MSME taxation in transition economies: country experience on the costs and benefits of introducing special tax regimes

Michael Engelschalk and Jan Loeprick

No 7449, Policy Research Working Paper Series from The World Bank

Abstract: The paper analyzes the design of simplified small business tax regimes in Eastern Europe and Central Asia and the impact of such regimes on small business tax compliance. Although many approaches for tax simplification exist, a general trend in the region is to offer small businesses the option to be taxed based on their turnover instead of net income. The study finds that many of the regimes in place are overly simplistic and neither take into account fairness considerations nor do they facilitate business growth and migration into the standard tax regime. Although revenue generation is not a main objective of such regimes, low revenue performance and the risk of system abuse by larger businesses should be issues of concern. More attention should therefore be devoted to improving the design of simplified regimes and monitoring their application. This will require in particular a more profound analysis of the economic situation and the tax compliance challenges in the small business segment and increased efforts to improve the quality of bookkeeping.

Keywords: Public Finance Decentralization and Poverty Reduction; Taxation&Subsidies; Tax Law; Public Sector Economics; Macro-Fiscal Policy; Tax Administration; Economic Adjustment and Lending; Tax Policy (search for similar items in EconPapers)
Date: 2015-10-19
New Economics Papers: this item is included in nep-acc, nep-iue, nep-pbe and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:7449

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