what is the purpose of taxation essay

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• Introduction

Purposes of taxation

• Classes of taxes
• History of taxation
• Principles of taxation
• Shifting and incidence

What is taxation?

How does taxation relate to government revenue, what is a direct tax, what is an indirect tax, what is vat (value-added tax).

taxation , imposition of compulsory levies on individuals or entities by governments. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well.

This article is concerned with taxation in general, its principles, its objectives, and its effects; specifically, the article discusses the nature and purposes of taxation, whether taxes should be classified as direct or indirect, the history of taxation, canons and criteria of taxation, and economic effects of taxation, including shifting and incidence (identifying who bears the ultimate burden of taxes when that burden is passed from the person or entity deemed legally responsible for it to another). For further discussion of taxation’s role in fiscal policy , see government economic policy . In addition, see international trade for information on tariffs .

In modern economies taxes are the most important source of governmental revenue . Taxes differ from other sources of revenue in that they are compulsory levies and are unrequited—i.e., they are generally not paid in exchange for some specific thing, such as a particular public service, the sale of public property , or the issuance of public debt . While taxes are presumably collected for the welfare of taxpayers as a whole, the individual taxpayer’s liability is independent of any specific benefit received. There are, however, important exceptions: payroll taxes , for example, are commonly levied on labour income in order to finance retirement benefits, medical payments, and other social security programs—all of which are likely to benefit the taxpayer. Because of the likely link between taxes paid and benefits received, payroll taxes are sometimes called “contributions” (as in the United States ). Nevertheless, the payments are commonly compulsory, and the link to benefits is sometimes quite weak. Another example of a tax that is linked to benefits received, if only loosely, is the use of taxes on motor fuels to finance the construction and maintenance of roads and highways, whose services can be enjoyed only by consuming taxed motor fuels.

During the 19th century the prevalent idea was that taxes should serve mainly to finance the government . In earlier times, and again today, governments have utilized taxation for other than merely fiscal purposes. One useful way to view the purpose of taxation, attributable to American economist Richard A. Musgrave , is to distinguish between objectives of resource allocation, income redistribution, and economic stability. (Economic growth or development and international competitiveness are sometimes listed as separate goals, but they can generally be subsumed under the other three.) In the absence of a strong reason for interference, such as the need to reduce pollution , the first objective, resource allocation, is furthered if tax policy does not interfere with market-determined allocations. The second objective, income redistribution, is meant to lessen inequalities in the distribution of income and wealth. The objective of stabilization—implemented through tax policy, government expenditure policy, monetary policy , and debt management—is that of maintaining high employment and price stability.

There are likely to be conflicts among these three objectives. For example, resource allocation might require changes in the level or composition (or both) of taxes, but those changes might bear heavily on low-income families—thus upsetting redistributive goals. As another example, taxes that are highly redistributive may conflict with the efficient allocation of resources required to achieve the goal of economic neutrality.

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Explaining The Primary Purpose Of Taxation (Economics Essay)

Most people understand the basic reasons for taxation, such as to contribute to the well-being of the country as a whole. However, taxation is not that simple. The primary purpose of taxation is to contribute to the well-being of the country as a whole, but that is like saying adding onion to your soup is done to make you less hungry. There are numerous facets to the taxation method, and all of them constitute parts of the primary purpose of taxation. In my essay, I expose the most important facets that make up the primary purpose of taxation. (Jones, 1978)

Taxes pay for governments, non-profit services that are required to govern or protect the country, security, and aid to other countries. Sadly, these days, taxes also pay for national debt. Another lesser-understood benefit is the economic development of a country. When speaking of economic development, some people think of massive company bailouts and terms such as “too big to fail,” but there is more to it than that. The act of taxing helps determine where people put their money. For example, if income from savings are not taxed, then more people will save their money, more saving schemes will come into existence, and less money will exist in the consumer marketplace, which will help lower or stabilize inflation. (Salanie, 2011)

Taxing worker earnings is one way of forcing people to take full-time jobs. Let’s say that you only work 20 hours per week. Taking 24% of your earnings may result in you earning a wage that you are unable to live on comfortably. However, if you work 40 hours per week and the government takes 24% of your earnings, you may then have enough to live on more comfortably. Contrast this with a person who works 20 hours per week and is only taxed 2%, such a person may be tempted to stay as a part-time employee rather than getting a full-time job. If everybody did this tomorrow, then it would almost be like halving the country’s workforce. It is usually preferable to have a country full of people who are working full-time jobs to contribute to the Gross domestic product (GDP) of the country. We must also remember that taxes pay for the people who are either unable to work, who do not wish to work and people who are having trouble finding work. (Weber, 2018)

Competing with other countries is vitally important because there are many instances where foreign involvements will dramatically affect the economy of a country. That is why things such as duty taxes exist because they help regulate the flow of goods and services going in and out of a country. For example, if a company decided to charge companies taxes of 75% of the value of whatever they bring into a country, then foreign imports would slow to an almost stop, which would increase the cost of goods in a country for a while until companies start producing goods locally rather than buying from overseas. On the other hand, if no duty taxes were imposed on imports, then local companies would always struggle to compete with lower-priced imports. (Aaron, 2011)

Some people think that taxation is a way of fixing inequalities in wealth and income by taxing people more heavily if they have more money. However, such methods are flawed because it rewards people for working less, which negatively affects an economy, and it removes the incentive for people to strive for excellence or to overachieve. Higher taxes for people who earn more of for people who have more is like punishing people for doing well and working hard. Most right-wing governments will impose higher taxes on people who earn more and have more, but only because they have the means to pay such bills, and not as a punishment for earning more. Taxing people who earn more is also a good way of making them leave the country and have them spend their money in other countries. A classic example of this is from the British musician called Tom Jones, who was paying £0.92 out of every £1.00 he earned under a left-wing government, so he became a citizen of Hawaii. Taxing high earners will inevitably force them to earn less, to move away, or to cheat on their taxes. (Blundell, 1996)

It seems obvious that taxation is not just about paying for non-profit services such as the emergency services, immigration services, vehicle services, etc. Taxation has a massive effect on a country and its economy. As you saw from my examples, if just a few tax numbers change just a little, then it has a massive effect on people and on the country as a whole. My examples used exaggerated figures to make my point (except the Tom Jones figure), but it is obvious that the primary purpose of taxation is to contribute to the well-being of a country, and that this is not simply done with the collection of money, but is also achieved by using taxation as a method of economic control.

Bibliography

Aaron, H., &Boskin, M. J. (Eds.). (2011). The economics of taxation (Vol. 13). Brookings Institution Press.

Blundell, R. (1996). Labour supply and taxation. Oxford University Press.

Jones, G. (1978). The economics of taxation. Philip Allen, Oxford.

Salanié, B. (2011). The economics of taxation. MIT press.

Weber, T. O., Fooken, J., & Herrmann, B. (2014). Behavioural economics and taxation (No. 41). Directorate General Taxation and Customs Union, European Commission.

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Taxation: What It Is, How It Works, Types, and Examples

Last updated 08/28/2024 by

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Introduction to taxation

Historical roots of taxation, the purpose of taxation.

• Redistribution of wealth: Progressive taxation, where higher-income individuals pay a larger percentage of their income in taxes, helps reduce income inequality.
• Behavioral influence: Taxes on certain goods, like tobacco and alcohol, are imposed to discourage consumption and promote public health.
• Public goods: Taxes fund public goods and services, such as parks, libraries, and national defense, that may not be adequately provided by the private sector.

Types of taxes

Corporate tax, capital gains tax, property tax, inheritance tax.

• Funding public services: Taxes enable governments to provide essential services such as education, healthcare, and infrastructure development.
• Income redistribution: Progressive taxation helps reduce income inequality by taxing higher earners at a higher rate.
• Economic stability: Tax revenue stabilizes government finances and supports counter-cyclical policies during economic downturns.
• Economic distortion: High taxes on specific goods can lead to market distortions and unintended consequences.
• Compliance costs: Individuals and businesses incur costs in complying with tax regulations and reporting requirements.
• Tax evasion: Some individuals and entities may attempt to evade taxes, leading to revenue loss for governments.

Global perspectives on taxation

High-income tax countries, zero income tax countries, frequently asked questions, are there countries with no taxes at all, how do governments ensure tax compliance, can taxation reduce income inequality, how does taxation impact the economy, why is taxation considered compulsory, key takeaways.

• Taxation is a crucial mechanism through which governments fund public services and promote income equality.
• Various types of taxes exist, including income, corporate, capital gains, property, inheritance, and sales taxes.
• Taxation has historical roots and serves purposes such as funding public goods and promoting economic equality.
• Some countries have high income tax rates, while a few have no income tax at all.

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Introduction to Taxation

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Taxation is the process by which the sovereign, through its law-making body, generates revenue in order to promote welfare and protection of its citizenry. This is the primary purpose of taxation; other purposes of taxation include the ability to equitably contribute to the wealth of the nation, to protect new industries, and to protect local producers.

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Riccardi, L. (2018). Introduction to Taxation. In: Introduction to Chinese Fiscal System. Springer, Singapore. https://doi.org/10.1007/978-981-10-8561-1_1

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The Importance of Tax in Our Life Essay (Critical Writing)

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Introduction

Importance of tax.

Bibliography

Tax is one of the ways for authorities in the public sector to raise revenue to run their projects. Public administrations are charged with the development of sufficient revenue to finance programs that benefit the society; hence, they have to either raise the money through investments or apply levies on various commodities to generate the funds. The government can also introduce taxes with the aim of aligning the behavior of various entities with a given policy.

For instance, carbon taxes are used to compel different entities to reduce the impact of their business processes on the environment 1 . In the case under analysis, authorities in Cook County, Chicago, introduced a controversial tax on sweetened beverages in the soft drink field. Taxes are meant to generate revenue or to regulate the behavior of different entities; hence, the actual purpose of a new tax should be communicated to the public.

Lawmakers in the county responded to the pressure from citizens and various lobbying groups that had reviewed the nature and effects of the proposed tax. It is apparent that the tax was meant to reduce the consumption of sweetened soft drinks with the hope that consumers would be discouraged by the increased prices of the products 2 . However, the tax was not effective in attaining the intended health promotion objective because consumers could easily drive to the nearby towns outside the county and shop for the drinks.

A critical view of the tax reveals that its intention was not to boost health outcomes for the citizens of Cook County, but to help the administration in raising about $1.8 billion annually to increase its budget 3 . The government has been facing challenges in raising the required funds for the budget, and it is apparent that the only option it has is the development of new taxes that help in raising the deficit. Economic principles reveal that whenever an administration is facing deficits in its annual budget, there are some options that it may pursue to raise the required money 4 .

