.
19

▰ What happened over the course of the nineteenth century?
▻ 1st industrial revolution with the invention of steam engine.
▻ Development of democratic institutions.
▻ Advances in administration (from patrimonial to centralized bureaucratic
administration).
▻ Substantial increase in the demand for state spending.
20

▰ History of taxation
▻ 3,000 – 2,500 BC
▻ First data showing evidence of taxation, by pharaohs in Egypt.
▻ 600 – 300 BC
▻ Most pre-modern societies struggle to collect taxes, but Greek city states
successfully tax wealthy citizens, merchant guilds and goods traveling
through their ports.
21

▻ 221 – 206 BC
▻ As the power of China’s aristocracy weakens due to warfare, the Qin
Dynasty develops a sophisticated bureaucracy, based on merit.
▻ Tax collection improves as a result.
▻ Europeans will emulate the Chinese bureaucracy nearly 2,000 years later.
22

▻ Middle Ages – Early Modern period
▻ Most states collect no more than 5% of GDP in taxes, hampered by class
tensions, limited administrative capacity and an inability to enforce
collection.
▻ Feudal kings, who need the support of aristocrats to retain power, spare
nobility from heavy taxation and collect, instead, from poor peasants who
need protection from the crown.
23

▻ 18th century
▻ French philosopher Voltaire and other Western thinkers take admiring
notice of Chinese administrative practices, and Europeans slowly
implement advances that allow them to collect greater tax revenues.
▻ As in China, these occur after wars have weakened entrenched elites,
sweeping in periods of reform.
24

▻ 1798 – 1802
▻ To help pay for the Napoleonic Wars, Britain implements an income tax on
wealthier citizens.
▻ 1842
▻ Britain’s income tax is made permanent.
25

▻ 19th – early 20th century
▻ Democracy expands throughout the world, along with demand for state
spending on welfare programs and wars.
▻ By and large, citizens accept taxation as legitimate.
▻ Tax revenues rise rapidly, averaging around 9% of GDP in Organization
for Economic Cooperation and Development (OECD) countries by 1900,
and 20% by 1950.
▻ 1920
▻ Most developed European countries have introduced income taxes. 26

▻ 2000
▻ Tax revenues peak in developed nations, reaching as high as 45% of GDP
(in Denmark), as opposition to taxation takes hold among disenchanted
citizens, who question the value of many types of state spending.
▻ Today
▻ Countries’ tax revenues have increased slightly since 2010, but remain
lower than in 2000.
27

▰ Definition of taxation
▻ Taxation is the practice of a government collecting money from its citizens to
pay for public services.
28

▰ Definition of tax
▻ Taxes are compulsory payments, exacted by the state, that do not confer any
direct individual entitlement to specific goods or services in return.
▻ A tax is a compulsory, unrequited payment to general government. (OECD,
1996)
▻ "The power to tax is, therefore, the strongest, the most pervading of all the
powers of government, reaching directly or indirectly to all classes of
people…”
(Justice Miller of the United States Supreme Court, 1874) 29
5.1.2. Đặc điểm của thuế

▰ Compulsory payment
[This crucially distinguishes taxation from most other activities in modern democracies]
▰ Unrequited payment
[This is how taxes differ from the prices, fees, or charges]
▰ Parametric method
[A key characteristic of taxation in modern tax systems]
▰ Cash payment
[A key characteristic of taxation in modern tax systems]
30
Compulsory Unrequited
payment payment
[This crucially distinguishes [This is how taxes differ from the
taxation from most other activities prices, fees, or charges]
in modern democracies]
Parametric
method
(<> arbitrary)
[A key characteristic of taxation in
modern tax systems]
31

Compulsory payment
▰ What will happen if tax payers evade taxes in Vietnam?
▻ A fine from 1 to 3 times of the tax arrears.
(Circular No. 166/2013/TT-BTC on penalties for administrative violations pertaining to
taxation)
▻ Example:
▻ Falsifying tax documents or accounting books
▻ Destroying tax documents or accounting books to reduce tax payable or increase
refundable tax, reduced tax, or exempt tax.
32

