Using SPSS to Analyse Taxes on Personal Income - Math Problem Example

Module: Accounting Research Management and Methods Assignment 2: Statistical Study To: From: Student Number XXXXX Date: XXXXXXX Statistical Research Study: Using SPSS to analyse Contents Contents 2 1. Introduction 2 2. Selection & Source of data set: 3 3. The Research Study: 3 4. Results of Study: 4 Table 1: Summary Statistics For taxes on personal income as a percentage of gross domestic products 5 5. Limitations of Study: 12 6. Further Research: 12 7. Conclusions: 12 Reference 14 1. Introduction Personal income has been defined as, “an economic statistic that measures an individual's total annual gross earnings from wages, business enterprises and various investments”, and tax is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities (Cossa, 2008). Governments use taxation to encourage or discourage certain economic decisions. For example, reduction in taxable personal (or household) income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates more jobs (Heady, 2006). There are substantial differences between OECD countries in the level of personal income taxes. The tax wedges measure the difference between labour costs to the employer and the net take-home pay of the employee. In all OECD countries central government levies a tax on personal income. The rate structure of these income taxes displays wide discrepancy (Chiara Bronchi, 1999). This report provides an analysis of the taxes on the personal income of OECD countries based on the data set provided by OECD iLibrary. 2. Selection & Source of data set: 2.1 Selection of appropriate data: The appropriate data set to analyse the variance in taxes on personal income as a percentage of GDP in OECD countries. 2.2 Source of Data: The complete database of the information relating to tax and revenues in the OECD countries can be accessed via OECD’s iLibrary. The database provide the various data sets related to a number of economic and social statistical data and OECD.Stat includes data and metadata for OECD countries and selected non-member economies (iLibrary, 2011). 3. The Research Study: 3.1 Objectives: Main objective of the analysis is to establish: 1. The variations on the taxes on personal income tax as a percentage of the GDP in the OECD countries 2. The trend in the income tax as a percentage of the Gross domestic product across the OECD countries(for 10 years) 3. The relationship between the personal income tax as a percentage GDP and the country’s total revenue. 3.2 Approach: To answer the statistical questions in 3.0 above the best and an appropriate statistical package for running the appropriate statistical test and interpreting the results has to be selected. Three statistical packages were compared with a view of selecting the suitable one; SAS, Stata and SPSS. Due to the ease of use and the available analytic tools for carrying out the various tests, SPSS was chosen. Excel was also used to draw the graphs. 4. Results of Study: The statistical results are duly considered under the following four categories: i. Frequencies ii. Mean(sd) /Median(IQR) percentage tax for the distribution iii. Standard deviation iv. Median v. Kruskal wallis Analysis of variance 4.1 Frequencies The first investigation carried out on the data set was to check for completeness of the data. Chile and Mexico were eliminated from the analysis due to lack of data. Then normality tests (using specifically Shapiro wilks test and also confirming with histograms) were carried out in order to decide whether to use parametric or non-parametric statistics/tests since the data was in the form of actual values. This helped know whether to report the mean (sd) or Median (IQR). This helps us to understand our data better by establishing what the average personal income tax for each country if they are normally distributed or median otherwise whilst at the same time highlighting any obvious discrepancies arising from incorrect data input (Kothari, 2003). There exists a significant variations between OECD countries in the segment of personal income