Capital Tax Research Articles

The impact of taxation on firm performance and risk: Evidence from Greece

<abstract> <p>In this paper, I examine the relationship of taxation with performance and risk with the usage of a sample of 76 non-financial companies traded on the Athens Stock Exchange. The period covered by my study spans from 2018 to 2022, while correlation and panel data analysis is conducted. Both financial performance and stock return are considered, while risk concerns the volatility of the companies' share prices. The explanatory variables used concern figures reported both in the balance sheet and the profit and loss statement and include net deferred tax, deferred tax asset, deferred tax liability, total tax expense/revenue, income tax, and deferred tax expense/revenue. The empirical results reveal a positive relationship of financial performance with net deferred tax, total tax expense/revenue, income tax and deferred tax expense/revenue. Moreover, deferred tax asset is found to affect financial performance in a negative fashion, while deferred tax liability bears a positive influence on financial performance. The opposite relationships with deferred tax asset and deferred tax liability are detected in the case of stock return and risk. Finally, evidence of a negative relationship of total tax and income tax with stock risk is obtained.</p> </abstract>

보유세 부담과 세부담 제한제도에 대한 고찰

Korea's wealth tax was divided into property tax and comprehensive real estate tax when the comprehensive real estate tax was introduced in 2005, and since then, it has developed into a complex system with various burden enhancement and relief systems for each tax category. This study examines the dual burden and restriction structure of Korea's wealth tax system and examines how to rationalize the wealth tax burden according to the taxpayer's ability to pay through the example of the United States.
 The holding tax system tries to moderate the tax burden by operating the tax burden ceiling, fair market value ratio, tax credit, and overstatement limit for property tax and comprehensive real estate tax, respectively. However, these complex burden mitigation measures do not adequately assess the taxpayer's burden. Property taxes are supposed to optimize the level of tax burden based on physical taxation, but property taxes determine the level of taxation based on human taxation, which is a major departure from the essence of property taxes.
 Looking at the case of California in the United States, property taxes are assessed according to the principle of ad valorem taxation, and the burden is determined accordingly, and resident-oriented deductions and property tax payment credits are operated to appropriate the burden on taxpayers.
 In order to solve the structural problems of the estate tax, it is necessary to discuss the reorganization of the estate tax system. In order to reduce the tax burden on taxpayers, it is possible to consider introducing a plan to deduct the holding tax burden from income taxation, and it is necessary to discuss in-depth improvements to the taxation system by property tax period. It is also necessary to consider introducing a monthly payment system for property taxes for taxpayers' convenience.
 In the future, considering the globalization and aging of our society, it is necessary to discuss how to improve the integrated wealth tax system in order to appropriate the burden level of property taxes and prepare an integrated taxation system that suits the power.

가상자산에 대한 과세상 취급 및 법제도 정비과정의 시사점

As the blockchain technology-based industry grows rapidly, transactions of virtual assets such as tokens, which are its mediums, become active, and the market size of virtual assets is also expanding, the need for regulation and taxation on virtual assets is emphasized. Starting with the overhaul of related systems for regulating criminal activities and illegal money laundering using virtual assets, Korea has introduced a virtual asset taxation system through tax law revision. The revised tax law stipulates that income from the transfer or loan of virtual assets is classified as ‘other income’ and income tax is imposed.
 Major foreign countries such as the United States and the United Kingdom have already imposed taxes on virtual asset income or are developing taxation systems to solve new tax problems(hard fork, airdrop, DeFi services, etc.). Income tax treatment on virtual assets in each country is derived from the definition of virtual assets. Most countries recognize virtual assets as a form of asset. They are generally treated as intangible assets and financial assets other than goodwill, and these assets are considered to generate capital gains.
 As the virtual asset-related market continues to develop, new incidents emerge as virtual asset diversification and segmentation occur, and legislative supplementation through legal revisions is needed to properly respond to taxation issues. Clear laws and guidelines should be provided to address tax uncertainty.
 Therefore, we would like to set a reasonable taxation direction for Korea by considering the tax treatment and legal system maintenance process for virtual assets of major foreign countries. By interpreting taxation guidelines from major foreign countries and analyzing related cases, we intend to contribute to reducing trial and error experienced in the process of legal system maintenance and stabilizing the changed system.