Taxes directly involve citizens in contributing to public programs run by the government 5 . However, the government is always limited by various policies when it comes to the introduction of taxes 6 . The policies are meant to ensure that the administration does not introduce laws that exploit the public in an unfair manner. For instance, in Cook County, the local government observes laws that dictate against the development of additional sales taxes on commodities 7 . The associated lawmakers had to introduce the tax at the point of sale, which was quite a bad choice because it would exempt all consumers using food stamps as stipulated by the law.

This case reveals that while taxes are necessary for boosting the capabilities of the government in meeting its obligations and plans, they have to be introduced in a manner that shows legitimacy and appropriate reasoning on the part of the proponents 8 . The tax on sweetened fizzy drinks was banned because its legitimacy was questionable. First, the administration did not have a solid reason for introducing the tax. Secondly, the intentions of the tax were concealed through the claim that the tax was meant to enhance health outcomes for the citizens of Cook County.

The Cook County administration demonstrated that it is always necessary for the authorities to look into introducing legitimate taxes. By introducing the tax, the government intended to raise more money to boost its budget, rather than promote health outcomes as the leaders claimed. Taxes are normally applied to finance government projects by raising revenue or regulating certain behaviors on the part of various entities.

Auerbach, Alan, Raj Chetty, Martin Feldstein, and Emmanuel Saez, eds. Handbook of Public Economics . Vol. 5. Boston: Newnes, 2013.

“ Chicago’s Soda Tax Is Repealed. ” The Economist , 2017. Web.

Lawton, Amy. “Green Taxation Theory in Practice: The 2012 Reform of the Carbon Reduction Commitment.” Environmental Law Review 18, no. 2 (2016): 126-141.

Lu, Xiaobo, and Kenneth Scheve. “Self-Centered Inequity Aversion and the Mass Politics of Taxation.” Comparative Political Studies 49, no. 14 (2016): 1965-1997.

Rood, Deborah K. “The Importance of Tax Quality Control.” Journal of Accountancy 219, no. 4 (2015): 24.

Saad, Natrah. “Tax Knowledge, Tax Complexity and Tax Compliance: Taxpayers’ View.” Procedia-Social and Behavioral Sciences 109, no.1 (2014):1069-1075.

• Amy Lawton, “Green Taxation Theory in Practice: The 2012 Reform of the Carbon Reduction Commitment,” Environmental Law Review 18, no. 2 (2016): 126-141.
• “Chicago’s Soda Tax Is Repealed,” The Economist , 2017. Web.
• “Chicago’s Soda Tax Is Repealed.”
• Natrah Saad, “Tax Knowledge, Tax Complexity and Tax Compliance: Taxpayers’ View,” Procedia-Social and Behavioral Sciences 109, no.1 (2014):1069-1075.
• Alan J. Auerbach et al., eds., Handbook of Public Economics , Vol. 5 (Boston: Newnes, 2013), 4.
• Deborah K. Rood, “The Importance of Tax Quality Control,” Journal of Accountancy 219, no. 4 (2015): 24.
• Xiaobo Lu and Kenneth Scheve, “Self-Centered Inequity Aversion and the Mass Politics of Taxation,” Comparative Political Studies 49, no. 14 (2016): 1965-1997.
• Tax Reform in the United States
• Public and Private Goods Relating to Taxation
• Childhood Obesity Scientific Studies
• Obesity and Its Challenges Analysis
• Legitimacy, Authority, and Power
• Fraud Examiners and the Panama Papers
• "Amazon Laws" and Taxation of Internet Sales
• Personal Income Tax: Arguments For and Against
• Canada Revenue Agency, Its Benefits and Limitations
• Tariffs, Their Advantages and Disadvantages
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2020, October 31). The Importance of Tax in Our Life. https://ivypanda.com/essays/the-importance-of-tax-in-our-life/

"The Importance of Tax in Our Life." IvyPanda , 31 Oct. 2020, ivypanda.com/essays/the-importance-of-tax-in-our-life/.

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IvyPanda . 2020. "The Importance of Tax in Our Life." October 31, 2020. https://ivypanda.com/essays/the-importance-of-tax-in-our-life/.

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Taxation: Philosophical Perspectives

Martin O'Neill and Shepley Orr (eds.), Taxation: Philosophical Perspectives , Oxford University Press, 2018, 264pp., $55.00 (hbk), ISBN 9780199609222.

Reviewed by Matthew Braham, Universität Hamburg

Taxation is central to the existence of states. It is its income and expenditure. Taxation finances the production of goods and services that the market undersupplies, is the source of income for those in need, and is used to incentivize behaviour -- to encourage people to reduce the consumption of personally or socially or environmentally unhealthy things and practices. Tax policy is therefore a key element of the wherewithal of our personal lives. Yet, a quick search on work by moral and political philosophers on taxation will reveal an interesting fact: it is a subject that has not received much detailed attention. And, the work that has been produced is somewhat fragmented.

This collection aims at correcting this state of affairs by bringing together philosophers who work mostly at the intersection of philosophy and economics. We are offered 12 new essays that highlight taxation as a key issue for moral and political philosophers. As the editors, Martin O'Neill and Shepley Orr, point out in their introduction, taxation is an "irreducibly normative matter, and one which implicates a number of our concerns of social justice. When we think about issues of social justice in practice, we cannot avoid thinking at the same time about tax" (p. 2). Taxation is foundational to our thinking about property rights, democracy, and the nature and role of the state.

The volume is divided into two parts. Part I (seven essays) focusses on normative and conceptual questions. Part II (five essays) delves into a variety of policy issues. O'Neill and Orr's comprehensive introduction lays out the philosophical context for both parts. They begin with the stark and contrasting positions of Robert Nozick and John Rawls. In a memorable passage in Anarchy, State, and Utopia (1974), Nozick claimed that "Taxation of earnings from labour is on par with forced labor" (p. 169). In Nozick's libertarian world view, mandatory taxation is limited to providing for a minimal state that protects and enforces property rights only. Redistributive transfers for those in need are not morally permissible. Such transfers would be injustices, violations of just pre-tax entitlements. Providing for those in need is, rather, a task for charity. In contrast, Rawls believed that there are no pre-political constraints on property rights, which are themselves part of the "basic structure" of society. In the Rawlsian world, a tax system is just insofar as it is part of the overall system of rules and institutions that satisfy his two principles of justice. Hence, given that redistribution is required by Rawlsian justice, it follows that redistributive taxation is morally permissible.

Having staked out the Nozickean-Rawlsian divide, O'Neill and Orr situate the essays within the Rawlsian universe that had its fullest development in the now seminal treatment by Liam Murphy and Thomas Nagel in The Myth of Ownership (2002). Murphy and Nagel's standpoint is that "pre-tax income" has no special normative status; there are no primitive entitlements to property. Many of the essays engage directly with this thought and attempt to find a middle ground between the Rawlsian and Nozickean positions.

An illuminating feature of the collection is that it opens up what Alan Hamlin, in "What Political Philosophy Should Learn from Economics about Taxation", denotes as the "black box" technology of taxation. Political philosophers, he notes, are especially prone to call upon this technology to "put into effect whatever distribution of economic benefits and burdens that is required by the normative theory under discussion" (p. 20). Hamlin unpacks the black box with an elegant review and understanding of different economic theories of taxation: Optimal Taxation, the Political Economy of Taxation, and the Tax Constitution Approach. This is very refreshing and stands out from the stock "economics bashing" that many political philosophers -- even those who claim an economics background -- presumptively engage in without a whimper of thought and respect for the discipline. Hamlin notes that political philosophers with a non-ideal theory bent are well advised to study carefully and with an open mind what economists have to offer. It is fair to say that the collection provides the reader and the disciplines an intellectual programme that goes far beyond taxation.

Marc Fleurbaey's "Welfarism, Libertarianism, and Fairness in the Economic Approach to Taxation" immediately takes up the baton of optimal taxation discussed by Hamlin and defends it against the criticism set out in Murphy and Nagel's Myth of Ownership . Fleurbaey shows us that it is possible to enrich the orthodox optimal taxation theory of welfare economics with elements of libertarianism and fairness. Here, I believe we are observing progress in both philosophy and economics through careful modelling of normative principles bounded by weak descriptive conditions of rational choice. Again, critics of economics take note: Fleurbaey achieves his goal without a formula in sight; however, his formal work on taxation underlies the essay.

Geoffrey Brennan's "Striving for the Middle Ground: Taxation, Justice, and the Status of Private Rights" begins by directly engaging Murphy and Nagel and also by expanding on the Tax Constitution approach outlined by Hamlin. Brennan himself pioneered this approach together with James M. Buchannan in their influential The Power to Tax (1980). Brennan denotes his analysis as "quasi-Rawlsian". There is a methodological reason for this, because he asks what the "constitutional architecture" of society would deliver in terms of a tax system. But this is not about Rawls' Two Principles. Rather, it is an investigation into basic democratic procedures and the structure of private rights (that include property rights) and how these determine a just tax system. That is, the principles of taxation emerge from the interplay of constitutional elements. In an interesting twist to Nozick's "minimal state", Brennan discusses the "maximal state", which is the largest possible state subject to constitutional constraints, one of which is the system of private property rights. One of Brennan's thought provoking conclusions is that Rawlsian principles of justice in a capitalist society will not fully realize Rawls's own principles.

"Taxing or Taking? Property Rhetoric and the Justice of Taxation" by Laura Biron, is more traditionally philosophical. She, too, takes her cue from Murphy and Nagel, but her angle of analysis is that the starting point of thinking about the tax system is philosophical and jurisprudential thinking about property. In a sense, this is Nozick's line (although she comes to different conclusions) and Biron is engaging in a conversation with economists and asking them to go back to conceptual basics. And along with Brennan, she is skeptical about Murphy and Nagel's "myth of ownership".

Peter Vallentyne's "Libertarianism and Taxation" makes clear what a rich subject taxation is for moral and political philosophers. He argues that the moral doctrine that "individuals initially fully own themselves, that natural resources are initially unowned, and that individuals initially have certain unilateral moral powers (requiring no consent from others) to use and appropriate unowned natural resources" (p. 99) supports a variety of views on just taxation. Nozick's right-libertarian view that taxation beyond a charge for the protection of property rights is "on par with forced labor" is just one view. There are also sufficientarian (centrist) and left-libertarian views , with the latter breaking down into two sub-forms of equal-share and equal-opportunity libertarianism. Each of these views permit taxation over and above the Nozickean minimum.

