Tax Planning in Personal Income Tax: A Systematic Literature Review
Abstract
The systematic literature review analyses and synthesizes research conducted regarding personal income tax planning within the time period of 2012 to 2022, 30 articles were reviewed. The review discovered that most of the articles dwelled mostly on unincorporated businesses and their owners/entrepreneurs/sole proprietors/investors as well as those articles that discussed issues relating to tax authorities’ regulations on personal income tax. The articles reviewed, gave insights on issues relating to personal income tax planning of wealth transfers, such as inheritance and bequest; gifts and inta-vivos; deathbed planning, etc. Importantly, they provided insights into how unincorporated businesses and entrepreneurs can optimize their disposable income through good personal income tax planning. In addition to the above, it highlighted such financial instruments that were resorted to, the most by taxpayers, which made their personal income tax planning more effective. (life insurance policies are the most widely used tax-saving tool, followed by provident funds and tax-saving fixed deposits, loans for homes and schools, National Savings Certificates, unit-linked insurance plans, health insurance plans, and equity-linked savings schemes, Infrastructure Bonds, in that order); we also found out that government strategies that influenced tax planning in favour of the state include: cooperation, increased uncertainty, creation of models, and maintaining a friendly atmosphere to avoid aggressive tax planning and improve revenue. Finally, direction for future research was suggested.
References
Agostini, C. A., Engel, E., Repetto, A., & Vergara, D. (2018). Using small businesses for individual tax planning: evidence from special tax regimes in Chile. International Tax and Public Finance, 25 (6), 1449–1489. https://doi.org/10.1007/s10797-018-9509-0
Alm, J. (2014). Does an uncertain tax system encourage “aggressive tax planning”? Economic Analysis and Policy, 44 (1), 30–38. https://doi.org/10.1016/j.eap.2014.01.004
Alm, J., Kirchler, E., & Muehlbacher, S. (2012). Combining Psychology and Economics in the Analysis of Compliance: From Enforcement to Cooperation. Economic Analysis and Policy, 42 (2), 133–151. https://doi.org/10.1016/S0313-5926(12)50016-0
Batrancea, L. M., Kudła, J., Błaszczak, B., & Kopyt, M. (2022). Differences in tax evasion attitudes between students and entrepreneurs under the slippery slope framework. Journal of Economic Behavior and Organization, 200, 464–482. https://doi.org/10.1016/j.jebo.2022.06.017
Bergolo, M., Burdin, G., de Rosa, M., Giaccobasso, M., & Leites, M. (2021). Tax Bunching at the Kink in the Presence of Low Capacity of Enforcement: Evidence from Uruguay. SSRN Electronic Journal, 12286. https://doi.org/10.2139/ssrn.3390276
Bueschkens, M. A., & Mann, B. (2019). Canada and the GAAR: a catch-all for abusive/avoidance tax planning. Trusts & Trustees, 25 (1), 75–92. https://doi.org/10.1093/tandt/tty169
Buettner, T., Erbe, K., & Grimm, V. (2019). Tax planning of married couples and intra-household income inequality. Journal of Public Economics, 179, 104048. https://doi.org/10.1016/j.jpubeco.2019.104048
Dastan, L. C., Thangaraj, S. S., Shirley, M. M. P., Cross, H., & Autonomous, C. (2022). Income tax planning for individuals in india for the assessment year 2021-2022. Presidency College ( Autonomous ), Chennai ., September.
Del Castillo, P. R., & Villanueva-Garcia, J. (2021). Linking Tax Morale and Personal Income Tax in Spain. SSRN Electronic Journal, August. https://doi.org/10.2139/ssrn.3275392
Erixson, O., & Escobar, S. (2020). Deathbed tax planning. Journal of Public Economics, 185, 104170. https://doi.org/10.1016/j.jpubeco.2020.104170
Escobar, S. (2017). Inheritance tax evasion: Spousal bequests and under-reporting of inheritances in Sweden. Uppsala Center for Fiscal Studies.