tax as a percentage of GDP (see Table 1). In 2010, personal income tax as a percentage of GDP varied from almost 2.3% in the Slovak Republic to 24.40% in Denmark. Table 1: Summary Statistics For taxes on personal income as a percentage of gross domestic products N Range Minimum Maximum Sum Mean Std. Deviation Yr_2002 32 22.60 3.00 25.60 289.70 9.0531 4.62615 Yr_2003 33 22.50 3.00 25.50 293.80 8.9030 4.54770 Yr_2004 33 22.20 2.70 24.90 288.80 8.7515 4.53584 Yr_2005 33 22.30 2.60 24.90 291.20 8.8242 4.54897 Yr_2006 33 22.30 2.50 24.80 292.00 8.8485 4.39972 Yr_2007 33 22.80 2.50 25.30 297.20 9.0061 4.34611 Yr_2008 33 22.50 2.70 25.20 294.20 8.9152 4.26102 Yr_2009 33 24.00 2.40 26.40 288.00 8.7273 4.41852 Yr_2010 27 22.10 2.30 24.40 239.50 8.8704 4.37175 Valid N (listwise) 26 The most highly taxed citizens in the selected countries are from Denmark with a mean percentage tax of approximately 25% and the least (lowest) taxed citizens are the Slovak Republicans with a mean Percentage tax of 2.6%. On average, citizens were highly taxed in the year 2002 (9.1%) and least taxed in the year 2009 (8.7%). The trend is as indicated in figure 1. Fig. 2: the trend for taxes on personal income as a percentage of gross domestic from 2002-2010 The mean of the means (over the years) of all the selected countries is approximately 8.83. This was taken as the baseline to categorize the countries into two; the highly taxed and the lowly taxed countries as show in figure 2. Fig. 2: Mean of the means (over the years) of all the selected countries The bar graph show the percentage deviation from the mean of the means and the countries on the positive side are the over taxed and those on the negative side are the under taxed. The values in figure 3 are got by {CountryMean –(minus) Country mean from 2002 to 2010}. Table 2 Total country mean (2002-2010) CountryMean N Valid 32 Missing 3 Mean 8.8319 Figure 3: Over taxed and Under taxed countries Table 3: Descriptive statistics by year (2002-2010) N Minimum Maximum Mean Std. Deviation Yr_2002 32 3.00 25.60 9.0531 4.62615 Yr_2003 32 3.00 25.50 8.9000 4.62043 Yr_2004 32 2.70 24.90 8.7469 4.60834 Yr_2005 32 2.60 24.90 8.8281 4.62170 Yr_2006 32 2.50 24.80 8.8500 4.47012 Yr_2007 32 2.50 25.30 9.0094 4.41561 Yr_2008 32 2.70 25.20 8.9125 4.32918 Yr_2009 32 2.40 26.40 8.7219 4.48911 Yr_2010 26 2.30 24.40 8.8769 4.45819 Valid N (listwise) 26 The year 2009 had the highest mean range of 4.0 4.2 Test of Hypothesis A hypothesis is a statement or conjuncture about a phenomenon for which the truth has not been verified or is yet to be verified. Procedure for testing a hypothesis State Null Hypothesis (Ho). State alternative hypothesis (Ha) State level of statistical error Choose appropriate test statistic Apply data and evaluate test statistic Take decision reject or not reject null hypothesis Ho: There is no significant difference in the mean percentage taxation between the years Ha: There is a significant difference in the mean percentage taxation between the years Level of statistical error α=0.05 Test statistic: analysis of variance (ANOVA) Table 5: Analysis of variance between the years of taxation (2002-2010) Since the data was skewed, the Non-parametric test (Kruskal wallis) was appropriate Table 4: Kruskal-Wallis Test Ranks TwoStep Cluster Number N Mean Rank Yr_2002 2002 32 146.94 2003 32 142.95 2004 32 139.58 2005 32 141.30 2006 32 142.97 2007 32 147.27 2008 29 138.95 2009 32 140.12 2010 32 146.55 Total 285 Test Statisticsa,b Yr_2002 Chi-Square .396 df 8 Asymp. Sig. 1.000 a. Kruskal Wallis Test b. Grouping Variable: year As indicated in table 4, since p>0.05, we fail to reject Ho and conclude that there was no significant difference in the mean rank percentage tax by year (chi=0.396, p=1.000) There exist no significant percentage changes in the personal income tax as a percentage of the GDP for the last nine years (from 2002-2010). 5. Limitations of Study: 1. Lack of classification of countries by continent for continental comparisons. 