Alexander W. Cappelen and Bertil Tungodden's "Tax Policy and Fair Inequality" is another prime example of an economic analysis that builds in substantive normative reflection. It also picks up where Fleurbaey left off. Cappelen and Tungodden aim to explore the shape of a liberal-egalitarian system (Rawlsian) and in particular to try and get around the well-known problems of responsibility-insensitivity that besets Rawlsian justice (avoiding exploitation of the hardworking and talented). One fascinating result is that they show precisely why political philosophers need to peer inside the "black box" of taxation. In their framework,

a progressive income tax system may have two opposing effects on fairness. It may increase the level of unfairness in society by eliminating fair inequalities reflecting differences in responsibility factors, but it may also reduce the level of unfairness in society by eliminating unfair inequalities reflecting differences in non-responsibility factors. (p. 121)

In other words, we are reminded of the falsity of what John Harsanyi once called the "all good things come together assumption". Desirable values are not always positively correlated. Another very appealing feature of this essay is that the authors cap their analysis with an empirical case study of their fair tax system using Norwegian data. The essay is a "must read" for the modern political philosopher eager to engage with policy-making.

The final essay in Part I is another piece of traditional normative analysis. "Beggar Your Neighbour (Or Why You Do Want to Pay Your Taxes)" by Véronique Munoz-Dardé and M. G. F. Martin takes issue with libertarian views on taxation, in particular that the needy are to be provided for by charity rather than via state redistribution. They argue that there are reasons why redistributive taxation instead of charitable giving would be favoured by the taxpayers themselves. The argument can be summed up as follows: mandatory taxation is simply a more efficient way of collecting and distributing resources for the needy. They write:

Even if you, as a well-meaning individual who keeps their life in good order, manage to provide a large amount in donations to various charities, still it is likely that you will be bothered in some way or another by further charitable organizations looking to raise their income to meet the demands on them. In such a world, the irritations of the double-glazing salesman, or the mortgage salesman, or the new phone deal, would pale in comparison with the campaigns run by the major charities seeking to meet the needs of the poor. (p. 138)

Munoz-Dardé and Martin argue that it is reasonable to reject such a system. This idea is crying out for a carefully constructed economic model that actually delivers a formal proof of the proposition. Until then, the jury is still out.

Part II begins with "The Case for a Progressive Benefits Tax" by Barbara H. Fried. Fried opens Hamlin's "black box" of taxation and investigates it from a "Tax Constitutional Approach". That is, we are presented with the question of whether we "should take the preferences of taxpayers into account in deciding how tax revenues are raised and spent", and are provided with the trite answer: "Of course we should". And it is observed that in a democracy we "automatically will", as these decisions are delegated to elected representatives. But as Fried points out, there is a lot more here than meets the eye. We are asked a difficult further question: is a majoritarian or a supermajoritarian decision rule the appropriate one for determining fiscal policy? Starting from a broadly libertarian premise that taxation is just if it is limited to provision of public goods that the market undersupplies, Fried argues that this implies an individual's tax burden should be limited to cover the price of these goods. This is commonly referred to as "benefits taxation". She then makes an intriguing case for a strongly progressive tax rate for benefits taxation and one that will even permit redistribution for the purposes of social welfare. She ends with a more fundamental issue: "What counts as a public good (benefit) for which the state can rightly charge?" She believes it includes much of our built and social and physical environment: from norms of civility to architecture, good teachers, and well-functioning hospitals. Her version of libertarianism seems to have the capacity to accommodate this position.

Stuart White's "Moral Objections to Inheritance Tax" returns us to a more standard way that philosophers use to look at the world. His task is to carefully dismantle four major moral arguments against inheritance tax: the double tax objection, the equity objection, the virtue objection, and the wrong problem objection. The first says that inheritance tax is unfair because tax has already been paid on the assets; the second says that inheritance tax is unfair because it leads to unequal tax burdens on people who have equal wealth but choose to use that wealth differently; the third says that inheritance tax penalizes virtuous behavior; and the forth says that inheritance tax does not solve the problem it sets out to address (inequality), because it is fixed on inequality of possessions whereas the real issue is inequality of consumption. Depending on your moral priorities, you will or will not agree that White achieves his objectives. It really depends on whether you gauge these objections to be the "strongest possible". Also, defeating four objections does not imply that that the path is clear to impose an inheritance tax. The jury is out on this one, too.

"The Politics of Land Value Taxation", by Iain McLean, ends with a very abrupt paragraph: "Property is not theft. But it could be taxed in a more rational way than at present. In the long run, everybody would gain" (p. 201). This says it all. McLean argues that a land value tax "has both theoretical and practical merit". He examines both the intellectual and political history of land tax drawing mostly on examples from the United Kingdom. A key part of the essay is the section on the practical politics of a land tax. Having discussed the merits of a Land Value Tax, McLean is aware that it is also unpalatable for many, so he asks "How then could a brave government make Land Value Tax for housing acceptable to the median voter?" Here, McLean engages in a form of political engineering with the aid of Public Choice Theory. There isn't space here to set out his four suggestions, but they are eye-opening -- particularly his case of the "Devon widow", which is the situation of an asset rich/cash poor household. His solution is to defer the tax liability until after death or at the time the property is sold.

In "The State and Tax Competition: A Normative Perspective", Peter Dietsch moves the discussion to an area of tax justice that has been largely overlooked by political philosophers: the strategic interaction effects of tax regimes in a global economy. He targets the effect on social justice when states compete with each other for mobile capital through low tax rates and favorable regulation. Although this competition is clearly a way for governments to stimulate economic growth and create jobs, it simultaneously interferes with, and even undermines, the fiscal independence of states and hence their ability to fund public services and meet local demands of social justice. That is, there are spill-over effects of fiscal policy. The underlying question is whether there are any moral limits to the migration of the tax base between countries. "The crucial question", asks Dietsch, "becomes which portion of fiscal interdependence should be considered benign from a normative viewpoint, and which portion should be condemned as problematic" (p. 214). He answers this by introducing two normative principles: the autonomy prerogative and the global justice constraint . That is, for fiscal policy to be just, it must be able to implement autonomous political choices and promote distributive justice globally. Thus, jurisdictional rules on tax competition must be designed so as to respect these twin principles.

In the final essay, "Global Taxation and Accounting Arrangements: Some Normatively Desirable and Feasible Policy Recommendations", Gillian Brock and Rachel McMaster delve into the nitty gritty of accounting practices and how they contribute to what is cogently termed as tax escape -- tax avoidance and evasion. In particular, they examine the practice of "transfer pricing" used for sales and purchases within a company or group of companies. The practice permits profits to be disguised and taxes avoided. Brock and McMaster also provide a review of the characteristics, scope, and effects of tax havens. They offer insight into means for regulating tax escape, including such global taxes as air ticket taxes and currency transaction taxes. At a very practical level they set out four normative and four feasibility criteria for collecting global taxes. They show that air ticket and currency transactions taxes meet these criteria and to their mind serve as an example of how to implement Thomas Pogge's Global Resource Dividend. The book thus ends exactly with the point made at the outset by Hamlin: we need to open up the black box of taxation.

This is a friendly review from someone who works at the interface of philosophy and economics. Does the collection come up short in any way? That would require dissecting each essay –which I haven't taken to be my remit. My remit is the collection as a whole, which I find to be an excellent entry into the world of taxation and an exercise in that growing research area we call PPE. One of my own tests for how good a book is, is whether I would include it as essential reading for an undergraduate course. Yes, I certainly would.

The book's overall message is that the Libertarian, Rawlsian and standard welfare economics views of taxation are much richer, complex, and flexible than generally thought. Regardless of the rhetorical appeal, it really would be best were we to refrain from using the Nozickean forced labour argument, to refrain from simply stating that a tax system is just if it is part of the "basic structure", and to refrain from setting optimal tax theory against fairness. And even if we agree that a tax is justifiable for whatever purpose, it requires careful and detailed elaboration of the tax system itself.

Why tax matters

It is often assumed that tax is a bad thing: that governments want to deprive citizens of their hard-earned money. But from an economic justice and human rights perspective, taxes are crucial for four reasons, which can be summarised as the four ‘Rs’:

Revenue: funding to deliver the services citizens need

Redistribution: to address poverty and inequality, representation: building accountability of governments to citizens and reclaiming policy space.

• Repricing: limiting public ‘bads’; encouraging public ‘goods’.

Below we explain the importance of each in turn and their links to economic and social justice issues.

‘Taxation funds the lion’s share of the education budget, particularly the salaries of teachers, and so requires more attention if countries are to meet the Education for All Objectives by 2015.’ ActionAid and Education International, 2009 1

Tax is a vital source of revenue for most governments enabling them to fund essential services and infrastructure for their citizens. Of course, revenues will not automatically be used for such social goods. But when governments get revenue from tax, citizens are in a far stronger position to exert pressure that it be spent on the services to which they are entitled.Taking education as an example, in 1995 the Ghanaian government introduced a new value added tax (VAT) of 17.5 per cent, which initially led to widespread protests. The government was forced to revoke the policy and in 1997 VAT was introduced at 10 per cent, accompaniedby an intensive government campaign to create awareness among citizens about what therevenues from the tax would be used for. Subsequently the level of VAT was raised to 12.5 per cent, with the revenue from the added 2.5 per cent ring-fenced for education through the Ghana Education Trust Fund. With education being key to everybody, it caught on well. 2

ActionAid has stressed that ‘governments prefer to use tax revenue, rather than aid or loans, to cover the salaries of teachers, because it is relatively secure and predictable. They do not want to hire teachers with aid money and then find they cannot pay the salaries two or three years later, as making teachers redundant is politically very sensitive. So, the best way to get more money for more teachers is to expand the national tax base.’ 3 When aid contributions have enabled governments to improve provision of services, domestically raised revenue tends to also be an important factor. In Kenya the declaration of free primary education in 2005 led to the realisation by the state of the need to improve fiscal resources to maintain the president’s electoral promise. This, together with other societal needs, has led to increased tax targets and collection in order to improve education and other services. 5

What is true of education is true of many other services that rely on government support and funding. Millions of small farmers in southern countries rely on governments to provide training, research and credit and to develop markets for inputs and outputs; yet governments in Africa tend to spend far too little in this area, and donor support to agriculture has been woefully inadequate over recent decades. Increased earnings from domestic tax would enable governments to provide more of these services or at least provide citizens with the scope to argue the case for this spending to take place. Addressing high maternal and infant mortality rates, successfully tackling HIV, reducing the blight of malaria and other tropical diseases all require reliable long-term funding from governments. Of course, financing through taxation is not the only factor that will drive the provision of such services. Other factors such as political will are crucial. But tax is an important part of the solution. For this reason, citizens in many countries have sought to influence tax policies in order to get the services to which they are entitled.

