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12-1-1972
Recommended Citation
Yeh, Yu Liang, "The role of taxation in economic development" (1972). ETD Collection for AUC Robert W. Woodruff Library. Paper 771.
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THE ROLE OF TAXATION IN
ECONOMIC DEVELOPMENT
A THESIS
BY
YU-LIANG YEH
DEPARTMENT OF ECONOMICS
ATLANTA, GEORGIA
DECEMBER 1972
ABSTRACT
ECONOMICS
11
harbours, public health, and education, etc. The mass invest
Atlanta, Georgia
Yu-Liang Yeh
November, 1972
111
TABLE OF CONTENTS
Page
PREFACE 11
TABLE OF CONTENTS iv
CHAPTER
I. INTRODUCTION 1
iv
CHAPTER Page
BIBLIOGRAPHY . . . 71
CHAPTER I
INTRODUCTION
1
security and the economic development, the public revenue and
national product.
reconstruct from the war ruins and debris. So did the newly
of expenditure.
and that the golden rule “not to kill the golden goose”
pay back principal with interest, how can you pay for that,
development.
of backwardness.
tax and poll tax cannot shift, therefore, we can regard them
differences.
taxes.
1Federal budget.
economic development, the investment must be accelerated.
economic development.
7. Summary
INFLATIONAL TAX
12
new projects will bid production factors away from other
the higher price must be paid too. Thus the cost of produc
like the government taking away the purchasing power from the
That is the reason why we said that inflational tax had some
limits before.
collect any more inflational tax but also the other revenues
M v + 8,~ revenues
10% — 1% 2% + 7%
Here H stands for total money supply, N stands for
tion:
H + = ~, + 6% revenues
10% — 1% = 4% + 5%
supply.
are reluctant to accept the increased money stock and the money
4~M 4Y
+
___
v ___
+ l,~ revenue
10% + 2% = 9% + 3%
following:
M v + -9,~ revenues
80% + 10% = 89% + 1%
the increased money stock all eaten away by inflation but also
ment cannot get any inflational tax but the negative revenue,
in some sense.
savings.
labor forces are the farmers, the casuals, the petty traders,
and the population growth; and we would like to say that the
will work) , they still will spend a large part of their new
put will happen. Suppose that the workers buy food (it is
only eat more but eat better) from those who are still remain
ticated.
inflation and the net gain from the development projects will
development.
5. Summary
form of tax. They regard that inflation may have very adverse
profit earners from the view point of the whole society. But
CUSTOMS DUTIES
26
2. Import Duties
the excise tax is imposed and the tax burden of foreign pro
produced within the taxing country, so that the excise tax can
the excise tax rates and so are the economic effects of this
analysis.
3. Does Revenue Tariff Conflict with Protective Tariff?
them, but the degree of conflict need not be like the above
impose upon the commodities which are not produced in the tax
this is the case and the duty rates are increased on the minor
the most vigorous argument, but his argument could not hold
withdrawn accordingly.
developing countries.
5. Export Duties1
duties must have rates that are nominal when world prices are
export duties are imposed upon the raw material such as raw
are:
R —
- -~Q 2 +/~Q
~
T = tQ
Here
R: total revenue from export
C: total cost
Q: output
the total cost after tax and ~ for profit, then the profit
dT — — b — 2t
dt — 2(a +9) = 0
t = (/) - b)/2
Since d2T —2 —l
dt2 2(a +&) = a +~<~ (since ~ 0 a +&,O)
when we set tax rate equal to (/?— b)/2, then we can have the
one only.
6. Summary
of developing countries.
of development.
CHAPTER IV
37
imposed upon every stage or just one stage of production and
exports.
the whole sales receipts as their tax bases, and can therefore
the lowest rate to obtain a given revenue; they can spread the
nation, but with the tax rate as low as less than one percent
equality yet we are sure that the system is made more com
turnover taxes each one uses the wholesale receipts as its tax
bution only.
tax, since the former has fewer firms to manage than the
latter.
thus offset.
tax base is the value which has been added in the manufacturing
method which applies the tax rate upon the selling prices of
the products then minus the tax paid for purchasing material
and parts (of course, these must be the amount used in products
the materials and parts are exempted from the tax the sub—
sales tax but requires the higher tax rate to produce the same
wholesaling.
impact of the tax over all firms while the latter concentrates
capital goods, materials, and parts are taxed when sold, but
added tax has more taxpayers than a retail sales tax and the
thus reduces the injury to the firms upon which the impact
tax rate and the greater concentration of the tax impact, and
saler’s sales taxes, the retail sales tax can ensure the actual
and coincide with the desired ratios; but in the case of non—
and the margins of the retailer are ten percent and fifty
luxuries are quite different too these will have the adverse
of the retail tax, the tax base of retail tax is broader than
that of other single—stage tax. Besides, the retail tax can
or wholesale stages, thus with the given tax rate the retail
that a simple and well designed retail sales tax can make an
amounts so small that they could not keep the adequate record
country.
large part the same firms will be the taxpayers under whole
sale and manufacturer’s sales tax, yet the problems with each
can use a lower tax rate than the manufacturer type does, its
which follow inevitably from any deviation from the use of the
retail level. But the manufacturer type can avoid the need
7. Excise Taxes
sales tax, especially when sales tax has many exemptions. The
(not extreme) high tax rate imposed upon them can restrain the
8. Government Monopoly
into public functions, the other group asserts that the State
The former hold that labor for personal profit can and must
to work for the benefit of all, not for one class or person.
there are some but not all enterprises suitable for State
collecting revenues.
thus we not only can get maximum profit but also can release
9. Summary
tax has more merit of spreading tax burden than retail sales
The high excise tax rate on luxuries can curtail the consump
is not recommendable.
development.
55
when time and space are different, but generally speaking
who own most real properties receive the most protection and
benefits from the State and pay the most in real property
since the rich are taxed more and the poor are taxed less.
tion effect from the rich to the poor and “vertical equity”
be corrected.
not only can raise more revenue for development but also can
will rise and this will force the real wage rate in the capital
more labor from subsistence sector, and this would worsen the
away by the government so that the real wage rate could not
Rural land tax is the most important tax among all real
lower, thus the terms of trade for the capital sector could be
rural land tax effect upon the subsistence sector, the levy
land increases the cost of holding land thus can constrain the
The value of urban land does not stem from the nature
taxing them will not reduce the supply of sites offered. The
4. Building Tax
the building tax can plug this loophole to some degree. There
the best way to impose a lower building tax upon usual build
ings and a higher rate upon luxury housing so that both problems
5. Summary
ment.
Taxation of urban land serves to recover for the govern
revenue and curb the prices of land from rapidly rising; both
INCOME TAXATION
construe and apply the law and much negotiation between tax
65
evasion under such a system.
2. Investment Incentives
that is, those which are totally new to the country in question,
or old.
come tax holiday is the most popular one. Many countries feel
countries which give tax holiday and the firms which are given
can postpone the tax liability to later days, so that the firms
will have more funds available and be free from the financial
the size of the tax base will be enlarged later on. But tax
economic development.
4. Summary
which are available for use; yet in the course of design, both
71
Netzer, Dick. Economics of The Property Tax. The Brookings
Institution, 1970.