Methods for Assessing the Fiscal Effectiveness of Indirect Taxation

E. V. Balatsky and N. A. Ekimova

Journal of Applied Economic Research, 2020, vol. 19, issue 1, 19-39

Abstract: The purpose of the article is to systematize different approaches to the assessment of the fiscal effectiveness of taxation in general and indirect taxation in particular. The article also seeks to elaborate proposals as to which methods are applicable to which analytical tasks. Comparative analysis of the existing practice of evaluating tax systems is used in the report. The results of the study are four types of fiscal effectiveness which were identified by the authors. The first type – budget effectiveness of indirect taxation – characterizes the ability of a tax to provide revenue to the budget. The second one – main effectiveness of indirect taxation – implies measuring the degree of the implementation of the main principle, according to which the trajectory of fiscal charges over time for a effectively working tax system must pass next to the main route, the role of which is played by the GDP trajectory. The third method – marginal effectiveness of taxation – is based on the construction of the production and institutional function and on the identification (based on this function) of the maximum tax burden for business (production) and the state (budget), when exceeding these limits leads to a drop in GDP and budget revenues respectively. The fourth one – institutional effectiveness of taxation – is based on the construction of the production and institutional function and the corresponding equation of distortion of equilibrium prices of macrofactors, which allows one to estimate the validity of the established tax burden from the point of view of the state's implementation of its obligations on formation and maintenance of effective institutions. The main conclusion of the article points to the necessity of a comprehensive assessment of tax systems using all four methods; otherwise one-sided and incomplete results would be turned out. The suggested methodological recommendations can be used for diagnostic and analytical purposes by governing bodies and research teams.

Keywords: budget; efficiency; taxes; diagnostics; institutions; indirect taxation; valuation methods; fiscal efficiency (search for similar items in EconPapers)
JEL-codes: H24 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnjaer:v:19:y:2020:i:1:p:19-39

DOI: 10.15826/vestnik.2020.19.1.002

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