A broad based consumption tax, such as a value added tax, is generally considered to be a regressive tax. This conclusion, however, has not taken into account the fact that in developing countries the commodities on which poor households spend most of their income, even if they are included in the legal tax base, are administratively impractical to tax. This paper employs a rich data set on household incomes and expenditures for the Dominican Republic. The data set covers 2042 goods and services purchased by households of different income and consumption levels. It also contains information on the type of establishment from which the items were purchased. With this information we estimate the effective rate of tax that has been paid on each item purchased by households. These estimations include the effect of the different rates of the tax compliance across households with different expenditure levels. The results of the study show that the burden of the current VAT in the Dominican Republic is progressive over all the quintiles of household expenditure. Furthermore, if the base of the VAT is made comprehensive, the estimated incidence of the burden of the VAT is still progressive over all the quintiles household expenditure.

This study employs the bounds test for co-integration and Granger causality tests to investigate the long-run equilibrium relationship and the direction of causality between financial development, international trade and real income growth for the Cyprus economy. The results of the study reveal that financial development as measured by broad money (M2), international trade and real income growth are cointegrated; thus, a long-run equilibrium relationship can be inferred among these three variables. On the other hand, Granger causality test results suggest that in Cyprus the growth in real income stimulates the growth of international trade (both exports and imports) and the growth of money supply. Furthermore, growth in imports of goods and services also stimulates a growth in exports of goods and services of Cyprus. Although this result contradicts our initial expectations, it indicates the importance of capital inflows in Cyprus that plays a major role in financing the investments mainly in the tourism sector. As a final point, the results of this study reveal that the supply-leading, export-led growth and import-led growth hypotheses are not confirmed by this study whereas the demand-following hypothesis can be justified for the Cypriot economy when M2 measure of money supply is under consideration.

This study explores the impact of countrywide corruption on the credit risk of commercial banks with different levels of credit risk. It applies the quantile regression (QR) estimation method for a panel data of 191 commercial banks, from 18 MENAP countries, between the years 2011-2018. The research finding indicates that corruption significantly exacerbates the problem of bad loans of banks. Furthermore, the QR results reveal that corruption does not affect all banks at the same level. Banks in higher quantiles (i.e., higher credit risk banks) appear to be affected more than the ones in lower quantiles (i.e., lower credit risk banks).Banks with high credit risk appear to be more vulnerable to corruption than banks with low credit risk.

PurposeThis paper aims to examine the factors affecting the adoption of internet banking services by domestic commercial banks in a sparsely populated small island.Design/methodology/approachBeing one of the smallest island economies in the world, North Cyprus was chosen as a case study to explore the factors that affected the penetration of internet banking services in North Cyprus over a two year period. The managers of 23 banks operating in North Cyprus were interviewed first in 2004 and later in 2006. Furthermore, the web sites of these banks were also examined both in 2004 and in 2006 in order to measure the progress made in adopting internet banking services between these periods.FindingsEvidence from survey studies and from banks' web sites indicated that banks in North Cyprus have been consistently moving towards providing internet banking services despite a very small potential market to share. In 2004, the majority of commercial banks claimed that the potential market was too small to adopt internet banking services in North Cyprus. Yet, in 2006 the same banks were in the process of introducing internet banking as an assurance to their customers that they would be able to maintain a competitive quality of service in the future, hence avoid losing their customers to the branches of foreign banks.Research limitations/implicationsThe implication for domestic banks is that if they wish to complete with foreign banks they must embrace internet banking.Originality/valueContributes to the literature on internet banking services in small islands.

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