BUOYANCY AND ELASTICITY: DETERMINANTS OF
LOCAL TAX SYSTEM’S PERFORMANCE
Civil servants and priests, soldiers and ballet-dancers, schoolmasters and police constables, Greek museums and Gothic steeples, civil list and services list—the common seed within which all these fabulous beings slumber in embryo is taxation.
Karl Marx
Every citizen, whether young or old, wealthy or poor, property owners or property-less, pays taxes to help finance governmental functions. Every business pays taxes, which almost certainly enter into the prices the consumers pay. The wages of the workers are withheld for income taxes. No one can avoid paying taxes.
Taxes have always been the traditional sources of government revenues. Recourse to taxation to finance the operational costs of government has been availed of by rulers of all times and climes from antiquity down to the present. It is what the government uses for community development.
Taken in this light, therefore, taxes are not mere contributions of the people to their governments, but represent the peoples' investments for their own welfare and future. Despite this, however, and the compulsory nature of taxes, many delinquent taxpayers manage to evade or avoid the payment of their taxes in one way or another. Tax evasion has become a serious societal problem. Too many people fail to pay their rightful tax. As a consequence, the government incurs huge deficit, and its delivery of basic services is tremendously affected.
With R.A. 7160, otherwise known as the Local Government Code of 1991, providing greater degree of fiscal autonomy to local government units, a periodic evaluation of the performance of the prevailing local tax system from the perspective of resource mobilization is, therefore, an imperative task among local government units.
Estimation of Tax Buoyancy and Elasticity
An important point to consider in any tax system is the responsiveness of the tax revenue to changes in income. According to Mansfield (Majuca, 1998), this responsiveness is measured by the concepts of tax elasticity and tax buoyancy.
Tax buoyancy is a ratio of the percentage change in tax revenue to the percentage change in aggregate income with the revenue changes inclusive of the increment in revenue brought about by discretionary factors. Modifications in the statutory rates ...
... middle of paper ...
...mp;#61669;T1Y = (T1 / T1) / (Y/ Y)
= ((Ti / Ti) / (Bi / Bi)) . ((Bi / Bi) / (Y/ Y))
=  Ti Bi  Bi Y
 Ti Bi will be estimated econometrically by regressing tax receipts on tax base while BiY will be obtained by regressing tax base on aggregate income.
LITERATURE CITED
Manasan, Rosario G. “Survey and Review of Forecasting Models in Internal Government Revenues,” Philippine Institute for Development Studies, No. 81-13, March 1981.
Mansfield. "Elasticity and Buoyancy of a Tax System: A Method Applied to Paraguay", IMF Staff Papers, Vol. 19, No. 2, 1972.
Osoro and Leuthold. "Changing Tax Elasticities Over Time: The Case of Tanzania", African Development Review, Vol. 6, No.1, June 1994.
Trinidad, Emmanuel and Perio Sylvia de, “Buoyancy and Elasticity of Revenue,” Journal of Philippine Development, Vol. VIII, Nos. 1 and 2, 1981.
http.//www.students.uiuc.edu/~majuca/buoyancy.html
http.//www.students.uiuc.edu/~majuca/growth.html
Mikesell, J. L. (2010). Fiscal administration: Analysis and applications for the public sector (8th ed.: 2010 custom edition). Mason, OH: Cengage Learning
Our current system of taxation is a varied rate percentage based on different income brackets. Many say that it violates our constitutional rights through unequal taxation. Multiple deductions, loopholes, special rates, and a complex system of regulations all characterize our Federal Income Tax System, prompting many to question why it is still being used (Peters, 2013). The current system although bringing in over $3 trillion, taxes income multiple times, and includes the taxing of estate, labor, savings, and investments (National Priorities Project, 2013). The system itself is complex with over 20,000 pages of regulations, requiring a massive filing system, which is set up and maintained by an even larger IRS, requiring over $225 billion in compliance costs (Hall, 2001). One can be hard pressed to find an advantage in the current system, other than the fact that it provides the government with an enormous amount of funds, and it has...
Business Source Premier. Web. 19 Jan. 2014. Stokey, Nancy L., and Sergio Rebelo. "Growth Effects Of Flat-Rate Taxes." Journal Of Political
This paper will take a close look at the concepts of the "flat tax," and look at the possible benefits and potential failings. Although there is a basic format to the flat tax, there are multiple flat tax proposals that have been offered by conservatives. Along with critiquing the basic format of the flat tax, this paper will compare an...
Tiebout, Charles; ‘A Pure Theory of Local Expenditures,’ Journal of Political Economy, Vol. 64, No. 5, (1956), pp. 416–24.
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Be...
We see this every time we make a purchase, taxes are a part of everyday spending. Taxes come in many forms, from income tax, to sales tax, to property taxes. As citizens of the United States, it is a requirement for us to pay our due share, and this comes in the form of taxes. The impact from taxes grossly affects the both personal finances and the economy on a grand scale. So why does the government require us as citizens to pay taxes? Well according to the article why do you have to pay taxes?
Lehan, Edward A., Simplified Governmental Budgeting. Chicago: Municipal Finance Officers Association of the US and Canada, 1981.
Some argue that these hidden taxes can be regressive, impacting poorer people significantly. Tax Avoidance and Evasion (ahh, my favorite thing in the world). Another issue that arises is tax avoidance and evasion. Some people and corporations may find ways to minimize their tax obligations through legal loopholes or even illegal means. This can lead to a loss of tax revenue for the government, perhaps, affecting the funding of public services.
The four types of taxes this paper will discuss are income tax, sales tax, property tax, and user fees. Income tax was not permanently established until the 16th Amendment was passed in 1913. Most federal taxes had been previously derived from excise taxes on tobacco and alcohol and other consumer goods. The US Constitution, when written and still continues to, legitimize taxation in the United States through Article I, Section 8, that Congress has the power to lay and collect taxes, duties et al, pay the debts or provide for the common defense and general welfare of the United States (Cornell Law LII). Investopedia defines income tax as ‘a tax government(s) impose on financial income generated by all entities within their jurisdictions (Investopedia, 2014). Businesses and individuals are required to file an income tax return every year to determine if they owe taxes or qualify for a refund. That is determined by measuring the total income one earns to a designated tax rate, calculating one’s taxable income, which are some or all items of income reduced by other adjustments or expenses in that tax year. There are different subcategories of income tax; there is a federal income tax that is set by the federal government, apart from a few states, there is a state income tax that is imposed on their respective residents, as well as the possibility of there being local income tax ...
Optimal Taxes Should Depend On Personal Characteristics As Well As Income: Reliance on individual income as the only source of determining ability to pay tax is discouraged. Mirrlees (1971) suggests that other characteristics such as I.Q, number of degrees, age and colour should be used in determining the ability of a taxpayer. Other barometers referred to as “Tagging” was put forward by Akerlof (1978) to supplement the income oriented tax system. This provided more information on individuals, which the policymakers can capitalize on while determining tax liability.
Dornubusch, Rudiger. Macroeconomics. USA. McGraw-Hill Publishing Company. 1990.
Hubbard, R. G., Garnett, A., Lewis, P., & O’Brien, A. P. (2010). Essentials of economics.
Lim, Joseph Y. and Montes, Manuel F. "The Structure of Employment and Structural Adjustment in the Philippines." Journal of Development Studies v.36