So, if you are campaigning for the provision or improvement of education, health or other services, engaging in tax issues should be a central part of your efforts.

Tax and human rights

Every government in the world has certain responsibilities regarding its citizens.The human rights legal framework spells out those responsibilities.However, human rights encompass not just social and political rights, but also economic and social rights.The minimum requirements for the fulfilment of economic and social rights include the provision of available foodstuffs for the population, essential primary healthcare, basic shelter and housing, and the most basic forms of education.Groups working on human rights should be concerned about how rights are realised through the budget, and how they are violated when states are unable to meet their obligations through weak or unfair taxation.

In 1986 the United Nations made explicit the link between this right and the resources required to fund it. More recently the millennium development goals (MDGs) are an attempt to create a practical benchmark for states to work towards implementing human rights.

MDG campaigners often focus on pushing countries to fulfil their aid pledges, aimed at meeting the MDGs. While this is important, there is an increasing recognition that the progressive realisation of rights, in the long term, requires domestic resource mobilisation through tax. Indeed, a recent analysis by theTax Justice Network showed a strong relationship between African countries with high levels of tax collection and those making progress with regard to the MDGs. 6

Are resources being mobilised to ensure that governments fulfill their responsibilities towards the progressive realisation of rights? If not, a government may be failing in its human rights obligations and may be held to account for doing so.

Tax policy can play an important role in redistributing wealth within an economy. The provision of services discussed in the previous section is one way of addressing poverty and inequality through taxation – as it is the poor who tend to depend more on key services such as publicly funded health and education. As we saw with the Bolivia case study on page 2, tax policy has the potential to redistribute a country’s riches from the wealthy (in this case oil and gas companies) towards the poorest and most vulnerable (old people, and children who would otherwise lack education). This is an example of ‘progressive’ and equitable taxation.

Tax systems can include progressive or regressive elements. For example, a country could rely on taxation of resource wealth, corporate taxation or taxation of property while collecting less tax from those on low incomes. Or income taxes could be differentiated between those on lower and higher incomes. These would generally be considered progressive policies. Conversely, a reliance on consumption taxes (levied on food, fuel and other goods) would be considered regressive.

In reality, tax systems the world over are often regressive. This is even more likely to be the case in many southern countries, which tend to have particularly low levels of taxation on income and an over-reliance on consumption taxes. For example in Latin America individual income taxes contribute only 4 per cent of the overall tax collection. Some southern countries fare better. In Bangladesh direct taxation comprises 20 per cent. In Ghana the figure is 22 per cent, but this is much higher than most of its regional neighbours and is still far below the developed country average of 35 per cent. 8 A regressive tax system can do a lot of damage and can even contribute directly to increasing the concentration of wealth – as it has been shown to do in Latin America where inequality is greater after tax than before taxes are paid.

The ‘tax consensus’ pushed by the International Monetary Fund (IMF), World Bank and others over the last two to three decades has tended to contribute to furthering the ‘regressive’ nature of many tax systems. While countries have been strongly encouraged to minimise the taxation of foreign investors as well as to reduce trade taxes that were previously important sources of revenue for social spending (both of these trends are explained in detail later in this chapter), governments have meanwhile been encouraged to increase taxes on purchases – generally known as ‘value added tax’ (VAT) or sometimes referred to as a ‘goods and services tax’ (GST) or ‘consumption taxes’. These policy recommendations are based on the premise that taxes should be economically neutral and should focus on raising revenue only, ignoring the potential for tax to challenge inequality.

‘It is hardly possible to speak of the struggle for an equitable society and for social justice unless the agenda of progressive taxation is concretely articulated.’ Freedom from Debt Coalition, the Philippines 7

VAT unfair on the poorest

Most southern countries have very large informal sectors and significant rural populations, from whom it is difficult for governments with weak tax administrations to collect income tax. Even if governments had better systems in place, these are often the citizens least able to afford to pay tax. In response to this problem as well as to pressures from international financial institutions (IFIs) and donors, many southern countries have increasingly relied on an expansion of VAT for their tax revenues. While developed country economies tend to rely on VAT for about 30 per cent of total tax revenues, in southern countries it is often dramatically higher. In Latin America consumer taxes account for almost two-thirds of tax revenues, with VAT being the most important of these.

Yet consumption taxes such as VAT or GST are usually regressive taxes. Unless a comprehensive set of exemptions is applied to the basic goods and services consumed by poor people, they will spend a much higher percentage of their minimal incomes on the goods and services that carry this tax than those with large disposable incomes. So too much reliance by a government on VAT for its revenue can end up deepening inequality in a country. For this reason VAT has been a focus for tax justice protests in countries around the world.

‘Progressive’ or ‘regressive’ taxation?:

Gender inequality in the tax system 12.

Tax systems can also play a role in addressing or exacerbating economic inequality between women and men. This can either be implicit or explicit. Implicitly, an identical tax may have a differential impact on women and men because of their differing social and economic roles. For example:

• A high rate of tax on part-time earners is likely to affect women more than men because women are more likely to work part time to accommodate family responsibilities.
• If the tax code treats a married couple as a single unit (combining their earnings for tax purposes), the couple can face a ‘marriage penalty’ whereby they end up paying more than when they filed their taxes separately as single people. This usually affects women disproportionately because the higher tax is effectively placed on the ‘second’ earner. Women are more likely to be earning less than their spouses and their earnings are thus usually regarded as ‘secondary’.
• A shift from direct taxes to indirect taxes such as VAT can produce greater gender inequalities if taxes are levied on essential goods that are consumed disproportionately by female-headed households. 13
• Men are more likely than women to benefit from corporate and income tax exemptions as they are more likely to own property and shares.

There are also sometimes explicit differences built into the tax system between how women and men are taxed. In Pakistan, for instance, the tax code allows working women to shield a greater amount of their income from tax than working men. In contrast, in South Africa prior to 1994, married women were taxed at higher rates than married men. So, it is important for groups working on tax to assess the gender implications of tax structures and to challenge those systems that are regressive along gender lines.

‘A tax system should be progressive, meaning that those with higher incomes pay greater taxes as a share of income than those with lower incomes.’ Taxation and Development in Ghana: Finance, Equity and Accountability, 2009 15

‘If the government continues to give tax cuts and tax holidays to attract investors, where will we get money to finance primary education, build roads, and reduce infant mortality? We will source it from indirect taxes such as the Value Added Tax which burdens more Filipinos.’ Professor Leonor Magtolis-Briones, Social Watch 16

Who holds the money – central or local governments?

In many southern countries, local taxation accounts for only a tiny share of total tax revenue. In Ghana, districts continue to be fiscally dependent on central transfers and donor revenues. However, there is remarkably little coordination between local authorities and the national tax authorities. Citizens are consistently confronted with two distinct and uncoordinated sets of tax collectors and tax demands, while some national tax officials report that local tax officials sometimes seek to increase local collection by encouraging the evasion of national taxes. This undermines the credibility of the system as a whole and may lead to poorly educated or uninformed citizens paying more tax than they should.

The importance of CSOs speaking out directly on tax equity issues is highlighted by recent trends in tax reform. A PricewaterhouseCoopers/ World Bank report makes clear that the most popular change to tax systems worldwide between 2004 and 2006 was reducing corporate profit tax rates. 17 The private sector has been effective in ensuring reforms for its benefit. Unfortunately it is less common to hear the voices fighting for an increase in tax collection and equitable tax reforms. Civil society groups can promote pro-poor tax policies by ensuring that crucial equity issues are part of tax debates.

Building accountability of governments to citizens

If you are working on governance and accountability issues, tax should also be on your agenda. Taxation is about more than revenue- raising; it is also a fundamental part of state- building and democracy. One important study examined the link between democracy and taxes in 113 countries between 1971 and 1997. It found that introducing or increasing taxes without simultaneously increasing and improving service delivery led to citizens demanding their rights and to subsequent democratic reforms. 18

Campaigners have always challenged governments when they raise and spend public revenue in unfair or corrupt ways. In many countries the imposition of unfair taxes has been an important catalyst of social and political change, from the poll tax in medieval England through the Boston tea party to VAT in 1990s Ghana. The long-term relationship between taxation and the development of more accountable and responsive governments has a number of components:

• Collective bargaining around tax revenue creates a ‘social contract’ between members of society who are paying taxes and voting for political parties, and officials who are expected to raise and spend those revenues in a manner that benefits the constituents who elected them. Taxes make government more immediate and visible, and ultimately more accountable. Critically, fairness in the tax system is important for building that accountability between governments and citizens – without the perception that the big players are contributing their fair share, the incentive for ordinary citizens to do so is considerably diminished.
• A state that depends on taxes needs a healthy economy to generate them. That requires citizens and businesses that flourish, so the government has an interest in responding to their needs.
• To raise tax reliably, governments need efficient, accountable and honest revenue services (that is good administrative governance).

However, without transparency and access to information, citizens are less able to hold governments to account. Without knowing how much tax is being raised and from where, the people are less able to make proposals about how the money should be spent. Lack of transparency and lack of freedom of information are both issues that are also central to the democratic control that a population holds over its government. The demand for transparency and freedom of information is therefore a campaign issue in its own right, as well as a central aspect of tax justice campaigns. Many organisations and activists are finding ways of getting governments to share this information and of holding them to account.

‘Tax provides people with a weapon: if government doesn’t act well, you can withhold tax, particularly when it comes to high- level corruption. Government responsiveness is higher from government to citizen than before.’ Alvin Mosioma, Tax Justice Network Africa

Protests on tax and representation

• In colonial India, Ghandi organised salt tax marches in the 1940s against the unjust taxes that the British colonial administration imposed on Indian people without the right to decide how they were spent.
• In the UK, when women campaigned for the vote they adopted the slogan ‘no vote, no tax’.
• During the events that led to the US war of independence in 1776, British colonists who were not represented in the UK Parliament rallied around the cry ‘no taxation without representation’.This established the precedent for the right to be taxed only by one’s own elected representatives.

In times of independence, some tax justice activists have reversed the slogan of the US independence campaigners to say ‘no representation without taxation’, recognising that proper representation is unlikely to be achieved without a transparent and fair tax system.

Citizens campaign for right to information on tax

The counterpart to pushing for fair enforcement of taxation is pushing for transparency and inclusiveness in the tax system. In Sierra Leone, citizens desperately need detailed information about how taxes are assessed, how much tax revenue is collected and how that revenue is used. At the local government level, this is particularly important where citizens complain that tax assessment is arbitrary and that information about how much revenue is collected and how it is spent is unavailable. Transparency can be the basis for encouraging voluntary tax compliance and more broadly building the legitimacy and accountability of government. 19 In recognition of this importance, a number of civil society campaigns have aimed to ensure greater tax transparency, in conjunction with budget monitoring and advocacy.

