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What are the Costs of a New Tax Administration? The Case of a Personal Income Tax in Kuwait

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  • James Alm

    (Department of Economics, Tulane University)

Abstract

This paper assesses the viability of introducing a new personal income tax (PIT), focusing on the administrative costs of new tax. I first present a methodology for calculating the one-time start-up costs and the ongoing administrative costs of a new PIT. I then apply this methodology to the specific case of Kuwait. I estimate that the first-year total administrative costs of a new PIT tax administration in Kuwait range from Kuwaiti dinars (KWD) 46.8 million to KWD 90.9 million (or from USD 154.4 million to USD 300.0 million), depending on how the construction costs are financed. However, after the initial construction costs are incurred, I find that the annual total administrative costs of a PIT fall significantly to about KWD 50 million (or about USD 164 million), regardless of specific financing methods, and then rise at an annual rate of less than 6 percent per year to reach KWD 82.0 million (or USD 270.6 million) by year 2020, driven mainly by labor force growth. I also estimate that the likely revenues of a new PIT far exceed these administrative costs, even if the PIT is imposed at low rates.

Suggested Citation

  • James Alm, 2018. "What are the Costs of a New Tax Administration? The Case of a Personal Income Tax in Kuwait," Working Papers 1804, Tulane University, Department of Economics.
    • Handle: RePEc:tul:wpaper:1804
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    File URL: http://repec.tulane.edu/RePEc/pdf/tul1804.pdf
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    References listed on IDEAS

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    Cited by:

    1. James Alm, 2019. "Can Indonesia Reform Its Tax System? Problems And Options," Working Papers 1906, Tulane University, Department of Economics.

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    More about this item

    Keywords

    Public administration; tax administration; administrative costs.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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