Research Topics: Tax Term Paper Examples

Contrast the Benefits of Tax on Pollution with the Benefit of Legally Regulating It.

Introduction             Negative externality (Hoel 79) is the concept of environmental economics that covers pollution. This explains that some of the effects of economic activities such as pollution were not taken into account in determining the price of commodities derived through these economic activities (Kolstad 92). Pollution may be considered as extending beyond the level deemed as socially optimal in instances when manufacturers do not include the costs linked to the impact of pollution, from its production plants, to the people affected. One example of externality is ‘tragedy of the commons’ (Russell 14), a phenomenon arising from the unregulated use of public goods, which have the possibility of being exhausted. Public parks are non-exclusive and open to all people. Due to this, people tend to visit public parks more often than private parks. This could then lead to the exhaustion of this natural public resource through the accumulation of trash, vandalism and destruction of installations and resources in the park resulting to its deterioration. Externalities are considered in economic parlance as forms of market failures and inefficiencies (Russell 57). In the case of the public park, the inefficiency is the excessive pollution with the polluters not mindful of the impact of their actions to other people. To address inefficiencies and market failures, a number of solutions have been developed and advocated. One is environmental regulation, which uses the determined economic impacts through cost-benefit measures as the standards of regulation (Kolstad 8). Regulations are enforced through fines. Another is taxes for pollution to increase costs of polluting and deter polluters.    Benefits of Taxation and Direct Regulation on Pollution             The quest for effective means of addressing the market failures caused by pollution resulted to the consideration of the comparative benefits of the two commonly implemented measures, taxation and direct regulation of pollution.             First benefit of taxation is cost-effectiveness (Hoel 79) because the government spends a minimal amount in enforcing this law and the action is on the part of the polluters to weigh the cost of abatement with the cost of paying emission taxes. However, this works effectively only if all producers in comparable situations face the same costs of abating, in order to achieve equalization (Hoel 80). Uniform costs of abatement enables producers to determine the costs of stopping pollution such as additional expenses in shifting to environment friendly options with the emission tax. Apart from uniformity, the emission tax constitutes a value that should be large enough to outweigh the average abatement costs faced by producers. Otherwise emission taxes would not work in deterring polluting by manufacturers.             However, cost-effectiveness has also been linked to the different forms of direct regulation such as emission permits and quotas (Hoel 80). This is because of the deterring effect of these direct regulations on polluters when enforced. Emission permits and quotas work in limiting the level of polluting from manufacturing activities. Non-compliance with these limits constitutes a violation of the permit or quota that entails the payment of fines. When compared to emission taxation, these forms of direct regulation deter polluting by leaving it upon manufacturers the prerogative to weigh the cost of paying fines, instead of abatement, to compliance with permits or quotas.              Second benefit of taxation is ‘double dividend’ (Hoel 80). This means that emission taxes have developed dual benefits. First is the minimisation of tax distortions. The high amounts of emission taxes, to constitute effective deterrents of polluting, highly contribute to revenue generation so that the amounts of other taxes could be lowered. This provides multi-faceted benefits. If income taxes are lowered, employees get to take home more income to meet their personal and household needs. As such, emission taxes have indirect social welfare benefits (Bovenverg 421) provided the amount of emission taxes is high enough to constitute both a deterrent as well as revenue-generating taxation policy. Second benefit is the deterrence of polluting of manufacturers by enforcing dues for polluting. This benefit sets-out revenue-generating regulations from the other pollution regulations that do not contribute or minimally contribute to public funds.             