Compulsory payment
▰ Late payment interest and penalties waived on French taxes?
▻ Regarding CIT, VAT, registration duties, and business tax:
▻ Late payment is subject to late interest computed at a rate of 0.4% per month late
(4.80% per year) (the 2017 Act reduces this rate to 0.20% per month late [2.40% per
year] for interest due from 01/01/2018 through 31/12/2020) and to a 5% penalty.
▻ Late filing is subject to late interest computed at a rate of 0.4% per month late (4.80%
per year) (the 2017 Act reduces this rate to 0.20% per month late [2.40% per year] for
interest due from 01/01/2018 through 31/12/2020) and to a 10% penalty.
▻ Moreover, a penalty of 40% applies in case of bad faith and is increased to 80% in
case of fraud.
33

Compulsory payment
▰ Criminal penalties for persons accused of tax evasion in Vietnam
▻ (Law No. 37/2009/QH12 of June 19, 2009, amending and supplementing a number of
articles of the Criminal code, Article 161)
▻ From VND 100m to under 300m: a fine of VND 100m - 500m or 03 - 24 months'
imprisonment.
▻ From VND 300m to under 1000m: a fine of from VND 500m – 1.500m or 1 to 3 years in
prison.
▻ From VND 1.000m: a fine of from VND 1.500m – 4.500m or 2 - 7 years in prison.
34

Unrequired payment
35

Parametric method
Parametric Arbitrary
method method
It is governed by It is not precisely
legislation which governed by a legal
defines in advance framework specifying
the basis of individual how liability to tax
tax liability. should be calculated.
36

In cash vs. In kind
In cash In kind
37
5.1.3. Mục đích của thuế
Raising
revenue
Regulating
Addressing
specific
externalities
activities
Redistributing
income and
wealth 38

▰ Raising revenue
▻ Arguably the main purpose of taxation is raising revenue to finance government
activities.
▻ Revenue raised from tax and non-tax sources reduces the need for government
borrowing to finance pubic services.
▻ Although some government activities can be funded through user charges, charges for
specific public services are generally too low to finance more than a small share of total
government expenditure.
39

▰ Regulating specific activities
▻ Taxation can be used to promote or discourage specific activities.
▻ Within an existing tax structure, tax subsidies — credits, exemptions, or deductions for
spending or contributions to specified activities — can promote behavior by making it
financially more attractive.
▻ Example:
▻ Encourage saving or contributions to charitable activity by offering tax credits
or deductions from taxable corporate profits or household income for sums
contributed to approved savings accounts or charitable organizations.
▻ Promoting conservation by offering tax benefits for purchasing fuel-efficient
vehicles or retrofitting buildings with energy-saving devices.
40

▰ Regulating specific activities
▻ Most countries discourage certain activities by imposing disproportionately high tax
rates on them.
▻ Example: impose high taxes on tobacco products to discourage smoking.
41

▰ Redistributing income and wealth
▻ Many countries try to moderate the wide disparity in pre-tax income and wealth by
levying progressive income taxes, in which higher portions of household income are
subject to progressively higher marginal tax rates, along with taxes on large estates and
inheritances.
▻ Example: In the United States
▻ During 2019 the first US$19,050 of taxable household income was taxed at a rate of
10%, for married couples, while amounts above that were subject to rates ranging
from 12% to 37%.
▻ Estates valued at more than US$11.18 million per person were subject to the federal
estate tax.
42

▰ Addressing externalities
▻ Taxes can also be used to address externalities.
▻ using subsidies (credits, deductions, or exemptions) to make activities with positive
externalities less expensive.
▻ imposing taxes or charges to make activities with negative externalities more expensive.
▻ Example:
▻ A number of countries provide tax subsidies for basic research, which has positive
externalities.
▻ Many countries impose pollution charges, such as effluent fees, and some impose carbon taxes,
to make the use of heavily polluting fuels such as coal more expensive.
▻ Singapore imposes special fees (non-tax revenues) for entering crowded business and
shopping districts during peak periods, to reduce congestion.
43
5.2
Hệ thống thuế
và phân loại thuế
44
5.2.1. Thuế trong luồng luân chuyển thu nhập

