What are the Costs of a New Tax Administration? The Case of a Personal Income Tax in Kuwait

James Alm ()

No 1804, Working Papers from Tulane University, Department of Economics

Abstract: This paper assesses the viability of introducing a new personal income tax (PIT), focusing on the administrative costs of new tax. I first present a methodology for calculating the one-time start-up costs and the ongoing administrative costs of a new PIT. I then apply this methodology to the specific case of Kuwait. I estimate that the first-year total administrative costs of a new PIT tax administration in Kuwait range from Kuwaiti dinars (KWD) 46.8 million to KWD 90.9 million (or from USD 154.4 million to USD 300.0 million), depending on how the construction costs are financed. However, after the initial construction costs are incurred, I find that the annual total administrative costs of a PIT fall significantly to about KWD 50 million (or about USD 164 million), regardless of specific financing methods, and then rise at an annual rate of less than 6 percent per year to reach KWD 82.0 million (or USD 270.6 million) by year 2020, driven mainly by labor force growth. I also estimate that the likely revenues of a new PIT far exceed these administrative costs, even if the PIT is imposed at low rates.

Keywords: Public administration; tax administration; administrative costs. (search for similar items in EconPapers)
JEL-codes: H2 H5 H83 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tul:wpaper:1804

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