PROBLEMS OF PRESENTING INFORMATION ABOUT DEFERRED TAXES

Currently, accounting standards in the area of income tax accounting continue to be vague and unspecific. In this connection, this paper investigates the key aspects of the presentation of deferred tax information in accordance with the rules of modern accounting standards and theoretical provisions. The article describes the peculiarities of deferred tax classification in the balance sheet and the profit and loss statement. An attempt is made to explain the effect of restoration of deferred tax liabilities. The conclusion is made that in scientific literature the essence of income taxes still remains undisclosed and that because of this the developers of accounting standards are deprived of an opportunity to compile them adequately. The example of the use of provisions of IAS 12 «Income Taxes» in order to conceal important economic information is given. American and international experience in terms of indicating the sources of recovery of the value of deferred tax assets is compared. It has been defined that the Russian standard in the field of accounting of income taxes is not transparent in the part of representation of the information on deferred taxes. In the conclusion the directions of improvement of accounting legislation are presented.

Contentious issues regarding the betterment levy

The adjacent fee constitutes a fee determined in relation to the increase of the value of real property due to various events, such as construction of technical infrastructure equipment, division and merging of real property. It is paid by the owners or perpetual usufructuaries. In case of the adjacent fee, two layers of problems can be clearly distinguished: a theoretical and a practical layer. The theoretical layer refers to the legal nature of this liability. Authors treat the said fee in various way, by defining it as a public levy, a tax, a surcharge, or non-tax budget dues. In case of tax, there are additional references to capital gains tax or wealth tax. The practical layer of the adjacent fee is related to the case law of administrative courts. Courts may choose between two lines of judgment which are connected with the seller of the real property after construction of technical infrastructure equipment. In the case of the first line of judgment, the said fee must be paid by the seller. According to the second line of judgment, the purchaser of the real property must cover the fee since it is not related to a person but to an object and it is transferred from the seller to the purchaser along with the ownership right to the real property. In the case of the adjacent fee, another issue is connected with the fact that it is obligatorily charged by municipal authorities. Some lawyers question the obligatory nature of the said fee by assuming that according to the linguistic interpretation of regulations it is optional and can be imposed after specific conditions are met. Another important aspect of the adjacent fee are the costs that should be justified and commensurate with the benefits achieved as the seller or the purchaser. The next problem concerns the absolute execution of the adjacent fee that does not take into consideration the financial capabilities of the frontager. The above-mentioned issues shall be discussed in the article in a comprehensive and critical manner, along with proposed changes in regulations of law.

Can passive monetary policy decrease the debt burden?

Large expansionary fiscal measures are often implemented with monetary accommodation during an economic crisis. When a government is highly indebted, and the timing of switching to the conventional regime M (passive fiscal/active monetary policies) is uncertain, a government spending increase in regime F (active fiscal/passive monetary policies) increases government debt. Such regime uncertainty dampens inflation and debt revaluation effects. Also, as regime uncertainty generates a smaller real interest rate decline, debt servicing costs fall less, and tax revenues increase less, than in the fixed regime F. These factors contribute to reversing the debt decline for a spending increase in the fixed regime F. The result holds under adverse supply shocks and potentially higher capital taxes, relevant factors in the post-COVID U.S. economy.

Wealth inequality and intergenerational mobility in Russia: possibilities of tax regulation

The economic inequality of people in Russia today is high. The decline in intergenerational mobility is determined by increasing concentration of capital. The purpose of the study is to examine the capabilities of taxes in smoothing the wealth inequality of Russians and strengthening the intergenerational mobility in the framework of assessing their relationship on the basis of the World Bank database. According to the results of the analysis, there was a decrease in the mobility between generations in Russia and emergence of the problem of consolidating the economic situation within family, which, if the present trends continue, will be intensifying. For generations born in the 1970s and 1980s, there was recorded a sharp increase in the relative indicator of immobility — the correlation coefficient between the duration of education of children and their parents, from 0.32 to 0.48. There is observed a decrease in the absolute indicators of mobility between generations — a decrease in the share of children who got a longer or higher education than their parents. The Great Gatsby Curve has been transformed in the coordinates of the concentration coefficient of net personal wealth and relative intergenerational mobility in education. Russia’s position on the Great Gatsby Curve indicates aggravation of two related problems — consolidation of inequality and reduction of mobility between generations. To level the economic inequality in Russia, it is necessary to increase vertical mobility between generations. One of the traditional and effective ways of the state regulation of the polarization of personal assets and property of citizens is tax regulation. Today in Russia, property taxes do not help to smooth out the inequality. Personal income tax on donations and property taxes of citizens make in total about 1% of the tax revenues of the consolidated budget. Concentration of wealth in 10% of the most affluent Russians exceeded 74% in 2021. Progressive taxation of personal property, increased rates for owners of many real estate objects, ««luxury tax», inheritance and gift tax, as well as capital taxation have prospects from the standpoint of smoothing wealth inequality and activating intergenerational mobility in Russia.

