Handbook of Accounting and Development

Handbook of Accounting and Development

Elgar original reference

Edited by Trevor Hopper, Mathew Tsamenyi, Shahzad Uddin and Danture Wickramasinghe

The perspectives of the expert contributors reflect the strong growth of research on the topic, as accounting is increasingly recognised as an important factor in development. The book draws commentary and analyses together to inform future research, practice and policy and raises awareness of the actual and potential role of accounting in formulating and executing development policy.

Chapter 14: Taxation and Accounting Issues in Development Policies

Kevin Holmes

Subjects: development studies, development economics, economics and finance, development economics, international accounting


Kevin Holmes INTRODUCTION In less developed countries (LDCs) direct and indirect tax systems1 are often a relatively new innovation or are in need of reform. It is not uncommon to find in these countries that the level of tax compliance is at best disappointing and at worst abysmal. This outcome may result from poor policy formulation, inadequate legislation, inept administration of the tax law, or a combination of those factors. The upshot is that many ‘taxpayers’ (meaning those individuals and entities that should be paying tax but are not, or are not paying their full liability) are not engaged with the tax system. Taxation in LDCs is examined in this chapter at the policy, legislation and operational levels. In these respects, the focus is on effective ways to achieve equity between taxpayers, legislative simplicity, cost-effective implementation, and enforcement, with the objective of achieving greater levels of taxpayer compliance. In a real sense the development of good tax policy, legislation and administration in LDCs is very much dependent on a well-developed level of accounting knowledge and all that goes with that: accounting education, basic record-keeping skills, accounting and auditing standards, ethical standards, and an information technology infrastructure. Without that, try as we might to introduce viable income and consumption tax regimes, we are not very successful in practice. Therefore the link between proper tax assessment and robust accounting information is vital, and still needs to be firmly established in many LDCs. Generally this chapter considers the interrelationship between accounting and taxation...

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