▰ In modern economies taxes are the most important source of governmental revenue.
▰ Collecting taxes and fees is a fundamental way for countries to generate public revenues that
make it possible to finance investments in human capital, infrastructure, and the provision of
services for citizens and businesses.
45
5.2.1. Thuế trong luồng luân chuyển thu

nhập
▰ Governments finance policy from :
▻ taxes,
▻ grants (typically in the form of ‘development
assistance’ transfers), and
▻ debt (more precisely budget deficits, or reductions
of budget surpluses).
46
47
49
50
5.2.2. Phân loại thuế
Tax authority
Tax rate
Tax base
design
Relationship
Taxation
between tax
method
and income 52

▰ Tax authority
Tax authority
Federal taxes
Local taxes
53

▰ Tax authority
Example: The United States
State/local budget Federal budget
 Most income from  Most income from
 Sales taxes  Income taxes
 Income & Property taxes  Payroll taxes
 Grants from Fed. gov’t  Social security taxes
 Income pays for  Medicare taxes
 Education  Unemployment taxes
 Public Welfare  Income pays for
 Roads and repairs  Military defense
 Public Safety  Highways and roads
 Police and Fire  Other gov’t programs
54

▰ Tax authority
55

▰ Tax base
Tax base
Income taxes
Property taxes
Consumption taxes
56

▰ Taxation method
Taxation method
Direct taxes
Indirect taxes
57

▰ Taxation method
58

▰ Taxation method
Direct taxes Indirect taxes
Taxable objects Income or properties Goods or services
Taxable persons Tax payers are taxable Consumers

Tax payers persons Intermediaries
High
(Direct taxes are narrowly
Administrative costs Low
based and has many
exemptions)
Progressive Regressive
Distribution effects (They help to reduce (They widen the gap 59
inequalities) of inequalities)

▰ Relationship between tax and income
Relationship
between tax and income
Progressive tax
Regressive tax
Proportional tax 60

61

62

▰ Tax rate design
Tax rate design
Specific tax
Ad valorem tax
Combined tax 63

▰ Tax rate design
Ad valorem tariff Specific tariff
Price changes are taken into Easy to apply and administer.
account. Tariff revenue is stable & a
Pros Importers are encouraged to constant degree of protection is
negotiate import prices. maintained.
Fair to importers. Expensive goods are stimulated.
Determination of the value of an Price changes are not taken into
imported product is complicated. account.
Cons Tariff revenue depends on price Importers are not encouraged to
changes. negotiate import prices.
64
Tax evasion may happen.
5.2.3. Hệ thống thuế

▰ OECD classification
▻ depending on the object of taxation,
▻ useful for international comparisons,
▻ not very useful for economic discussion,
▻ does not show the economic
characteristics of taxes.
65

▰ OECD classification
▻ Main headings in the OECD classification
▻ 1000 Taxes on income, profits and gains
▻ 2000 Social security contributions
▻ 3000 Taxes on payroll and workforce
▻ 4000 Taxes on property
▻ 5000 Taxes on goods and services
▻ 6000 Other tax revenues 66

▰ Five most common type of taxes
▻ Five most common type of taxes
▻ Taxes on earnings
▻ Taxes on individual income
▻ Taxes on corporate income
▻ Taxes on wealth
▻ Taxes on consumption
▻ Payroll, income, and wealth taxes are called direct taxes because they are assessed
directly on individuals.
▻ Consumption taxes are called indirect taxes because they tax individuals indirectly by
taxing their transactions.
71

▻ Taxes on earnings
▻ Payroll tax: a tax levied on the earnings of workers.
▻ Payroll taxes are the primary means of financing social insurance programs (Social
Security, unemployment insurance, Medicare, and so on).
72