Common Sense of a Wealth Tax

Thomas Paine’s writing helped spur the American colonies to independence and ensure that the new nation would be a republic, not a monarchy. In light of the renewed interest in wealth taxes, this article provides a close examination of Thomas Paine’s wealth tax proposal in the second volume of The Rights of Man. Unlike Paine’s proposal to tax inheritances, his 1792 proposal to tax wealth on an annual basis is often overlooked. The article identifies Paine’s various design specifications, provides original estimates of the impact of Paine’s wealth tax proposal within his own time period and as applied to billionaires today, and discusses ambiguities in the proposal. The article then places Paine in conversation with the contemporary wealth tax policy debate and demonstrates how Paine informs both the design and evaluation of tax policy. Lastly, the article clarifies the relationship between democratic ideals and taxation, portraying tax policy as a normative expression of republican ideals.

The impact of tax optimization and temporary differences on earnings management: The case of Vietnam

The purpose of this paper is to study the effects of tax optimization strategies used by Vietnamese companies for earning management through the use of temporary difference between accounting and taxable profit. Following the model of Cindy (2021), we leverage quantitative methods, built models and tested the impact of 08 factors on earning management (EM), tax optimization (ETR), deferred tax asset (DTA), deferred tax liability (DTL), deferred tax expense (DTE), company size (SIZE), financial leverage (LEV), return on assets (ROA), cash flow from operating activities (CFO). The sample we selected were 113 industrial enterprises operating in multiple sectors listed on the Vietnam Stock Exchange in the period between 2016-2020. Empirical results our sample have shown that earning management (EM) may be affected by DTA, ROA, cash flow from operating activities, and financial leverage under various motives. This study also aims at illustrating that other indicators relating to differences between accounting and taxable profit do not leave any remarkable impacts on the model. This means that enterprises operating in the industrial sector do not use or rarely use those indicators to implement EM.

How to finance green investments? The role of public debt

Economic costs are a central political obstacle to investing in climate change mitigation and adaptation measures. Several studies now demonstrate that as costs increase, voters are less likely to support green initiatives. In this paper we argue that opposition to government green investments is conditional on the method of financing. Notably, because public debt shifts the burden of investments into the future, it may face less public opposition than broad based taxes that require an immediate sacrifice. To test this proposition, we fielded a preregistered conjoint survey experiment on nationally representative samples in one highly indebted (Italy) and one fiscally sound country (The Netherlands). We find debt financing increases voter support for green financing by up to 10 percentage points relative to broad-based taxes. However, we find carbon taxes and wealth taxes are most preferred. These findings demonstrate that credit market tools, like green bonds and debt for climate swaps, are likely politically efficient and not just economically efficient. Where investments are already financed with debt, the findings suggest that political communication can limit a political backlash to green investments. Most importantly, the findings show that the political opposition to paying for green investments can be circumvented.

Deferred taxes in financial institutions: A review of empirical research and the role of tax effects in regulatory capital. Part 2

Subject. This article examines the industry practices of the regulation of deferred taxes in financial institutions. Objectives. The article aims to analyze the significance of deferred taxes for financial institutions (banks, insurance organizations) and determine the role of tax effects in regulatory capital. Methods. The research is speculative. For the study, I used the dialectical method of scientific knowledge, the method of collecting theoretical and regulatory information, the method of formalization, as well as analysis, synthesis, observation, and comparison. Results. The article finds that the preventive nature of the accounting revaluation of deferred tax assets controls the probability of their recovery at the expense of future taxable profits, and therefore they should be included in the regulatory capital. It determines that a full reversal of the active deferred tax position is possible if the accounting assets generate income with the profitability necessary to cover the deductible temporary differences in excess of the balance sheet valuation of the assets. Conclusions and Relevance. At present, the theoretical basis of deferred taxation continues to remain undisclosed. Deferred taxes are an artificial information construct that refines the measurement of assets at fair value. Deferred taxes alone are not able to generate cash flow, they reconcile the tax flow with the financial flow in relation to the fair value of assets in order to show how much value the assets will generate taking into account the current tax situation. The results of the study can be useful to practitioners in the field of deferred tax accounting and banking management, as well as analysts and researchers whose activities are focused on accounting, taxation, and other persons concerned who study the theoretical and financial aspects of deferred taxes.