However, emission taxes do not constitute the only revenue-generating pollution measures. Tradeable emission permits also generate revenue when these are sold to manufacturers at the market price (Hoel 80). This type of polluting permit generates revenue when purchased at auctions and other similar modes of trading because it is ensured that the permits are purchased at the highest possible price that the manufacturers are willing to pay. Purchase price adds to the public coffers. If the amount collected from trading is large enough, then dual benefit could also be experienced, except that apart from lessening tax distortions, tradeable emission permits deter polluting by placing a high premium for the privilege to pollute instead of directly deterring polluting like emission taxes.             There are also criticisms of emission taxes that constitute the benefits of regulating pollution. First benefit of regulating pollution is its direction towards the achievement of goals but not necessarily to the point of ensuring quantitative accuracy (Hoel 81). Regulations address pollution by not making manufacturers pay but making polluting permits property rights with a high price. As such, the targeted goal is to deter polluting by placing a high price for emission permits. This is in contrast to the goal of emission taxes of making polluting an issue of accurately quantifying the revenue generation effects and the influences on tax distortion. The advocates of direct regulation provide that accurate quantifications of goals are not inevitable in addressing the problem of pollution and pollution deterrence.               However, it cannot also be denied that quantification or accuracy of goals is important in the achievement of goals. This means that there is need for accurate direction to a certain extent in achieving the goals of polluting (Zaim 38). As such, direct regulations with minimal accurate goal direction may have drawbacks when compared to polluting with emission taxes. A significant drawback is the difficulty in identifying the extent of achievement of goals. Without quantifiable measures, policy-makers would find it difficult to determine whether the direct regulation they implemented have actually achieved the intended effect or whether there are certain implementation problems that need to be addressed to achieve positive results. Emission taxes measure achievement, through the extent of revenue generation, so that it is easier to measure outcomes of emission taxes more than direct regulations.                 Second benefit of direct regulation is the ability of measuring emission for purposes of monitoring compliance with permits and quotas (Hoel 88). This directly addresses the problem of deterring polluting because implementing this policy involves the close and regular monitoring of manufacturers to ensure compliance and identify infractions. By doing so, manufacturers would likely implement certain environment guidelines in their production processes to ensure continuous compliance with their permits or quotas to prevent incurring costs or penalties that double the costs of production instead of incurring only the cost of obtaining permits and quotas. The existence of polluting guidelines in the company makes it easier for monitoring bodies to ensure compliance of manufacturing companies.             This is in contrast to emission taxes that do not directly monitor polluting for purposes of deterring polluters but indirectly monitor polluting by ensuring the payment of emission taxes by manufacturers found to operate with high levels of polluting. This means that as long as the polluters pay their taxes, they may continue with their present level of polluting. If the amount of tax dues can be offset by large companies from continuing their production, then emission taxes may not be sufficient to address the problem of polluting.             This benefit of direct regulations cannot be equally matched by emission taxes. This constitutes a key benefit since the purpose of pollution countermeasures is to prevent unnecessary polluting and penalise the parties that do fail to comply with the polluting limits contained in the permit or quota. By doing so, the issue of pollution and polluting regulation is addressed.             Third benefit of direct regulation is its lesser potential adverse effect on employment (Hoel 91). Direct regulation does not impose dues on polluters but provides them with the option to limit or control their polluting to an acceptable level or allows certain quotas of polluting. Manufacturers incur costs from purchasing permits or paying for quotas as well as payment of fines in case these fail to comply with the limits in their permits or quotas. By knowing these repercussions, manufacturers not wanting to increase polluting costs would ensure compliance. As such, the possibly lower costs would have no strong adverse effects on employment.             