▻ Individual income tax: a tax paid by individuals on income accrued during the year.
▻ Income for income tax purposes includes labor earnings, but the tax is distinguished
from the payroll tax by:
▻ (1) applying to a broader set of income sources (such as interest earnings from
household savings as well).
▻ (2) applying in many cases to the entire income of a family, not just to the
income of one individual worker.
73

▻ A form of income taxation that is of particular interest is the taxation of capital
gains.
▻ Capital gains: Earnings from selling capital assets, such as stocks, paintings, and
houses.
74

▻ Taxes on corporate income
▻ Corporate income tax: Tax levied on the earnings of corporations.
▻ The purpose of the separate taxation of corporations, above and beyond taxes on
individuals, is to tax earnings of owners of capital that otherwise might escape
taxation by the individual-based income tax system.
75

▻ Taxes on wealth
▻ Wealth taxes are taxes paid not on income as it is accrued, but on the value of the
assets held by a person or family, such as land, jewelry, artwork, real estate, and
stocks.
▻ Property taxes, which are based on the value of land and any structures built
on the land
▻ Estate taxes, which are based on bequests (money, property, and so on) left
behind when one dies.
76

▻ Taxes on consumption
▻ The form of taxation that is most common around the world is the consumption tax,
which is paid on individual or household consumption of goods (and sometimes on
services as well).
▻ Sales taxes: taxes paid by consumers to vendors at the point of sale.
▻ Excise tax: tax paid on the sales of particular goods, such as cigarettes or
gasoline.
77

▰ Tax structure: Developed vs. Developing countries
78

79

80

▰ Tax structure: Tax on incomes vs. Taxes on goods and services
81
5.3
Lý thuyết thuế chuẩn tắc
82
5.3.1. Quan điểm về lý thuyết thuế chuẩn tắc

▰ Normative versus positive economics
▻ Positive economics is concerned with what “is,” with describing how the economy
functions.
▻ Normative economics deals with what “should be,” with making judgments about the
desirability of various courses of action.
▻ Normative economics makes use of positive economics.
▻ We cannot make judgments about whether a policy is desirable unless we have a clear
picture of its consequences.
▻ Good normative economics also tries to be explicit about precisely what values or
objectives it is incorporating.
83

▰ Public expenditure theory
▻ Public expenditure theory defines the legitimate areas of public concern as well as the
permissible forms that policy may take.
▻ Moreover, public expenditure theory often contains its own theory of taxation in the
sense that the expenditure decision rules define a set of taxes and transfers necessary to
guide the market system to an optimum.
▻ Taxes contribute to the pursuit of efficiency and equity in these instances.
84

▰ The theory of taxation
▻ The theory of taxation becomes interesting in its own right only when the expenditure
decision rules indicate the need for specific government expenditures without
simultaneously specifying how those expenditures are to be financed.
▻ When this occurs, the same criteria that guide public expenditure analysis also apply to the
collection of tax revenues.
▻ In particular, taxes should promote society's microeconomic goals of allocational
efficiency and distributional equity.
85

▰ The theory of taxation
▻ One goal of normative tax theory, then, is to design taxes that minimize these
distortions for any given amount of revenue to be collected.
▻ Alternatively, if the government must use one of two or three specific kinds of taxes to
raise revenue, normative tax theory should indicate which of these taxes generates the
minimum amount of inefficiency.
86
5.3.2. Tiêu chuẩn của một hệ thống thuế tốt

▰ Taxes are inevitably painful.
▰ Designing tax systems has always been a subject of considerable controversy.
▰ Governments, in deciding how best to raise the revenue they require, have looked for general
principles.
▰ There are five accepted properties of a “good” tax system.
87

Economic
efficiency
Administrative
Fairness
simplicity
Political
Flexibility
responsibility
88

