Abstract
Purpose: Capital flows, tax competition, multinational companies and tax havens weakens governments’ ability to lead independent tax policy. This race to the bottom, especially in the case of CIT rate, seems to work. Aim of the text is to show that the governments are not as powerless as it is often claimed. Despite common opinion, nation-states retain a relatively significant autonomy in creating their own fiscal policies, including tax instruments. Size of funds kept in tax havens have not been growing for few years and international cooperation of tax authorities is more and more efficient in dealing with the tax fraud. Methodology: The study uses desk research method for theoretical reasoning to verify the research hypothesis. Moreover, the study seeks answering if the application of EU tax policies determines national tax policy. To that end, the authors utilize time series and cause-effect analysis, as well as quantitative research for the systematization of statistical information and regression analysis for the examination of statistical dependencies. Tax competition or the functioning of tax havens naturally limits the realization of the fundamental functions of fiscal policies, although the taxation remains one of the most crucial instruments of macroeconomic and income policy of national authorities. Findings: The most important data on public revenues structure in different OECD countries indicate that taxation remains one of the most crucial instruments of macroeconomic and income policy of national authorities. We also show that impact of FDI on hosting economy is not as positive as it is said to be. There is no relation between FDI and R&D spending and level of wages in hosting country is even affected in the negative way by the FDI inflow. Irrespective of the regulatory details introduced at the EU level – the basic factor affecting jets coordination in the field of cooperation between tax services brings effects both in terms of the current collection of tax liabilities and the creation of regulations that hinder tax avoidance and under statement assessment. Originality/value: The study focuses on an analysis of tax policy. The view that taxation of international corporations is fraught with difficulties finds support in the undeniable reality of tax competition.Moreover, a large and growing share of profits is transferred to low-tax places. The prospects for taxing international companies with positive rates seem unoptimistic. Therefore, it is essential to check how the national economy is affected by the FDI inflow in OECD countries.
Highlights
Fiscal policies have always caused controversies, because it is difficult to find a more apparent example of state interference in the functioning of the market economy
Tax importance for the economy drastically increased: in the early twentieth century, taxes comprised less than ten percent of Gross Domestic Product in govern ment revenue, whereas today, the mean value for the OECD countries equals 34.2 percent GDP
State Autonomy in Shaping Tax Policies: Facts and Myths Based on the Situation in OECD Countries CEMJ 85 of their instruments – taxation both in its fiscal function and in other policy goals – increasingly diminishes so that the public sector must seek different instruments or acknowledge its limited ability to influence the economy? To empirically verify the hypotheses that stem from the above research problems, we will employ a mixed metho dology of qualitative and quantitative studies
Summary
Fiscal policies have always caused controversies, because it is difficult to find a more apparent example of state interference in the functioning of the market economy. While until the early twentieth century the role of taxes was confined to their fiscal function – fulfilling state demand for money – fiscal policies today serve as an attempt to achieve a vast array of socioeconomic and political goals, such as correcting market distribution of income, mitigating negative externalities, or creating impulses for the development of particular areas or segments of the economy. State Autonomy in Shaping Tax Policies: Facts and Myths Based on the Situation in OECD Countries CEMJ 85 of their instruments – taxation both in its fiscal function and in other policy goals – increasingly diminishes so that the public sector must seek different instruments or acknowledge its limited ability to influence the economy? We based the qualitative study on descriptive analysis, and the quantitative study on the analysis of source statistical data and the methodology of statistical dependence so as to employ the method of statistical data systematization
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