How to Design a Presumptive Income Tax for Micro and Small Enterprises / Jean-François Wen.

Format:

Book

Government document

Author/Creator:

Wen, Jean-François.

Series:

IMF How To Notes; How-To Note No 2023/002

IMF How To Notes

Language:

English

Physical Description:

1 online resource (26 pages)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2023.

Summary:

Turnover taxes are prevalent in developing countries as a simple form of presumptive taxation of business income. Such simplified tax regimes can reduce the relatively high compliance costs of micro and small enterprises, which might otherwise discourage entrepreneurs from formalizing their activities and paying taxes. The note addresses design issues for a turnover tax regime—which taxes it replaces, what the criteria are for eligibility, how to determine the optimal threshold, and how to set the tax rate. A key observation is that, although low turnover tax rates may incite larger firms to artificially reduce their sales, the rate should also not be so high as to discourage formalization of activities. A table of tax rates and turnover thresholds observed internationally is provided. The note concludes by suggesting analytical steps to guide practitioners in designing turnover tax regimes.

Notes:

Description based on print version record.

ISBN:

9798400243813