Fossen, F. M., Rees, R., Rostam-Afschar, D., & Steiner, V. (2021). How Do Entrepreneurial Portfolios Respond to Taxation? SSRN Electronic Journal, July. https://doi.org/10.2139/ssrn.3014699
Geisler, G., & Drnevich, D. (2019). Tax Planning for the Phase-Out of the QBI Deduction for Professional Service Businesses. Journal of Financial Planning, 32 (6), 50–56.
Guner, N., López-Segovia, J., & Ramos, R. (2020). Reforming the individual income tax in Spain. Series, 11(4), 369–406. https://doi.org/10.1007/s13209-020-00224-2
Harju, J., & Kosonen, T. (2021). The Impact of Tax Incentives on the Economic Activity of Entrepreneurs. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2277419
Kalgutkar, P. (2018). Tax awareness and tax planning on wealth creation of individual assessees. Journal of Management, 2 (1), 11–23.
Kreiner, C. T., Leth-Petersen, S., & Skov, P. E. (2014). Year-end tax planning of top management: Evidence from high-frequency payroll data. American Economic Review, 104 (5), 154–158. https://doi.org/10.1257/aer.104.5.154
Kumar, S., Tomar, S., & Verma, D. (2019). Women’s financial planning for retirement: Systematic literature review and future research agenda. International Journal of Bank Marketing, 37 (1), 120–141. https://doi.org/10.1108/IJBM-08-2017-0165
López, C. P., Rodríguez, M. J. D., & Santos, S. de L. (2019). Tax fraud detection through neural networks: An application using a sample of personal income taxpayers. Future Internet, 11 (4). https://doi.org/10.3390/FI11040086
Mansuri, S., & Dalvadi, Y. (2012). Tax awareness and tax planning among individual assessee: A study. Radix International Journal of Banking …, September 2012.
Merriman, D., Kriz, K., Byrnes, P., & Cassidy, G. (2021). Revenue Implications of Alternative Personal Income Tax Structures in Illinois. SSRN Electronic Journal, May. https://doi.org/10.2139/ssrn.3890991
Nyk, M. (2016). Tax Planning for Small and Medium Enterprises ( SMEs ). Annals of Marketing Management & Economics, 2 (1), 91–98.
Olsen, J., Kasper, M., Kogler, C., Muehlbacher, S., & Kirchler, E. (2019). Mental accounting of income tax and value added tax among self-employed business owners. Journal of Economic Psychology, 70, 125–139. https://doi.org/10.1016/j.joep.2018.12.007
Onu, D., Oats, L., Kirchler, E., & Hartmann, A. J. (2019). Gaming the system: An investigation of small business owners’ attitudes to tax avoidance, tax planning, and tax evasion. Games, 10 (4). https://doi.org/10.3390/g10040046
Pfeifer, M. G., & Yoon, S. J. (2016). The ethical limits of tax planning. Trusts & Trustees, 22(1), 159–165. https://doi.org/10.1093/tandt/ttv219
Savita, & Gautam, L. (2013). Income Tax Planning : A Study of Tax Saving Instruments. Internaltional Journal of Management and Social Sciences Research, 2 (5), 83–91. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.404.846&rep=rep1&type=pdf
Sommer, E. (2017). Wealth Transfers and Tax Planning : Evidence for the German Bequest Tax Wealth Transfers and Tax Planning : Evidence for the German Bequest Tax. IZA Discussion Paper, 11120. https://ssrn.com/abstract=3069463
Varotsis, N., & Katerelos, I. (2018). Models of Tax Planning Simulation: The Case of Greece. Open Journal of Modelling and Simulation, 06 (03), 27–44. https://doi.org/10.4236/ojmsi.2018.63003
Vyas, Y., & Gondaliya, V. R. (2020). Tax Planning and Tax Management of Salaried Individuals: A Study of Bardoli Region. VISION: Journal of Indian Taxation, 7 (1), 34. https://doi.org/10.17492/vision.v7i1.195703
Wrede, M. (2014). Fair inheritance taxation in the presence of tax planning. Journal of Behavioral and Experimental Economics, 51, 12–18. https://doi.org/10.1016/j.socec.2014.03.007
Copyright (c) 2023 Abdurrauf Umar, Ida Farida Adi Prawira, Memen Kustiawan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
Jurnal Pendidikan Akuntansi (JPAK) is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
PDF Downloads: 334