{
  "title": "Presumptive Taxation: Revenue and Automatic Stabilizer Aspects",
  "publication": "IMF Working Papers, August 1, 1993",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/presumptive-taxation-revenue-and-automatic-stabilizer-aspects-1207",
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  "summary": "Presumptive taxation has been adopted in many countries to tax hard-to-tax activities and reduce evasion. Further, in view of the possible efficiency gains from such techniques, a case can be made for adopting presumptive taxation of global income. This paper addresses two questions.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Presumptive taxation is used in many countries to tax hard-to-tax activities and reduce evasion.\n- The paper assesses whether presumptive taxation can raise revenue and whether it undermines macroeconomic stability by lacking the automatic stabilizer properties of progressive income taxation.\n- Two simple models are developed; one model’s relevance to presumptive excise taxation in Pakistan is examined."
    },
    {
      "heading": "Research questions",
      "content": "- Could revenue be increased by adopting presumptive tax methods?\n- Would presumptive income taxation contribute to macroeconomic instability because it lacks the automatic stabilizer property of standard progressive income taxation?"
    },
    {
      "heading": "Models and key findings",
      "content": "- Two simple theoretical models suggest:\n  - There is scope for increasing revenue under presumptive taxation.\n  - Revenue increases under presumptive taxation do not necessarily undermine economic stability.\n- The analysis considers the behavior of a risk-averse taxpayer, tax liability, aggregate tax liability, distortionary taxation, and the role of utility functions in determining taxpayer responses."
    },
    {
      "heading": "Relevance to Pakistan",
      "content": "- The first model is examined for its applicability to presumptive excise taxation in Pakistan.\n- The paper discusses policy-relevant implications for countries using presumptive excise approaches to tax hard-to-tax activities."
    },
    {
      "heading": "Policy implications and considerations",
      "content": "- Presumptive taxation can be a tool to improve net revenue collection from activities subject to evasion or difficult to administer under standard income taxation.\n- Adoption of presumptive taxation methods should weigh potential efficiency gains against distributional and stabilization considerations associated with deviating from progressive income taxation.\n- Implementing presumptive taxation for global income is presented as a case worth considering in light of possible efficiency gains."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Income and capital gains taxes, Income tax systems, National accounts, Personal income, Presumptive tax, Revenue administration, Taxes\n- Keywords: aggregate tax liability, distortionary taxation, Global, Income and capital gains taxes, income level, Income tax systems, net revenue collection, Personal income, Presumptive tax, presumptive taxation, revenue gain, risk-averse taxpayer, tax liability, utility function, WP\n\nPresumptive Taxation: Revenue and Automatic Stabilizer Aspects — S. Nuri Erbas, August 1, 1993; Pages: 20; Volume: 1993; Issue: 069; Series: Working Paper No. 1993/069; DOI: https://doi.org/10.5089/9781451960693.001\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/presumptive-taxation-revenue-and-automatic-stabilizer-aspects-1207"
    }
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    "Authors: S. Nuri Erbas",
    "Published: August 1, 1993",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451960693.001",
    "Presumptive taxation is used in many countries to tax hard-to-tax activities and reduce evasion.",
    "The paper assesses whether presumptive taxation can raise revenue and whether it undermines macroeconomic stability by lacking the automatic stabilizer properties of progressive income taxation.",
    "Two simple models are developed; one model’s relevance to presumptive excise taxation in Pakistan is examined.",
    "Could revenue be increased by adopting presumptive tax methods?",
    "Would presumptive income taxation contribute to macroeconomic instability because it lacks the automatic stabilizer property of standard progressive income taxation?",
    "Two simple theoretical models suggest:",
    "The analysis considers the behavior of a risk-averse taxpayer, tax liability, aggregate tax liability, distortionary taxation, and the role of utility functions in determining taxpayer responses.",
    "The first model is examined for its applicability to presumptive excise taxation in Pakistan.",
    "The paper discusses policy-relevant implications for countries using presumptive excise approaches to tax hard-to-tax activities.",
    "Presumptive taxation can be a tool to improve net revenue collection from activities subject to evasion or difficult to administer under standard income taxation.",
    "Adoption of presumptive taxation methods should weigh potential efficiency gains against distributional and stabilization considerations associated with deviating from progressive income taxation.",
    "Implementing presumptive taxation for global income is presented as a case worth considering in light of possible efficiency gains.",
    "Subject: Income and capital gains taxes, Income tax systems, National accounts, Personal income, Presumptive tax, Revenue administration, Taxes",
    "Keywords: aggregate tax liability, distortionary taxation, Global, Income and capital gains taxes, income level, Income tax systems, net revenue collection, Personal income, Presumptive tax, presumptive taxation, revenue gain, risk-averse taxpayer, tax liability, utility function, WP"
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