This is in response to the possible drawback of emission taxes in negatively influencing employment. Emission taxes involve periodical payments that are assumed to be relatively higher than permits or quotas, the costs of which depend on market prices, because of the lack of follow-up fines for non-compliance. This means that high emission taxes may influence employees negatively. By paying emission taxes, companies may have to increase the price of polluting goods so that real wages are affected because income has a weaker purchasing power due to higher prices. An increased tax burden could also influence employees through redundancy due to the decrease in output caused by increased cost of production. (Bovenberg 427)             However, the relative benefit of direct regulation when compared to emission taxes applies, provided the cost to manufacturers of regulation is less than the cost of emission dues. Otherwise, this benefit could be attributed more to emission taxes than to forms of direct regulation.                Based on the consideration of the relative benefits of taxation and direct regulation, it becomes apparent that these address the environmental issues of pollution in different ways. The core benefit that can be derived from emission taxes is cost-effectiveness to a greater extent than direct regulations, specifically polluting permits. This is because of the more or less similar degree of monitoring involved in the emission of taxes compared to other dues. This means there is little need for investments on expertise and other requirements in implementing the policy. In relation to the monitoring of compliance permits, this involves the development of standards for permits and quota monitoring together with building of expertise of representatives in the field. The core benefit of direct regulation is its application of measuring the extent of emission for purposes of monitoring polluting. As mentioned earlier, this is important in the issue of pollution because the extent of acceptable polluting should be determined together with the limit of allowable polluting in order to determine when the regulation applies and when infractions have been made. Apart from its policy implementation value, direct regulations involving monitoring also directly address the need to ensure that manufacturers comply with the limits provided in the permits or quotas and prevent excessive polluting by identifying and penalising contraventions. The comparative core benefits of taxing pollution and regulating it differ, so that this limits comparison. Even if the relative merits of these benefits were made, there is no common ground for determining whether taxation is more effective than direct regulation and vice versa based on the core benefits. Conclusion             The purpose of determining the comparative benefits of regulations intended to address pollution should be the determination of the best means of solving pollution or even finding the best combination that allows the achievement of goals on the deterrence and control of pollution. In this light, the lack of insufficient ground to consider tax emissions as more superior than direct regulations or vice versa indicate the direction towards the integrative approach. This is necessary since, the core benefits of tax emission and direct regulation are not contradictory. Moreover, the possible drawbacks of one constitute the benefits of the other and vice versa.             Applying the integrative approach involves the application of emission taxation and direct regulations in situations that warrant these regulations in effectively addressing pollution. Although the cost-effectiveness of emission taxes involves uniform costs of abatement, this does not mean that uniformity is universal or general. This just means that all manufacturers in similar situations should experience similar costs of abatement to ensure effectiveness of taxation at least on a sector or industry-wide basis. Since not all players in the different sectors or industries face the same costs of abatement, the economic areas that are difficult to achieve uniformity may benefit from direct regulations based on emission standards. Works Cited Bovenberg, A Lans. “Green Tax Reforms and the Double Dividend: An Updated Reader’s Guide.” International Tax and Public Finance 6 (1999): 421-443. Hoel, Micheal. “Emission Taxes versus Other Environment Policies.” Scandinavian Journal of Economics 100.1 (1998): 79-104. Kolstad, Charles. Environmental Economics. Oxford: Oxford University Press, 2000. Russell, Clifford. Applying Economics to the Environment. Oxford: Oxford University Press, 2001. Zaim, Osman. “Measuring environmental performance of state manufacturing through changes in pollution intensities: a DEA framework.” Ecological Economics 48.1 (2004): 37-47.     Credit:ivythesis.typepad.com

