as the tax effort index model shows, the Korean economy can accommodate an increase in its tax burden. Thus, increasing tax revenue
should prove to be the most effective method for financing Korea's social
Social development expenditures include expenditures for health, social
security, and housing and regional development.
2. The indices are computed as follows:
(actual value of governmental expenditures/GDP) x 100/
(expected value of government expenditures/GDP)
For example, if a country has an index greater than 100, it means that its government expenditure is higher than expected considering the country's socioeconomic conditions.
The Korean public has long been preoccupied with fiscal inflation, and
therefore the major issue involved in the increase of government expenditure has
always been how it would affect the stability of the economy.
For example, the practice of using pseudo-names to avoid taxation of financial assets should be made a crime and a real-name system in financial assets
should be established.
5. The purpose of tax effort analysis is discussed in greater detail in Bird
( 1976). 7.
Per capita GNP has many defects. For example, if there is severe inflation
and the exchange rate is not evaluated at the optimal level, then comparing the
per capita GNP between countries is inaccurate. In this chapter, the data from the World Bank Atlas are used to avoid that problem.
In this chapter, the following three different groups were used in the model
estimation: (1) the 102-country case, (2) the 79-developing-countries case, in
which the 21 OECD countries and 2 high-income oil exporters were excluded,
and (3) the 58-middle-income-countries case, derived by subtracting the number
of countries with GNP below $400 from case 2. The estimated results for the developing- and middle-income-countries cases are in Appendix 1. The estimated
results using different data periods are summarized in Appendix 2.
The tax effort indices of Korea in the 102 country case (includes developing, industrial, and middle-income countries) varied from 85.66 to 93.14, in the
79-developing-countries cases from 86.50 to 93.49, and in the 58-middle-income
countries cases from 84.01 to 91.18. Furthermore, the indices also varied from
83.53 to 91.48 and from 86.71 to 95.35 when different data periods were used.
Thus Korea's tax effort ind ices are below 100 in every case. More details are found
in Appendix 3.
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Taxation and Economic Development among Pacific Asian Countries.
Contributors: Richard A. Musgrave - Editor, Ching-Huei Chang - Editor, John Riew - Editor.
Publisher: Westview Press.
Place of publication: Boulder, CO.
Publication year: 1994.
Page number: 275.
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