2. The period of time selected from 2002 to 2003 might not give a true picture of the trends and the relationship between the current tax policies and the earlier years 6. Further Research: The study investigated the variation in the personal income tax in the OECD countries but further research should be carried to investigate the relationship between each country’s tax system and the percentage personal income tax to be able to determine the best tax system. For instance the Slovak Republic which implemented the flat tax system recorded the lowest personal income tax as a percentage to GDP if compared with the United State which adapted a Hybrid comprehensive tax system has a mean percentage personal income tax of approximately 9.0% and recorded the highest tax revenue of all the OECD countries. The distortion effect of the personal income tax change on the economy of the member state can also be studied. 7. Conclusions: The personal income tax as a percentage of the GDP showed no significant changes over the year nine years though there has been growth in the revenue collected. Appendix 1 Taxes on personal income As a percentage of gross domestic product Countries Yr_2002 Yr_2003 Yr_2004 Yr_2005 Yr_2006 Yr_2007 Yr_2008 Yr_2009 Yr_2010 1 Australi 11.80 11.90 12.10 11.80 11.00 10.80 10.20 9.70 . 2 Austria 9.90 9.90 9.70 9.20 9.30 9.40 9.90 9.50 9.40 3 Belgium 14.20 13.90 13.80 13.00 12.30 12.20 12.60 12.10 12.30 4 Canada 11.90 11.80 11.80 11.90 11.90 12.30 12.00 11.40 10.80 5 Chile . . . . . . . . . 6 Czech Re 4.70 4.90 4.80 4.60 4.20 4.30 3.70 3.60 3.60 7 Denmark 25.60 25.50 24.90 24.90 24.80 25.30 25.20 26.40 24.40 8 Estonia 6.40 6.50 6.30 5.60 5.60 5.80 6.20 5.70 5.40 9 Finland 14.00 13.70 13.30 13.50 13.30 13.00 13.20 13.30 12.50 10 France 7.50 7.60 7.40 8.00 7.80 7.50 7.60 7.30 7.30 11 Germany 8.90 8.50 8.00 8.10 8.60 9.00 9.60 9.40 8.90 12 Greece 4.60 4.40 4.50 4.70 4.70 4.90 4.90 5.10 . 13 Hungary 7.70 7.20 6.70 6.70 6.80 7.40 7.80 7.50 . 14 Iceland 13.60 13.90 13.80 14.20 14.00 13.80 13.20 12.80 12.90 15 Ireland 7.40 7.60 8.20 8.30 8.70 8.80 8.10 7.70 7.50 16 Israel 10.00 8.90 8.00 7.70 7.90 8.10 7.30 6.30 6.20 17 Italy 10.50 10.50 10.40 10.40 10.70 11.10 11.60 11.70 11.70 18 Japan 4.80 4.50 4.70 5.00 5.20 5.50 5.60 5.40 . 19 Korea 3.00 3.00 3.20 3.20 3.80 4.40 4.00 3.60 3.60 20 Luxembou 6.40 6.50 6.60 7.10 7.50 7.10 7.70 7.80 7.80 21 Mexico . . . . . . . . . 22 Netherla 6.90 6.60 6.10 6.90 7.30 7.70 7.50 8.70 . 23 New Zeal 14.60 14.10 14.20 15.10 14.60 14.70 13.70 12.90 11.70 24 Norway 10.70 10.50 10.30 9.70 9.10 9.70 9.20 10.40 10.20 25 Poland 4.30 4.20 3.70 3.90 4.60 5.20 5.40 4.60 . 26 Portugal 5.30 5.30 5.20 5.20 5.30 5.50 5.60 5.70 5.60 27 Slovak R 3.30 3.20 2.70 2.60 2.50 2.50 2.70 2.40 2.30 28 Slovenia 5.70 5.70 5.70 5.50 5.80 5.60 5.90 5.90 5.70 29 Spain 6.50 6.40 6.10 6.40 6.80 7.40 7.10 6.60 6.90 30 Sweden 14.70 15.20 15.30 15.40 15.40 14.60 13.80 13.50 12.80 31 Switzerl 10.30 10.00 10.00 10.40 9.30 9.20 9.10 9.50 9.60 32 Turkey 4.30 4.10 3.60 3.60 3.80 4.10 4.00 4.00 3.70 33 United K 10.40 9.90 10.00 10.40 10.50 10.80 10.80 10.50 10.00 34 United S 9.80 8.90 8.80 9.50 10.10 10.60 10.00 8.10 8.00 Total N 35 32 33 33 33 33 33 33 33 27 Mean 9.0531 8.9030 8.7515 8.8242 8.8485 9.0061 8.9152 8.7273 8.8704 Median 8.3000 8.5000 8.0000 8.1000 8.6000 8.8000 8.1000 8.1000 8.7000 Std. Deviation 4.62615 4.54770 4.53584 4.54897 4.39972 4.34611 4.26102 4.41852 4.37175 Reference Cossa, L., 2008. Taxation: Its Principles and Methods. Reprint ed. Charleston: BiblioBazaar. iLibrary, O., 2011. OECD statextracts. [Online] Available at: HYPERLINK "http://stats.oecd.org/Index.aspx?DataSetCode=REV" http://stats.oecd.org/Index.aspx?DataSetCode=REV [Accessed 30Th January 2012]. iLibrary, O., 2011. Taxes on personal income. [Online] Available at: http://www.oecd- ilibrary.org/taxation/taxes-on-personal-income_20758510-table4 [Accessed 30th January 2012]. Kothari, C.R., 2003. Research Methodology methods and techniques. 2nd ed. New Delhi: New Age International. Mugenda, Olive M Mugenda, 2003: Research methods: Quantitative and qualitative approches Srivastava, S.C., 2006. Fundamentals Of Statistics. New Delh: Anmol Publications Pvt. Ltd. Read More