▰ Efficiency
▻ The tax system should not be distortionary; if possible, it should be used to enhance economic
efficiency.
▰ Administrative simplicity
▻ The tax system should have low costs of administration and compliance.
▰ Flexibility
▻ The tax system should allow easy adaptation to changed circumstances.
▰ Political responsibility
▻ The tax system should be transparent.
▰ Fairness
▻ The tax system should be, and should be seen to be, fair—treating those in similar
circumstances similarly, and imposing higher taxes on those who can better bear the burden of
taxation.
89

▰ Corruption resistant
▻ In many developing countries (and even in some developed countries) there is an
important sixth attribute: the tax system should be “corruption resistant.”
90

▰ Economic efficiency
▻ The tax system should not interfere with the efficient allocation of resources.
▻ Most taxes change relative prices.
▻ As a result, the price signals are distorted, and the allocation of resources is altered.
▻ A persistent concern is the extent to which the tax system discourages savings and work, and distorts
other decisions relating to consumption and production.
91

Economic impacts of taxation
General Announcemen
Behavioral Financial Organizational
equilibrium t effects and
effects effects effects
effects capitalization
92

▻ Behavioral effects
▻ Most of the efficiency effects of taxation are far more subtle and difficult to assess.
▻ Example:
▻ Work, education, retirement
▻ Savings, investment, risk taking
▻ Energies devoted to avoiding taxes instead of creating wealth
▻ Marriage and divorce
93

▻ Financial effects
▻ Sometimes taxation affects a transaction’s form more than its substance.
▻ Example: Fringe benefits (in cash or in kind?)
▻ Because dividends, capital gains (increases in the price of and asset), and interest are all
treated differently, the tax structure may have a significant effect on the financial structure of
corporations.
94

▻ Organizational effects
▻ Corporations versus unincorporated enterprises.
▻ Intertwined with financial effects (banks versus insurance versus other forms of finance).
▻ Another major economic organization within our society is the family.
▻ Tax laws affect both family formation and the distribution of well-being within a family.
95

▻ General equilibrium effects
▻ The imposition of a tax such as that on wages or on the return to capital alters the equilibrium of
the economy.
▻ Example: A tax on interest may reduce the supply of savings and, eventually, the stock
of capital; this in turn may reduce the productivity of workers and their wages.
▻ General equilibrium effects have important distributional consequences, sometimes in a
direction quite opposite to the intent of the legislation.
▻ Example: A tax on capital may reduce the supply of capital, thereby increasing the
return to capital; in some instances, the degree of inequality may actually be increased
by such a tax.
96

▻ Announcement effects and capitalization
▻ The economy does not instantaneously adjust to a new tax.
▻ Often, the long-run distortions are much greater than the short-run distortions, as the
economy is able to respond more fully to the new situation.
▻ Some effects of the tax may be felt even before it is imposed, simply upon its announcement.
▻ An announcement concerning the future tax treatment of an asset has an immediate impact on
the value of the asset.
▻ It is these announcement effects, or impact effects, which may be quite significant, that have
given rise to the saying that “an old tax is a good tax.”
▻ Not only may the announcement effect present serious equity problems, but anticipation of it can
also affect the supply of assets.
97

▻ Announcement effects and capitalization
▻ Future taxes on an asset reflected (“capitalized”) in the price of the asset at the time the tax is
announced.
98

▻ Distortionary vs. Non-distortinary taxation
▻ Any tax system influences behavior.
▻ Distortions are associated with the individual’s or firm’s attempt to lower the tax liability.
▻ Virtually all taxes imposed are distortionary.
▻ Any tax on commodities is distortionary: an individual can change his or her tax liability
simply by reducing purchases of the commodity.
▻ Any tax on income is also distortionary: an individual can reduce his or her tax liability
simply by working less or by saving less.
▻ A tax is non-distortionary if, and only if, there is nothing an individual or firm can do to alter
the tax liability.
▻ Economists call taxes that are non-distortionary lump-sum taxes.
99