Building tax into budget monitoring

Many organisations across the South are involved in monitoring their government’s budget, in order to guard against corruption and to ensure that funds are being directed appropriately and spent effectively. Budget monitoring usually focuses on how government money is spent; but increasingly citizens are recognising that it is equally important to track where the money comes from, as no government programme or policy can succeed without funds to implement or enforce it.

As the International Budget Partnership (IBP) points out in its guide for non-governmental organisations (NGOs) thinking of working on tax, 21 the budget is one of the most important public documents produced by a government, expressing its priorities and commitments. It is the place where a government proposes how much revenue it plans to raise and how it plans to use these funds to meet the nation’s competing needs, from bolstering security to improving healthcare to alleviating poverty. Given its wide-ranging implications for a nation’s citizens, the budget should be the subject of widespread scrutiny and debate. The IBP rightly points out that groups that are knowledgeable about both sides of the budget – expenditure and revenues – will ultimately be more effective.

Unfortunately, expenditure that targets the poor is often the easiest to sacrifice, because the poor tend to be unorganised and politically weak. CSOs may find that they can more easily defend these programmes if they also engage with tax issues and work to ensure revenue adequacy. Moreover, if civil society groups are advocating new expenditure policies that require substantial funding, they can strengthen their case by proposing specific taxes or other revenue sources to pay for them. Knowing how the tax burden is borne by different groups – rich or poor, male or female, urban or rural, employers or workers – can help civil society advocate new, fairer tax policies.

‘Government support via tax will lead to more influence by citizens than where government is reliant on external sources for funding.’ Siapha Kamara, SEND Foundation, Ghana

Reclaiming policy space and achieving independence from aid and debt

The previous section discussed the role of tax in improving the accountability of governments towards their citizens. Unfortunately, many southern country governments depend on aid and debt for a high percentage of their revenue, which means their greatest accountability is often towards donors and lenders. Donors and IFIs can impose harmful policy conditionalities that are inequitable and actually make it harder to raise revenue and obtain independence from debt. Shifting the balance away from external financing towards greater revenues from taxation can provide greater policy-making space at the national level. Tax is therefore a critical element of strengthening the power of citizens to make demands on their governments.

Tax is also a more sustainable source of finance than aid or loans because it is less likely to dry up and does not involve interest repayments.

Take debt: financing development projects through debt is a short-term fix but is not sustainable – indeed, it leaves a legacy whereby the limited tax raised domestically goes on paying off the debt for past projects instead of being used on much-needed essential services.

Latin America suffered extensively during the debt crisis. However, in recent years, thanks to strong growth and high commodity prices, many countries have made efforts to reduce their debt burdens. This, alongside debt write-offs under the Heavily Indebted Poor Country (HIPC) Initiative, means that the region’s external debt as a share of GDP has fallen significantly. The IMF reports the region’s external debt to have fallen from 59 per cent of GDP in 2003 to 32 per cent in 2008. However, in many countries the internal debt burden remains high, and debt servicing continues to have a serious detrimental impact on social spending. In Brazil, where tax collection is relatively high, 30 per cent of the federal budget goes on servicing the internal and external debt. In comparison, health spending is just under 5 per cent of the federal budget. Low-tax Latin American countries can find themselves similarly constrained by debt servicing. In Nicaragua, for example, external debt stood at 60 per cent of GDP in 2008 (and the total debt burden, including domestic debt, stood at 80 per cent of GDP). Debt servicing that year amounted to US$275 million – around 4.4 per cent of the country’s GDP. In fact, debt servicing managed to swallow up 25 per cent of the country’s annual tax take. This was equivalent to 36 per cent of total public social spending and dwarfed the country’s entire health budget, which amounted to only 3.7 per cent of GDP.

In the Philippines, the debt service for interest payments from 1986 to 2008 already averaged around 25.72 per cent of the national budget – this was without paying off any of the principal sum. In the recent 2010 budget of the Philippine government (US$32.2 billion), US$7.9 billion (24.34 per cent) was spent for interest payments and US$9.3 billion (28.95 per cent) for payment of the principal. This means that 53.3 per cent of the entire 2010 budget of the Philippines went to debt payments alone. On the other hand, only US$9.2 billion (28.5 per cent) was allocated for basic social services (education, health and housing).

Raising more tax domestically, through improving the tax take from those able to pay, reduces countries’ reliance on loans and the onerous repayment of those loans in the future. Critically, mobilising domestic revenue also helps governments to break away from dependency on western powers and from the often harmful conditions attached to their financing.

For these reasons it is important for organisations working on debt to look at how tax can be used to reduce the dependence of southern country governments on unsustainable external financing.

Too much dependency on development assistance also comes with a series of problems, such as the unwillingness of donors to fund certain socially important projects, a lower incentive for governments to improve tax collection and a continued tendency for donors to condition aid on a country’s acceptance of their policy ‘advice’. A further problem is that if aid is channelled towards projects that would otherwise have been paid for by tax revenues, those tax revenues may be diverted to corruption.

In sum, increasing revenue from tax reduces dependency on foreign donors and helps governments and their citizens to escape the aid and debt trap.

Repricing: limiting public ‘bads’; encouraging public ‘goods’

Taxes can be used to ensure that all social costs and benefits of production or consumption of a particular good are reflected in the market price. The design of a tax system can contribute to the achievement of other social benefits by making it costly to engage in actions considered socially undesirable, or by incentivising behaviour that is considered beneficial to society.

On the consumption side, this may include taxing tobacco to limit damage to health, or petrol to limit environmental costs. It may also be used to discourage speculation on essential products and services, which prevents the poor from accessing them. In the context of climate change, it is clear that market mechanisms do not price our consumption and production in a way that considers the impacts on future generations. However, advocacy on tax in this area also needs to consider any potential negative impacts on the poor.

On the production side, inhibitive taxes can, for instance, be imposed on aspects of mining activities that potentially cause environmental strain on the immediate ecosystem and nearby communities. Studies have pointed out that the social and environmental costs that occur as a result of the extraction of minerals are largely unaccounted for when making the decision about whether or not to embark on a mining project. 25 Such social and environmental costs are not normally valued by the markets or by most economic actors, including mining companies, but instead are borne by local communities living near the mines. Thus, taxes can go some way towards internalising these otherwise unaccounted for costs, for example through allocating a share of the mining royalty to local development funds earmarked for community needs. Another approach could be to tax carbon emissions generated through maritime transport, or aviation in particular, and use the receipts for climate change adaptation and mitigation efforts.

As noted by the FDC, ‘the point here is not to generate resources for government but to impel economic actors to shift to more environmentally friendly technologies and methods even if these entail more costs. But it must be stressed that these taxes should go hand in hand with regulatory mechanisms (such as anti-pollution laws and regulations) to attain social objectives.’ 26

The Importance of Taxation and Tax Administration (2024)

• June 4, 2024

Let’s be honest: no one likes paying taxes. Oftentimes people complain about paying too much of it or about other people that aren’t paying enough. But taxation is a topic that should not be avoided. It is important for many different reasons as it touches the lives of each and every one of us. In fact, how we tax, who we tax, and why we tax determines the kind of society we become.

The purpose and impact of taxation can be divided into four categories:

Generating Resources

Equity and growth, social contract.

The most important purpose of taxation is to raise resources for governments to deliver essential public services. Taxes pay for many of the things that are fundamental to functioning societies around the world, such as health care, schools, and social services. Studies have shown that the bare minimum tax revenue for countries is at least 15 percent of gross domestic product in order to be able to provide basic services to their citizens. [1]

But it is important to look at both sides of the equation – not only taxes collected, but also how the money is spent to improve citizens’ lives and well-being. Many scholars suggest that there is a strong correlation between taxation and happiness. Year after year, countries that rank in the top ten of happiest countries around the world, are those with the highest tax rates. [2] The positive link between tax and happiness is fully mediated by citizens’ satisfaction with public services. In short: because of higher taxes paid by citizens, the government can provide a better life for its citizens with social benefits, healthcare, education, employment, and better infrastructure among others – resulting in happier citizens.

Next to being a source of revenue, taxation has the potential to be a powerful tool for stimulating development in a country. Corbacho et al. make a case for the reform of fiscal and tax systems to progressive systems that help promote economic growth, mobility, and social equality. “Taxation is more than revenue. It is a tool for development.” [3] All governments need revenue, but the challenge lies in carefully choosing not only the level of tax rates but also the tax base. Participants of the global conference of the Platform for Collaboration on Tax (PCT) voiced the concern that the trend toward lower taxation of capital (to encourage growth) is making it harder to counter the growing inequality of income and wealth. [4] These growing income and wealth gaps can undermine social cohesion and ultimately undermine economic growth as well. It should be a priority to ensure an appropriate distribution of the tax burden among taxpayers with a system that helps to preserve the income of poorer households.

In addition, it is important that governments design a tax compliance system that does not discourage taxpayers from participating. Tax rates that are too high can hold back the development of the private sector and the formalization of businesses. Lower tax rates are particularly important to smaller-sized businesses. Even though businesses of this size do not add significantly to government tax revenue, they have a vital contribution to economic growth and employment.

Historically, taxes have been used in many countries to encourage healthy behaviors and deter less healthy ones. Examples are tobacco taxation to lower tobacco consumption and green taxes to help the environment. In doing so, taxation can have a powerful impact on the outcome of human development. Another example is the potential impact taxation has on the development of gender equality, a subject that is receiving increased attention in the policy debate on public finance and the responsibility of the government towards its citizens. [5] It has been proven that taxes influence people’s behavior and choices, with implications for health outcomes, gender equity, and the environment. The choices a government makes will make or break a society.

Lastly, effective tax administration can change the relationship between citizens and the government. Taxation not only pays for public goods and services; it is a major ingredient in the social contract between citizens and government. “How taxes are raised and spent can determine a government’s very legitimacy”. [6] When citizens see the tax system as being fair and find value in the public services they receive, they are more likely to comply with tax laws. Trust in government is essential to create tax morale: the extent to which people accept a moral obligation to pay taxes as their contribution to society. It is therefore important for governments to continue to build public trust by improving the design and the administration of their tax systems.

That’s Why Tax Matters

Hopefully, the four impacts of taxation described in this blog help to soften the blow the next time you pay your taxes. We all have to pay our fair share, allowing the government to generate enough resources to fund the priorities of society. In turn, the government’s duty is to improve the lives and well-being of its citizens. This involves strengthening tax administration so that all citizens and businesses meet their tax obligations. And, establishing tax systems that are better structured and more effective in creating sustainable improvement for society as a whole.