Contrast the Benefits of Tax on Pollution with the Benefit of Legally Regulating It.

Introduction Negative externality (Hoel 79) is the concept of environmental economics that covers pollution. This explai...

VALUE ADDED TAX: ITS PERSEPTION

VALUE ADDED TAX: ITS PERSEPTION

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Title: Importance of Company Income Tax in Nigeria

Title: Importance of Company Income Tax in Nigeria   The importance of corporate income tax as a primary and a major source generating revenues for government funds cannot be overemphasized. Okezie (2003) agrees that company income taxes are necessary to raise federal revenues. In the 2006 US federal economy, for instance, company income tax accounted for 14.6 percent of all its revenues and 2.7 percent of GDP. Likewise, Buettness and Fuest (2010) believe that corporate income taxes could also be used for as automatic   stabilizer for economic demand and capital market restrictions. Taxes have been classified into direct and indirect taxes.  Direct taxes are those which both   the impact and the final burden is borne by the payer while the indirect taxes, on the other  hand, are those which burden are expected to be shifted further down to third parties.    Nigerian tax policy for companies is regulated by the Companies Income Tax Act of 1979. The Act is contained in “Chapter 60, of the Federation of Nigeria (LFN) 1990 and is amended by subsequent Decrees (ACTS) including the Finance (Miscellaneous Provisions) of 1993 and other subsequent amendments thereto. The administration of CITA rests on the shoulders of the Federal Board of Inland Revenue which has the following powers and duties: I. It is responsible for the administration of the Companies Income Tax Act and Decree. It assesses and collects the necessary company taxes. 2. It can sue and be sued in its official name 3. It can acquire, hold or dispose any property held as security and account for the proceeds to the Minister of Finance. 4. It may authorize any person within or outside Nigeria to perform or exercise any of its powers except those stated under the first schedule to the Act. 5. It may (with consent from Finance Minister) appoint the Joint Tax Board to perform or exercise any of its duties or powers. (An Evaluation Of The Relevance Of Pioneer Income Tax Relief As An Alternative Investment To Companies In Nigeria, The Nigerian Observer, http://www.nigerianobservernews.com/3122008/features/features3.html, retrieved 24 April, 2011.)” Company Income tax rate is 30 percent which was effected since January 1, 1996. (Taxes in Nigeria, Nigeria Exchange Business, http://www.ngex.com/business/public/newsinfo.php?nid=2, retrieved 24 April 2011).” Nigeria has a population of over a hundred and forty (140) million where half are assumed to be in the working bracket; few   are engaged in salaried employment and; the majority does businesses ranging from small scale trading, farming and other crafts, partnership business and even small and large scale companies.  This said, the federal government’s potential in income generation deserves emphasis.   Although Nigeria has a promising feat of revenue income from corporate taxes, company income tax seems to be insignificant as a source of government fund. An article of Hadaycolar1 (2008) asserts that taxation in Nigeria had a lot of drawbacks especially in the areas of management imposition and efficiency administration. Area problems presented were based on the position of Lawal (1982) in Haydaycolar (2008) which ascertains that tax collection in Nigeria is promoted by the lack of adequate staff to carry tax collection, government mismanagement of tax collection which leads to reluctance of business taxpayers to comply with the tax policies, apparent bribery and corruption in the government offices, poor accounting record, substandard facilities in  tax systems, and tax evasion and delinquency from taxpayers.   Business entities in Nigeria are very successful in tax evasion. In fact, company income tax is often avoided and even evaded through variety of means.  Normally, businesses avoid taxes in the area of the form of business ownership wherein an investor establishes a business such that tax liability is reduced to the minimum. This problem is identifiable with the companies assessed to tax on profit at a rate (currently 30%) before dividends are distributed to owners. For instance, two businesses with similar investment, sales and profit potentials may pay widely different income taxes because they have different ownership forms. This gives advantage to the bigger and strong business to pay lower income taxes because it is not incorporated.  Because of this advantage also, investors often choose to establish either a partnership or sole proprietorship although the nature of their business indicates that it should be a corporation, all due to tax advantage.  Thus, most of Nigerian companies, either in small-scale or medium-scale areas register their businesses in partnership and proprietorship to evade the higher company income tax rate for corporations. After these problems are realized, the federal government of Nigeria would eventually hold on to its main objective of setting up income taxes to help finance government projects and infrastructures. References: 1.    An Evaluation Of The Relevance Of Pioneer Income Tax Relief As An Alternative Investment To Companies In Nigeria, The Nigerian Observer, http://www.nigerianobservernews.com/3122008/features/features3.html, retrieved 24 April, 2011.   2.    Buettner, Thiess and Clemens Fuest. (2010). The role of the corporate income tax as an automatic stabilizer. International tax and Public Finance, Volume 17, Number 6, 686-69. Retrieved from   http://www.springerlink.com/content/k7043w4045733347/.       3.      Hadaycolar1, 2008. The Problems and Prospects of Tax Collection, Discovering, http://bizcovering.com/accounting/the-problems-and-prospects-of-tax-collection, retrieved 24 April 2011.   4.    Taxes in Nigeria, Nigeria Exchange Business, http://www.ngex.com/business/public/newsinfo.php?nid=2, retrieved 24 April 2011. Credit:ivythesis.typepad.com

Title: Importance of Company Income Tax in Nigeria

Title: Importance of Company Income Tax in Nigeria The importance of corporate income tax as a primary and a major source generating ...

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