▻ Corrective taxation
▻ So far, this discussion has emphasized the negative aspects of taxation: that a tax system should
be designed so as not to interfere with economic efficiency.
▻ Taxation can sometimes be used in a positive way, to correct some market failure.
▻ Taxation could sometimes be used to correct for externalities.
▻ Corrective taxes (as these taxes are called) both raise revenue and improve the efficiency of
resource allocations.
▻ Example: The tax imposed on the chemical industry to pay for the costs of cleaning up and
disposing of toxic wastes can be thought of as a corrective tax
100

▻ The tax system ought to be easy and relatively inexpensive to administer.
▻ Good tax systems rely on self-compliance, so the system should be designed to make compliance easy
and voluntary.
▻ Administering our tax system entails significant costs.
▻ Direct costs: the cost of running tax authorities
▻ Indirect costs: borne by taxpayers, called compliance costs
▻ costs of time spent filling out tax forms
▻ costs of record keeping
▻ costs of services of accountants and tax lawyers
101

▻ The administrative costs of running a tax system depend on a number of factors.
▻ First, they depend on what records would be kept in the absence of taxation.
▻ A second factor that determines the administrative costs of a tax system is its complexity.
▻ Third, taxing some categories of income may be more expensive than taxing others.
102

103

▰ Flexibility
▻ Changes in economic circumstances require changes in tax rates.
▻ For some tax structures, these adjustments are easy;
▻ for some, they require extensive political debate;
▻ still for others, they occur automatically.
104

▰ Flexibility
▻ Automatic stabilization
▻ As the economy goes into a recession, a reduction in tax revenues may be extremely desirable, to
provide needed stimulus for the economy.
▻ When prices are stable, a progressive tax structure will provide “automatic” stabilization.
▻ When incomes drop, as a result of a recession, the average tax rate is reduced.
▻ When income increases, the average tax rate increases.
105

▰ Flexibility
▻ Automatic stabilization
▻ Unless tax brackets are indexed (i.e., adjusted to take account of inflation), during periods of
stagflation—when the economy is in a recession but there is still inflation—the average tax rate
would increase, although a lower rate would be needed to move the economy out of the
recession.
▻ Indexing contributes to stabilization when prices rise during recessions.
▻ During periods of expansion and inflation, indexing reduces the built-in stabilizing effects of the
income tax.
106

▰ Flexibility
▻ Political difficulties of adjusting rates
▻ When changing the tax rates is considered desirable, attempts to adjust the income tax often
occasion intense political debate.
▻ Which rates ought to be adjusted
▻ Is it fairer to reduce the taxes of individuals at different income levels by the same dollar
amount, or by the same percentage amount?
▻ Should focus be on the average tax rates individuals pay, or on their marginal tax rates?
107

▰ Flexibility
▻ Speed of adjustments
▻ An important aspect of the “flexibility” of a tax system for purposes of stabilizing the economy
is timing: the speed with which changes in the tax code (once enacted) can be implemented, and
the lags in the collection of funds.
▻ If fluctuations in the economy are rapid, the lags may limit the efficacy of the income tax, in
stabilizing the economy.
▻ There is always the danger that with sufficiently long lags, taxes will be increased just when the
economy needs a tax reduction, and vice versa.
108

▰ Transparent political responsibility
▻ A widely embraced political value is that government should not try to take advantage of
uninformed citizens.
▻ This view recommends taxes for which the burden of payment is clear.
▻ Such taxes are known as transparent taxes.
▻ Transparency has increasingly been recognized as an important characteristic of good government.
▻ Government policies are said to be transparent when they are subject to daylight—when it is clear
who is benefiting and who is paying.
▻ Sometimes it seems as though the government deliberately misrepresents the true costs of the services
it provides or who bears the costs.
▻ In some cases there is an almost deliberate attempt to persuade individuals that the cost of government
is less than it is.
109

▰ Transparent political responsibility
▻ A politically responsible tax structure is also one in which changes in taxes come about
as a result of legislation, and with which the government must repeatedly come back to
the citizenry for an appraisal of whether it is spending too much or too little.
110