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[1] Tax Capacity and Growth: Is there a Tipping Point?

[2] world happiness report 2020, [3] more than revenue: taxation as a development tool (executive summary), [4] pct – taxation and the sustainable development goals conference report, [5] gender & taxation – why care about taxation and gender equality, [6] paying taxes. why do tax rates and tax administration matter, sign up for updates.

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What Is Schedule K-1?

• How It Works

Who Files a Schedule K-1?

• Schedule K-1 FAQs

The Bottom Line

• Small Business
• Small Business Taxes

Schedule K-1 Federal Tax Form: What Is It and Who Is It For?

Lea Uradu, J.D. is a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, and Tax Writer.

Schedule K-1 is a federal tax document used to report the income, losses, and dividends for a business' or financial entity's partners or an S corporation's shareholders. The K-1 form is also used to report income distributions from trusts and estates to beneficiaries.

A Schedule K-1 document is prepared for each relevant individual (partner, shareholder, or beneficiary). A partnership then files Form 1065 , the partnership tax return that contains the activity on each partner's K-1. An S corporation reports activity on Form 1120-S. Trusts and estates report the K-1 form activity on Form 1041.

Key Takeaways

• Business partners, S corporation shareholders, and investors in limited partnerships and certain ETFs use Schedule K-1 to report their earnings, losses, and dividends.
• Schedule K-1s are usually issued by pass-through businesses or financial entities that don't directly pay corporate tax on their income but shift the tax liability (along with most of their income) to their stakeholders.
• Schedule K-1 requires the business entity to track each participant’s basis or ownership stake in the enterprise.
• Several different types of income can be reported on Schedule K-1.
• Schedule K-1s should be issued to taxpayers no later than Mar. 15 or the third month after the end of the entity's fiscal year.

Investopedia / Zoe Hansen

Understanding Schedule K-1

The U.S. federal tax code allows the use of a pass-through strategy in certain instances, which shifts tax liability from the entity (such as a trust or a partnership) to the individuals who have an interest in it.

The entity itself pays no taxes on earnings or income. Rather, any payouts—along with any tax due on them—pass through directly to the stakeholders. This is where Schedule K-1 comes in.

The purpose of the K-1 form is to report each participant's share of the business entity's gains, losses, deductions, credits, and other distributions (whether or not they're actually distributed).

In the case of a partnership, while not filed with an individual partner’s tax return, the financial information posted to each partner’s K-1 form is sent to the IRS with Form 1065. Income generated from partnerships is added to the partner’s other sources of income and entered on Form 1040.

Schedule K-1 is similar to Form 1099, in that it reports dividends, interest, and other annual returns from an investment. Whether you receive a K-1 or a Form 1099 depends on the investment. Master limited partnerships (MLPs), real estate limited partnerships (RELPS) and certain exchange-traded funds (ETFs) are all types of investments that routinely issue K-1s.

Aspects of Schedule K-1

Factoring in partnership agreements.

A partnership is defined as a contract between two or more people who decide to work together as partners. The rules of this business arrangement are stated in a partnership agreement. The partnership has at least one general partner (GP) who operates the partnership.

GPs are liable for their actions as partners and for the activities of other GPs in the partnership. Limited partners, on the other hand, are liable for the debts and obligations of the partnership based only on the amount of capital they contribute. The partnership agreement dictates how the partners share profits, which impacts the information on Schedule K-1.

Basis Calculation

Schedule K-1 requires the partnership to track each partner’s basis in the partnership . In this context, basis refers to a partner’s investment or ownership stake in the enterprise. A partner’s basis is increased by capital contributions and their share of income. It's reduced by a partner’s share of losses and any withdrawals.

Assume, for example, that a partner contributes $50,000 in cash and $30,000 in equipment to a partnership, and the partner’s share of income is $10,000 for the year. That partner's total basis is $90,000, less any withdrawals they've made.

The basis calculation is important because when the basis balance is zero, any additional payments to the partner are taxed as ordinary income. The basis calculation is reported on Schedule K-1 in the partner’s capital account analysis section.

Income Reporting

A partner can earn several types of income on Schedule K-1, including rental income from a partnership’s real estate holdings and income from bond interest and stock dividends.

Many partnership agreements provide guaranteed payments to general partners who invest the time to operate the business venture and those guaranteed payments are reported on Schedule K-1. The guaranteed payments are put in place to compensate the partner for the large time investment.

A partnership may generate royalty income and capital gains or losses, and those items are allocated to each partner’s Schedule K-1, based on the partnership agreement.

Those receiving K-1-reported income should consult with a tax professional to determine if their proceeds trigger the alternative minimum tax .

Types of Schedule K-1s

The K-1 forms used by the three entities (partnerships, S-corporations, and trusts) vary slightly in the way they look but they all have the same purpose. They report to the IRS, and individual partners, shareholders, and beneficiaries, the amounts of income, losses, deductions, credits, and other distributions they may have received.

K-1 Form for Partnerships

K-1s are sent to the IRS with the partnership’s tax return (Form 1065) and also to each partner so that they can add the information to their own tax returns.

K-1 Form for S-Corporations

S-corporations file an annual tax return using Form 1120-S . They include Schedule K-1 information about each shareholder’s share of income, losses, deductions, and credits.

K-1 Form for Trusts and Estates

Trusts and estates use  Form 1041  to file their tax returns. Beneficiaries receive a K-1 that shows the income that they need to report on their own tax returns.

If you spot an error on the Schedule K-1 you receive, ask the issuer to correct it, and send the revised version to the IRS.

There are four main types of entities required to file a K-1:

• Business partnerships
• Limited liability corporations (LLCs) that have at least two partners or elect to be taxed as corporations
• S corporations
• Trusts and estates

Individual taxpayers typically don’t file K-1 forms. Instead, they transfer the information provided in the K-1 to their personal, individual tax return. For example:

If you're a partner, use the information on Schedule K-1 to prepare your income tax return(s). You typically aren't required to attach the K-1 form (unless specifically required per the form instructions) but be sure to keep it in your records. The partnership files a copy of Schedule K-1/Form 1065, the U.S. Return of Partnership Income, with the IRS.

If you're a shareholder, use the information on Schedule K-1 (Form 1120-S) to prepare your income tax return(s). Again, you usually aren't meant to include the K-1 form with them but file it with your records. The corporation files Form 1120-S, the U.S. Income Tax Return for an S Corporation, with the IRS.

If you're a beneficiary of a trust or estate, use the information on Schedule K-1 (Form 1041) to prepare your income tax return(s). The K-1 isn't filed with your tax return, unless backup withholding was reported in box 13, code B. Keep it with your records. The trust or estate files a copy of Schedule K-1/Form 1041 with the IRS.

What Is IRS Schedule K-1?

Schedule K-1 is an Internal Revenue Service (IRS) tax form that's issued annually. It reports the gains, losses, interest, dividends, earnings, and other distributions from certain investments or business entities for the previous tax year. These are usually pass-through entities that don't pay corporate tax themselves because they directly pass profits on to their stakeholders or investors. Participants in these investments or enterprises use the figures on the K-1 to compute their income, and the tax due on it.

Who Gets an IRS Schedule K-1?

Among those likely to receive a Schedule K-1 are:

• S corporation shareholders
• Partners in limited liability corporations (LLCs), limited liability partnerships (LLPs), or other business partnerships
• Investors in limited partnerships (LPs) or master limited partnerships (MLPs)
• Investors in certain exchange-traded funds (ETFs) 
• Trust or estate beneficiaries

Is IRS Schedule K-1 Income Considered Earned Income?

That depends on the individual's participation and status. For trust and estate beneficiaries, limited partners, and passive investors, Schedule K-1 income is more akin to unearned income. For general partners and active owners in a business or pass-through business entity, the income can be considered earned income, and they may owe self-employment tax on it.

When Should I Receive My IRS Schedule K-1?

Schedule K-1 forms are notorious for arriving late. The IRS says they are due by March 15 (or the 15th day of the third month after the entity's tax year ends). Whether that means they need to be issued by then, or to actually be in taxpayers' hands by that date, seems open to interpretation. Most authorities agree you should receive one by March 15, or the closest business day to that.

A Schedule K-1 is a federal tax form that pass through entities like partnerships and S corporations and sometimes trusts and estates send to their partners, shareholders, or beneficiaries. The form reports the income, losses, and gains passed to each party with an interest in the entity. This information is then used by the recipient to prepare their own tax returns.

Internal Revenue Service. " About Form 1040, U.S. Individual Income Tax Return ."

Internal Revenue Service. " Partner's Instructions for Schedule K-1 (Form 1065) - Introductory Material ."

Internal Revenue Service. " About Form 1099-MISC, Miscellaneous Income ."

Internal Revenue Service. " About Form 6251, Alternative Minimum Tax - Individuals ."

Internal Revenue Service. " Tax Information for Partnerships ."

Internal Revenue Service. " About Form 1120-S, U.S. Income Tax Return for an S Corporation ."

Internal Revenue Service. " About Form 1041, U.S. Income Tax Return for Estates and Trusts ."

Internal Revenue Service. " Partner's Instructions for Schedule K-1 (Form 1065) ."

Internal Revenue Service. " Instructions for Form 1120-S ."

Internal Revenue Service. " Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 or 1040-SR ."

Internal Revenue Service. " About Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc ."

Internal Revenue Service. " Publication 509, Tax Calendars, For Use in 2024 ," Page 4.

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GPT-fabricated scientific papers on Google Scholar: Key features, spread, and implications for preempting evidence manipulation

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Academic journals, archives, and repositories are seeing an increasing number of questionable research papers clearly produced using generative AI. They are often created with widely available, general-purpose AI applications, most likely ChatGPT, and mimic scientific writing. Google Scholar easily locates and lists these questionable papers alongside reputable, quality-controlled research. Our analysis of a selection of questionable GPT-fabricated scientific papers found in Google Scholar shows that many are about applied, often controversial topics susceptible to disinformation: the environment, health, and computing. The resulting enhanced potential for malicious manipulation of society’s evidence base, particularly in politically divisive domains, is a growing concern.

