About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 Justin M. Ross, Gross Receipts Taxes: Theory and Recent Evidence 1 (2016)

handle is hein.taxfoundation/grssrtx0001 and id is 1 raw text is: TAXS FOUNDATION FISCAL FACT No. 529 Oct. 2016 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non-profit organization. (02016 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 Gross Receipts Taxes: Theory and Recent Evidence By Justin M. Ross Associate Professor of Public Finance & Economics, Indiana University Key Findings Gross receipts taxes fall short of many characteristics of sound tax policy: they lack economic efficiency, treat firms differently based on their structure, and are problematically nontransparent. Though there are few recent empirical studies on gross receipts taxes because of their near-universal abandonment in developed countries, some literature on taxes with similar structures can shed light on economic effects of gross receipts taxes. Gross receipts taxes and other taxes levied on business inputs have been shown to result in forward shifting of costs on to final consumers. Smart and Bird (2009) find significant forward shifting of taxes on business inputs in Canada's sales tax system, which was abandoned by four of nine provinces between 1992-1997. Though gross receipts taxes are business taxes and as such are sometimes viewed as progressive, in reality, they have potential to be more regressive than sales taxes as they pyramid and are passed on to consumers. Despite concerns that value-added-taxes (VATs) were replacing a more progressive system of gross receipts taxes, Alavuotunki and Pirttila (2015) find that countries saw no significant movement on measures of inequality between 1975 and 2010. An impact on the GINI index would have been expected if eliminating taxes on business-to-business purchases had a progressive incidence. Recent studies by Ufier (2014) and Adhikari (2015) link the abandonment of gross receipts taxes with increased production efficiency and growth in GDP per capita. taxfoundation org