▰ Fairness
▻ Most criticisms of tax systems begin with their unfairness.
▻ It is difficult to define precisely what is or is not fair.
▻ There are two distinct concepts of fairness:
▻ horizontal equity
▻ vertical equity
111

▰ Fairness
▻ Horizontal equity
▻ A tax system is said to be horizontally equitable if individuals who are the same in all relevant
respects are treated the same.
▻ Although the underlying idea is clear enough, there are two fuzzy notions in our definition:
▻ What does it mean for two individuals to be identical in all relevant respects?
▻ No two individuals are ever identical.
▻ What are to be acceptable distinctions?
▻ What does it mean for two individuals to be treated the same?
▻ Example: social contribution of men and women
112

▰ Fairness
▻ Vertical equity
▻ The principle of vertical equity says that some individuals are in a position to pay higher taxes
than others, and that these individuals should do so.
▻ There are three problems:
▻ (1) determining who, in principle, should pay at the higher rate;
▻ (2) implementing this principle—that is, writing tax rules corresponding to this
principle; and
▻ (3) deciding, if someone is in a position to pay the higher rate, how much more that
individual should pay than others.
▻ A: 500 B: 510
▻ Biểu thuế lũy tiến toàn phần: <=500: 5%; >500: 10%
▻ A: 25 => 475 B: 51 => 459
▻ Biểu thuế lũy tiến từng phần: <=500: 5%; >500: 10%
113
▻ A: 25 => 475 B: 500*5% + 10*10% = 26 => 484

▰ Fairness
▻ Fair basis of taxation
▻ Income as a basis for taxation
▻ Income is the most widely used basis of taxation;
▻ Income is widely viewed by governments and policy makers as a good measure of ability
to pay.
▻ Those who have a higher income have greater ability to pay and should therefore pay
higher taxes.
▻ How much more is, as we have said, a more difficult question.
▻ The income tax seemed able to introduce a high degree of progressivity and to avoid the
distortions associated with having a large number of taxes on different commodities.
114

▰ Fairness
▻ Income as a basis for taxation
▻ Today, in much of the world, the income tax has become a less important source of
revenue.
▻ It has been replaced, or supplemented, by the value-added tax, which is designed to tax
only consumption, not savings or investment, and which is typically not progressive.
115

▰ Fairness
▻ Consumption as a basis for taxation
▻ One of the most forceful arguments against income as a fair basis of taxation is that
income corresponds to the individual’s contribution to society—the value of his or her
economic output.
▻ Is it fairer to tax individuals on the basis of what they take out of society rather than
what they contribute — that is, on the basis of consumption, rather than income?
▻ Income and consumption differ by savings.
▻ A major issue is whether savings ought to be exempt from taxation.
▻ This is equivalent to the question of whether the return to savings (interest, dividends, and
capital gains) ought to be exempt from taxation.
▻ Example: An identical twin (Prudence versus Imprudence) 116

▰ Fairness
▻ Lifetime income as a basis for taxation
▻ The contrast between consumption and income as a basis of taxation may not be as stark
as it has sometimes been portrayed.
▻ The real issue may be the appropriate time unit to use as the basis of taxation.
▻ Under a view that is growing in support, the appropriate basis of taxation should be
lifetime income, not income in one year.
▻ Lifetime income is defined as the present discounted value of the individual’s wage
income.
▻ It thus becomes clear that if we believe that the correct basis of taxation is the individual’s
lifetime income, this is equivalent to believing that the correct basis of taxation is the
individual’s lifetime consumption. 117

▰ Fairness
▻ Lifetime income as a basis for taxation
▻ It thus becomes clear that if we believe that the correct basis of taxation is the individual’s
lifetime income, this is equivalent to believing that the correct basis of taxation is the
individual’s lifetime consumption.
▻ Strong implication of using lifetime income as a basis of taxation: interest income should
be exempt from taxation.
▻ A consumption tax is equivalent to a lifetime income tax, which in turn is equivalent to a
tax on wages alone.
118