Swedish School of Library and Information Science, University of Borås, Sweden

Department of Arts and Cultural Sciences, Lund University, Sweden

Division of Environmental Communication, Swedish University of Agricultural Sciences, Sweden

Research Questions

• Where are questionable publications produced with generative pre-trained transformers (GPTs) that can be found via Google Scholar published or deposited?
• What are the main characteristics of these publications in relation to predominant subject categories?
• How are these publications spread in the research infrastructure for scholarly communication?
• How is the role of the scholarly communication infrastructure challenged in maintaining public trust in science and evidence through inappropriate use of generative AI?

research note Summary

• A sample of scientific papers with signs of GPT-use found on Google Scholar was retrieved, downloaded, and analyzed using a combination of qualitative coding and descriptive statistics. All papers contained at least one of two common phrases returned by conversational agents that use large language models (LLM) like OpenAI’s ChatGPT. Google Search was then used to determine the extent to which copies of questionable, GPT-fabricated papers were available in various repositories, archives, citation databases, and social media platforms.
• Roughly two-thirds of the retrieved papers were found to have been produced, at least in part, through undisclosed, potentially deceptive use of GPT. The majority (57%) of these questionable papers dealt with policy-relevant subjects (i.e., environment, health, computing), susceptible to influence operations. Most were available in several copies on different domains (e.g., social media, archives, and repositories).
• Two main risks arise from the increasingly common use of GPT to (mass-)produce fake, scientific publications. First, the abundance of fabricated “studies” seeping into all areas of the research infrastructure threatens to overwhelm the scholarly communication system and jeopardize the integrity of the scientific record. A second risk lies in the increased possibility that convincingly scientific-looking content was in fact deceitfully created with AI tools and is also optimized to be retrieved by publicly available academic search engines, particularly Google Scholar. However small, this possibility and awareness of it risks undermining the basis for trust in scientific knowledge and poses serious societal risks.

Implications

The use of ChatGPT to generate text for academic papers has raised concerns about research integrity. Discussion of this phenomenon is ongoing in editorials, commentaries, opinion pieces, and on social media (Bom, 2023; Stokel-Walker, 2024; Thorp, 2023). There are now several lists of papers suspected of GPT misuse, and new papers are constantly being added. 1 See for example Academ-AI, https://www.academ-ai.info/ , and Retraction Watch, https://retractionwatch.com/papers-and-peer-reviews-with-evidence-of-chatgpt-writing/ . While many legitimate uses of GPT for research and academic writing exist (Huang & Tan, 2023; Kitamura, 2023; Lund et al., 2023), its undeclared use—beyond proofreading—has potentially far-reaching implications for both science and society, but especially for their relationship. It, therefore, seems important to extend the discussion to one of the most accessible and well-known intermediaries between science, but also certain types of misinformation, and the public, namely Google Scholar, also in response to the legitimate concerns that the discussion of generative AI and misinformation needs to be more nuanced and empirically substantiated  (Simon et al., 2023).

Google Scholar, https://scholar.google.com , is an easy-to-use academic search engine. It is available for free, and its index is extensive (Gusenbauer & Haddaway, 2020). It is also often touted as a credible source for academic literature and even recommended in library guides, by media and information literacy initiatives, and fact checkers (Tripodi et al., 2023). However, Google Scholar lacks the transparency and adherence to standards that usually characterize citation databases. Instead, Google Scholar uses automated crawlers, like Google’s web search engine (Martín-Martín et al., 2021), and the inclusion criteria are based on primarily technical standards, allowing any individual author—with or without scientific affiliation—to upload papers to be indexed (Google Scholar Help, n.d.). It has been shown that Google Scholar is susceptible to manipulation through citation exploits (Antkare, 2020) and by providing access to fake scientific papers (Dadkhah et al., 2017). A large part of Google Scholar’s index consists of publications from established scientific journals or other forms of quality-controlled, scholarly literature. However, the index also contains a large amount of gray literature, including student papers, working papers, reports, preprint servers, and academic networking sites, as well as material from so-called “questionable” academic journals, including paper mills. The search interface does not offer the possibility to filter the results meaningfully by material type, publication status, or form of quality control, such as limiting the search to peer-reviewed material.

To understand the occurrence of ChatGPT (co-)authored work in Google Scholar’s index, we scraped it for publications, including one of two common ChatGPT responses (see Appendix A) that we encountered on social media and in media reports (DeGeurin, 2024). The results of our descriptive statistical analyses showed that around 62% did not declare the use of GPTs. Most of these GPT-fabricated papers were found in non-indexed journals and working papers, but some cases included research published in mainstream scientific journals and conference proceedings. 2 Indexed journals mean scholarly journals indexed by abstract and citation databases such as Scopus and Web of Science, where the indexation implies journals with high scientific quality. Non-indexed journals are journals that fall outside of this indexation. More than half (57%) of these GPT-fabricated papers concerned policy-relevant subject areas susceptible to influence operations. To avoid increasing the visibility of these publications, we abstained from referencing them in this research note. However, we have made the data available in the Harvard Dataverse repository.

The publications were related to three issue areas—health (14.5%), environment (19.5%) and computing (23%)—with key terms such “healthcare,” “COVID-19,” or “infection”for health-related papers, and “analysis,” “sustainable,” and “global” for environment-related papers. In several cases, the papers had titles that strung together general keywords and buzzwords, thus alluding to very broad and current research. These terms included “biology,” “telehealth,” “climate policy,” “diversity,” and “disrupting,” to name just a few.  While the study’s scope and design did not include a detailed analysis of which parts of the articles included fabricated text, our dataset did contain the surrounding sentences for each occurrence of the suspicious phrases that formed the basis for our search and subsequent selection. Based on that, we can say that the phrases occurred in most sections typically found in scientific publications, including the literature review, methods, conceptual and theoretical frameworks, background, motivation or societal relevance, and even discussion. This was confirmed during the joint coding, where we read and discussed all articles. It became clear that not just the text related to the telltale phrases was created by GPT, but that almost all articles in our sample of questionable articles likely contained traces of GPT-fabricated text everywhere.

Evidence hacking and backfiring effects

Generative pre-trained transformers (GPTs) can be used to produce texts that mimic scientific writing. These texts, when made available online—as we demonstrate—leak into the databases of academic search engines and other parts of the research infrastructure for scholarly communication. This development exacerbates problems that were already present with less sophisticated text generators (Antkare, 2020; Cabanac & Labbé, 2021). Yet, the public release of ChatGPT in 2022, together with the way Google Scholar works, has increased the likelihood of lay people (e.g., media, politicians, patients, students) coming across questionable (or even entirely GPT-fabricated) papers and other problematic research findings. Previous research has emphasized that the ability to determine the value and status of scientific publications for lay people is at stake when misleading articles are passed off as reputable (Haider & Åström, 2017) and that systematic literature reviews risk being compromised (Dadkhah et al., 2017). It has also been highlighted that Google Scholar, in particular, can be and has been exploited for manipulating the evidence base for politically charged issues and to fuel conspiracy narratives (Tripodi et al., 2023). Both concerns are likely to be magnified in the future, increasing the risk of what we suggest calling evidence hacking —the strategic and coordinated malicious manipulation of society’s evidence base.

The authority of quality-controlled research as evidence to support legislation, policy, politics, and other forms of decision-making is undermined by the presence of undeclared GPT-fabricated content in publications professing to be scientific. Due to the large number of archives, repositories, mirror sites, and shadow libraries to which they spread, there is a clear risk that GPT-fabricated, questionable papers will reach audiences even after a possible retraction. There are considerable technical difficulties involved in identifying and tracing computer-fabricated papers (Cabanac & Labbé, 2021; Dadkhah et al., 2023; Jones, 2024), not to mention preventing and curbing their spread and uptake.

However, as the rise of the so-called anti-vaxx movement during the COVID-19 pandemic and the ongoing obstruction and denial of climate change show, retracting erroneous publications often fuels conspiracies and increases the following of these movements rather than stopping them. To illustrate this mechanism, climate deniers frequently question established scientific consensus by pointing to other, supposedly scientific, studies that support their claims. Usually, these are poorly executed, not peer-reviewed, based on obsolete data, or even fraudulent (Dunlap & Brulle, 2020). A similar strategy is successful in the alternative epistemic world of the global anti-vaccination movement (Carrion, 2018) and the persistence of flawed and questionable publications in the scientific record already poses significant problems for health research, policy, and lawmakers, and thus for society as a whole (Littell et al., 2024). Considering that a person’s support for “doing your own research” is associated with increased mistrust in scientific institutions (Chinn & Hasell, 2023), it will be of utmost importance to anticipate and consider such backfiring effects already when designing a technical solution, when suggesting industry or legal regulation, and in the planning of educational measures.

Recommendations

Solutions should be based on simultaneous considerations of technical, educational, and regulatory approaches, as well as incentives, including social ones, across the entire research infrastructure. Paying attention to how these approaches and incentives relate to each other can help identify points and mechanisms for disruption. Recognizing fraudulent academic papers must happen alongside understanding how they reach their audiences and what reasons there might be for some of these papers successfully “sticking around.” A possible way to mitigate some of the risks associated with GPT-fabricated scholarly texts finding their way into academic search engine results would be to provide filtering options for facets such as indexed journals, gray literature, peer-review, and similar on the interface of publicly available academic search engines. Furthermore, evaluation tools for indexed journals 3 Such as LiU Journal CheckUp, https://ep.liu.se/JournalCheckup/default.aspx?lang=eng . could be integrated into the graphical user interfaces and the crawlers of these academic search engines. To enable accountability, it is important that the index (database) of such a search engine is populated according to criteria that are transparent, open to scrutiny, and appropriate to the workings of  science and other forms of academic research. Moreover, considering that Google Scholar has no real competitor, there is a strong case for establishing a freely accessible, non-specialized academic search engine that is not run for commercial reasons but for reasons of public interest. Such measures, together with educational initiatives aimed particularly at policymakers, science communicators, journalists, and other media workers, will be crucial to reducing the possibilities for and effects of malicious manipulation or evidence hacking. It is important not to present this as a technical problem that exists only because of AI text generators but to relate it to the wider concerns in which it is embedded. These range from a largely dysfunctional scholarly publishing system (Haider & Åström, 2017) and academia’s “publish or perish” paradigm to Google’s near-monopoly and ideological battles over the control of information and ultimately knowledge. Any intervention is likely to have systemic effects; these effects need to be considered and assessed in advance and, ideally, followed up on.

