Presumptive Income Taxation: Administrative, Efficiency, and Equity Aspects
IMF Working Papers, August 1, 1987
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Bibliographic details
- Authors: Milka Casanegra de Jantscher, Vito Tanzi
- Published: August 1, 1987
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451969375.001
Summary
- Discusses assessment of income on the basis of approximate indicators as opposed to conventional records; this method is known as presumptive income taxation.
- Notes that presumptive income taxation is widely used in many developing and industrial countries.
- Observes that presumptive income taxation has been neglected in public finance literature.
- States that in most cases the presumptive approach has been followed for administrative reasons.
- Argues that more attention should be paid to the efficiency implications of presumptive taxes.
Key findings and analysis
- Presumptive taxation relies on approximate indicators rather than conventional bookkeeping or records.
- Use is widespread across both developing and industrial country contexts.
- The literature gap: public finance research has given limited attention to presumptive income taxation.
- Administrative motivations: the approach has most often been adopted for administrative reasons (ease of assessment, compliance, enforcement).
- Efficiency focus: the paper emphasizes that implications for efficiency deserve more systematic analysis and consideration.
Policy implications and recommendations
- Policymakers and tax authorities should consider not only administrative convenience but also the efficiency implications when designing or retaining presumptive tax systems.
- Greater analytical and empirical attention in public finance research is warranted to assess trade-offs between administrative simplicity and efficiency/equity outcomes.
Subjects and keywords
- Subject: Income and capital gains taxes, Income tax systems, National accounts, Personal income, Presumptive tax, Revenue administration, Tax administration core functions, Taxes
- Keywords: Global, gross sales, Income and capital gains taxes, Income tax systems, net wealth, Personal income, presumption method, presumptions of income, Presumptive tax, public finance, Tax administration core functions, tax department, taxable income, taxpayer compliance, WP