▰ Fairness
▻ Criticisms of income as a basis of taxation
▻ Some have criticized the use of income as a basis for taxation, believing that neither
income—lifetime or annual—nor consumption provides a fair basis of taxation.
▻ Example: An identical twin (Joe and Jim)
▻ In practice, then, governments use income or consumption as the basis of taxation, even if
they are flawed measures either of ability to pay or of an individual’s well-being.
119

▰ Fairness
▻ Benefit approach
▻ Individuals should contribute to the support of the government in proportion to the benefit
they receive from public services.
▻ The principles of charging for public services should be analogous to those used for
private services—and taxes can be viewed as simply the “charge” for the provision of
public services.
▻ Example: toll fees
▻ For the most part, economists have not been attracted to the benefit approach to
taxation, largely because it is impossible to identify the magnitude of the benefits
received by different individuals.
▻ A second objection raised against benefit taxes when they are related to usage is that they 120
are distortionary.

▻ A tax system that makes multiple distinctions—for instance, with different categories of goods (cars
versus trucks) being treated differently—is more prone to corruption.
▻ A tax system in which the things being taxed are more easily observable, and verifiable by a third
party, are more corruption resistant.
▻ There are often trade-offs.
▻ Complex, opaque tax systems that give tax officials considerable discretion and have high tax
rates are incubators of corruption.
▻ Simple, transparent, rules-based tax systems with low tax rates are more corruption
resistant, but may fall short on other objectives.
121

▻ How tax laws are enforced can also affect the extent of corruption.
▻ Frequent rotation of tax agents from one task to another and one location to another makes it
more difficult to form close links between particular taxpayers and particular government
officials, so this has proven to be an effective tool for reducing corruption.
▻ The use of computer systems and related information technology makes it easier to monitor
the behavior of taxpayers and tax officials and spot malfeasance.
▻ Requiring taxpayers to use the banking system to make their tax payments is another way to
make a tax system more corruption resistant, as it prevents tax officials from handling cash
payments from taxpayers.
▻ Adequate compensation for tax officials is a third antidote for corruption.
122

▻ How tax laws are enforced can also affect the extent of corruption.
▻ The most powerful tax administration medicine for making a tax system corruption resistant
is to offer taxpayers a balanced combination of a simple tax system well administered, so that
it is easy to do the right thing, and a credible threat of sanctions if they do not comply with tax
laws.
123
THANKS!
124

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Chương 5

TỔNG QUAN VỀ THUẾ

5.1. Khái niệm và đặc điểm của thuế

5.2. Hệ thống thuế và phân loại thuế

5.3. Lý thuyết thuế chuẩn tắc

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

Karl Marx J.J. Rousseau

Class conflict Social contracts

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.1. Khái niệm của thuế

5.1.2. Đặc điểm của thuế

5.1.2. Đặc điểm của thuế

5.1.2. Đặc điểm của thuế

5.1.2. Đặc điểm của thuế

5.1.2. Đặc điểm của thuế

5.1.2. Đặc điểm của thuế

5.1.2. Đặc điểm của thuế

5.1.3. Mục đích của thuế

5.1.3. Mục đích của thuế

5.1.3. Mục đích của thuế

5.1.3. Mục đích của thuế

5.1.3. Mục đích của thuế

5.1.3. Mục đích của thuế

5.2.1. Thuế trong luồng luân chuyển thu nhập

5.2.1. Thuế trong luồng luân chuyển thu

5.2.1. Thuế trong luồng luân chuyển thu nhập

5.2.1. Thuế trong luồng luân chuyển thu nhập

5.2.1. Thuế trong luồng luân chuyển thu nhập

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

Taxable objects Income or properties Goods or services

Taxable persons Tax payers are taxable Consumers

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

5.2.2. Phân loại thuế

Tax rate design

5.2.2. Phân loại thuế