Our study focused on a selection of papers that were easily recognizable as fraudulent. We used this relatively small sample as a magnifying glass to examine, delineate, and understand a problem that goes beyond the scope of the sample itself, which however points towards larger concerns that require further investigation. The work of ongoing whistleblowing initiatives 4 Such as Academ-AI, https://www.academ-ai.info/ , and Retraction Watch, https://retractionwatch.com/papers-and-peer-reviews-with-evidence-of-chatgpt-writing/ . , recent media reports of journal closures (Subbaraman, 2024), or GPT-related changes in word use and writing style (Cabanac et al., 2021; Stokel-Walker, 2024) suggest that we only see the tip of the iceberg. There are already more sophisticated cases (Dadkhah et al., 2023) as well as cases involving fabricated images (Gu et al., 2022). Our analysis shows that questionable and potentially manipulative GPT-fabricated papers permeate the research infrastructure and are likely to become a widespread phenomenon. Our findings underline that the risk of fake scientific papers being used to maliciously manipulate evidence (see Dadkhah et al., 2017) must be taken seriously. Manipulation may involve undeclared automatic summaries of texts, inclusion in literature reviews, explicit scientific claims, or the concealment of errors in studies so that they are difficult to detect in peer review. However, the mere possibility of these things happening is a significant risk in its own right that can be strategically exploited and will have ramifications for trust in and perception of science. Society’s methods of evaluating sources and the foundations of media and information literacy are under threat and public trust in science is at risk of further erosion, with far-reaching consequences for society in dealing with information disorders. To address this multifaceted problem, we first need to understand why it exists and proliferates.

Finding 1: 139 GPT-fabricated, questionable papers were found and listed as regular results on the Google Scholar results page. Non-indexed journals dominate.

Most questionable papers we found were in non-indexed journals or were working papers, but we did also find some in established journals, publications, conferences, and repositories. We found a total of 139 papers with a suspected deceptive use of ChatGPT or similar LLM applications (see Table 1). Out of these, 19 were in indexed journals, 89 were in non-indexed journals, 19 were student papers found in university databases, and 12 were working papers (mostly in preprint databases). Table 1 divides these papers into categories. Health and environment papers made up around 34% (47) of the sample. Of these, 66% were present in non-indexed journals.

Finding 2: GPT-fabricated, questionable papers are disseminated online, permeating the research infrastructure for scholarly communication, often in multiple copies. Applied topics with practical implications dominate.

The 20 papers concerning health-related issues are distributed across 20 unique domains, accounting for 46 URLs. The 27 papers dealing with environmental issues can be found across 26 unique domains, accounting for 56 URLs.  Most of the identified papers exist in multiple copies and have already spread to several archives, repositories, and social media. It would be difficult, or impossible, to remove them from the scientific record.

As apparent from Table 2, GPT-fabricated, questionable papers are seeping into most parts of the online research infrastructure for scholarly communication. Platforms on which identified papers have appeared include ResearchGate, ORCiD, Journal of Population Therapeutics and Clinical Pharmacology (JPTCP), Easychair, Frontiers, the Institute of Electrical and Electronics Engineer (IEEE), and X/Twitter. Thus, even if they are retracted from their original source, it will prove very difficult to track, remove, or even just mark them up on other platforms. Moreover, unless regulated, Google Scholar will enable their continued and most likely unlabeled discoverability.

A word rain visualization (Centre for Digital Humanities Uppsala, 2023), which combines word prominences through TF-IDF 5 Term frequency–inverse document frequency , a method for measuring the significance of a word in a document compared to its frequency across all documents in a collection. scores with semantic similarity of the full texts of our sample of GPT-generated articles that fall into the “Environment” and “Health” categories, reflects the two categories in question. However, as can be seen in Figure 1, it also reveals overlap and sub-areas. The y-axis shows word prominences through word positions and font sizes, while the x-axis indicates semantic similarity. In addition to a certain amount of overlap, this reveals sub-areas, which are best described as two distinct events within the word rain. The event on the left bundles terms related to the development and management of health and healthcare with “challenges,” “impact,” and “potential of artificial intelligence”emerging as semantically related terms. Terms related to research infrastructures, environmental, epistemic, and technological concepts are arranged further down in the same event (e.g., “system,” “climate,” “understanding,” “knowledge,” “learning,” “education,” “sustainable”). A second distinct event further to the right bundles terms associated with fish farming and aquatic medicinal plants, highlighting the presence of an aquaculture cluster.  Here, the prominence of groups of terms such as “used,” “model,” “-based,” and “traditional” suggests the presence of applied research on these topics. The two events making up the word rain visualization, are linked by a less dominant but overlapping cluster of terms related to “energy” and “water.”

The bar chart of the terms in the paper subset (see Figure 2) complements the word rain visualization by depicting the most prominent terms in the full texts along the y-axis. Here, word prominences across health and environment papers are arranged descendingly, where values outside parentheses are TF-IDF values (relative frequencies) and values inside parentheses are raw term frequencies (absolute frequencies).

Finding 3: Google Scholar presents results from quality-controlled and non-controlled citation databases on the same interface, providing unfiltered access to GPT-fabricated questionable papers.

Google Scholar’s central position in the publicly accessible scholarly communication infrastructure, as well as its lack of standards, transparency, and accountability in terms of inclusion criteria, has potentially serious implications for public trust in science. This is likely to exacerbate the already-known potential to exploit Google Scholar for evidence hacking (Tripodi et al., 2023) and will have implications for any attempts to retract or remove fraudulent papers from their original publication venues. Any solution must consider the entirety of the research infrastructure for scholarly communication and the interplay of different actors, interests, and incentives.

We searched and scraped Google Scholar using the Python library Scholarly (Cholewiak et al., 2023) for papers that included specific phrases known to be common responses from ChatGPT and similar applications with the same underlying model (GPT3.5 or GPT4): “as of my last knowledge update” and/or “I don’t have access to real-time data” (see Appendix A). This facilitated the identification of papers that likely used generative AI to produce text, resulting in 227 retrieved papers. The papers’ bibliographic information was automatically added to a spreadsheet and downloaded into Zotero. 6 An open-source reference manager, https://zotero.org .

We employed multiple coding (Barbour, 2001) to classify the papers based on their content. First, we jointly assessed whether the paper was suspected of fraudulent use of ChatGPT (or similar) based on how the text was integrated into the papers and whether the paper was presented as original research output or the AI tool’s role was acknowledged. Second, in analyzing the content of the papers, we continued the multiple coding by classifying the fraudulent papers into four categories identified during an initial round of analysis—health, environment, computing, and others—and then determining which subjects were most affected by this issue (see Table 1). Out of the 227 retrieved papers, 88 papers were written with legitimate and/or declared use of GPTs (i.e., false positives, which were excluded from further analysis), and 139 papers were written with undeclared and/or fraudulent use (i.e., true positives, which were included in further analysis). The multiple coding was conducted jointly by all authors of the present article, who collaboratively coded and cross-checked each other’s interpretation of the data simultaneously in a shared spreadsheet file. This was done to single out coding discrepancies and settle coding disagreements, which in turn ensured methodological thoroughness and analytical consensus (see Barbour, 2001). Redoing the category coding later based on our established coding schedule, we achieved an intercoder reliability (Cohen’s kappa) of 0.806 after eradicating obvious differences.

The ranking algorithm of Google Scholar prioritizes highly cited and older publications (Martín-Martín et al., 2016). Therefore, the position of the articles on the search engine results pages was not particularly informative, considering the relatively small number of results in combination with the recency of the publications. Only the query “as of my last knowledge update” had more than two search engine result pages. On those, questionable articles with undeclared use of GPTs were evenly distributed across all result pages (min: 4, max: 9, mode: 8), with the proportion of undeclared use being slightly higher on average on later search result pages.

To understand how the papers making fraudulent use of generative AI were disseminated online, we programmatically searched for the paper titles (with exact string matching) in Google Search from our local IP address (see Appendix B) using the googlesearch – python library(Vikramaditya, 2020). We manually verified each search result to filter out false positives—results that were not related to the paper—and then compiled the most prominent URLs by field. This enabled the identification of other platforms through which the papers had been spread. We did not, however, investigate whether copies had spread into SciHub or other shadow libraries, or if they were referenced in Wikipedia.

We used descriptive statistics to count the prevalence of the number of GPT-fabricated papers across topics and venues and top domains by subject. The pandas software library for the Python programming language (The pandas development team, 2024) was used for this part of the analysis. Based on the multiple coding, paper occurrences were counted in relation to their categories, divided into indexed journals, non-indexed journals, student papers, and working papers. The schemes, subdomains, and subdirectories of the URL strings were filtered out while top-level domains and second-level domains were kept, which led to normalizing domain names. This, in turn, allowed the counting of domain frequencies in the environment and health categories. To distinguish word prominences and meanings in the environment and health-related GPT-fabricated questionable papers, a semantically-aware word cloud visualization was produced through the use of a word rain (Centre for Digital Humanities Uppsala, 2023) for full-text versions of the papers. Font size and y-axis positions indicate word prominences through TF-IDF scores for the environment and health papers (also visualized in a separate bar chart with raw term frequencies in parentheses), and words are positioned along the x-axis to reflect semantic similarity (Skeppstedt et al., 2024), with an English Word2vec skip gram model space (Fares et al., 2017). An English stop word list was used, along with a manually produced list including terms such as “https,” “volume,” or “years.”

• Artificial Intelligence
• / Search engines

Cite this Essay

Haider, J., Söderström, K. R., Ekström, B., & Rödl, M. (2024). GPT-fabricated scientific papers on Google Scholar: Key features, spread, and implications for preempting evidence manipulation. Harvard Kennedy School (HKS) Misinformation Review . https://doi.org/10.37016/mr-2020-156

• / Appendix B

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This research has been supported by Mistra, the Swedish Foundation for Strategic Environmental Research, through the research program Mistra Environmental Communication (Haider, Ekström, Rödl) and the Marcus and Amalia Wallenberg Foundation [2020.0004] (Söderström).

Competing Interests

The authors declare no competing interests.

The research described in this article was carried out under Swedish legislation. According to the relevant EU and Swedish legislation (2003:460) on the ethical review of research involving humans (“Ethical Review Act”), the research reported on here is not subject to authorization by the Swedish Ethical Review Authority (“etikprövningsmyndigheten”) (SRC, 2017).

This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided that the original author and source are properly credited.

Data Availability

All data needed to replicate this study are available at the Harvard Dataverse: https://doi.org/10.7910/DVN/WUVD8X

Acknowledgements

The authors wish to thank two anonymous reviewers for their valuable comments on the article manuscript as well as the editorial group of Harvard Kennedy School (HKS) Misinformation Review for their thoughtful feedback and input.

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You Want Policies? Trump’s Got Policies.

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Mr. Edsall contributes a weekly column from Washington, D.C., on politics, demographics and inequality.

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In response to my query, Henry J. Aaron , an economist at the Brookings Institution, sent his criticism of the Trump agenda by email:

Take the across-the-board tariff. It would injure American consumers by jacking up prices not only directly but also indirectly by lessening foreign competition and would injure export industries through exchange rate effects that increase the price of American goods to foreign buyers.

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