Trade-offs in the Design of Simplified Tax Regimes

This paper provides novel evidence of the trade-offs policy makers face when designing simplified tax regimes for small businesses. First, it provides a comprehensive stocktaking of the main features of these regimes across Sub-Saharan Africa: they are adopted by two-thirds of countries, but their design varies greatly. Second, it draws on administrative and survey data for a thorough examination of a specific simplified tax regime. This analysis shows most small businesses lack knowledge about design features, such as the existence of a minimum exemption threshold, but they react strongly to increases in tax rates by lowering their declared turnover. Finally, the paper presents the results of an experiment that encourages taxpayers to pay fixed amounts—a potential alternative design of a simplified tax regime that aims for a better balance of the trade-offs facing policy makers. The findings show that providing simple guidance about how much small businesses with similar characteristics typically pay in taxes can increase revenue, but this reduces equity among taxpayers.

Bibliographic Details

Main Authors:	Hoy, Christopher, Scot, Thiago, Oguso, Alex, Custers, Anna, Zalo, Daniel, Doino, Ruggero, Karver, Jonathan, Orgeira Pillai, Nicolas
Format:	Working Paper biblioteca
Language:	English en_US
Published:	Washington, DC: World Bank 2024-09-19
Subjects:	TAXATION, PUBLIC FINANCE, SMALL BUSINESSES, RANDOMIZED EXPERIMENT, MICROECONOMICS, DECENT WORK AND ECONOMIC GROWTH, SDG 8,
Online Access:	http://documents.worldbank.org/curated/en/099529509162440365/IDU195bd66a01b249141051ad351d04d4880f6e3 https://hdl.handle.net/10986/42165
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