Vertical and horizontal equity of wealth taxes: An assessment from a joint income-wealth perspective

Despite an established theoretical literature on (optimal) wealth taxation, the empirical literature is still scarce. Previous studies usually focus on country case studies and a specific type of wealth tax in isolation. This paper analyses from a cross-country perspective the distributional effects of the mix of taxes on wealth, on capital income and on transfers of wealth. Moreover, we use the joint distribution of income and annuitised wealth as our analytical framework. To this end we combine data of the Eurosystem Household Finance and Consumption Survey with the tax-benefit microsimulation model EUROMOD, covering six countries: Belgium, Germany, France, Finland, Italy and Spain. Results indicate that existing wealth taxes do not contribute to vertical and horizontal equity: they are often progressive but do not achieve any significant redistribution due to the low revenues they generate and they imply a much lower burden on those deriving their living standard predominantly from wealth than on those who derive it mainly from income.

PENGARUH ASET PAJAK TANGGUHAN, PERENCANAAN PAJAK DAN ARUS KAS BEBAS TERHADAP MANAJEMEN LABA

This study aims to examine the effect of tax-deferred assets, tax planning and free cash flow on earnings management. The population in this study are companies in the property & real estate sector which are listed on the Indonesia Stock Exchange for the 2017-2021 period. The method of determining the sample using a purposive sampling method, with several predetermined criteria, there are 8 companies with observations for 5 years, so that the total sample is 40 financial report data. The analytical method used is multiple linear regression analysis with the eviews 9 program. The results of the regression test in this study prove that deferred tax assets, tax planning and free cash flow simultaneously influence earnings management. Meanwhile, partially free cash flow has a negative effect on earnings management, while deferred tax assets and tax planning have no effect on earnings management.

МІЖНАРОДНИЙ ДОСВІД РЕФОРМУВАННЯ СИСТЕМИ ОПОДАТКУВАННЯ ДОХОДІВ У ПОСТПАНДЕМІЧНИЙ І ВОЄННИЙ ПЕРІОДИ

Узагальнено міжнародний досвід реформування систем оподаткування доходів у воєнних і поствоєнних умовах, зокрема, проведено порівняння підходів до реформування систем оподаткування доходів у США, Швеції, Данії, Франції і Великій Британії. Розглянуто приклади, які демонструють, що, попри той факт, що податки на багатство в багатьох країнах Європи і світу характеризувалися низькою бюджетною ефективністю (не приносили значних бюджетних надходжень і при цьому вимагали суттєвих адміністративних витрат), тактика оподаткування надприбутків широко практикувалася тривалий час навіть після закінчення війни, зокрема, у постпандемічний період і в умовах сучасної енергетичної кризи в країнах ЄС.Систематизовано основні погляди на оподаткування багатства фізичних осіб – не стільки як загрози відпливу капіталу і дестимулювання капіталовкладень, скільки як важливої складової податкової системи, що в поєднанні з іншими податками на доходи і майно сприяє відновленню рівномірності розподілу багатства і мінімізує можливості для податкових ухилень. Акцентовано увагу на застосуванні країнами ЄС податку на надприбутки як солідарного одноразового загальноєвропейського податку у відповідь на глобальну соціально-економічну кризу, спричинену негативними наслідками пандемії COVID-19 і зростанням цін на енергоносії через воєнну агресію РФ. Обґрунтовано ключові вимоги, яким має відповідати податок на багатство фізичних осіб, для його запровадження в Україні, що передбачає встановлення неоподатковуваного мінімуму на високому рівні, а також його поширення не лише на резидентів України, а й на громадян інших країн, що володіють активами на її території, з метою підвищення його прогресивності й бюджетної ефективності.

Association of Personal Wealth Indicators and Health Care Costs in Persons With Alzheimer's Disease

ObjectivesThere is paucity of studies on the relationship between personal wealth and health care costs among persons with dementia, and earlier studies on other indicators of socioeconomic position have assessed costs after dementia diagnosis only. We investigated how different indicators of personal wealth (disposable income, supplementary income, assets subject to taxation, taxes and tax-like payments, and liabilities) are associated with health care costs in persons with Alzheimer's disease (AD) before and after AD diagnosis. DesignRegister-based nationwide cohort study of persons with AD. Setting and ParticipantsCohort of 70,531 people who received a clinically verified AD diagnosis in Finland between 2005 and 2011 and were community-dwelling at time of diagnosis. MethodsData on income indicators were obtained from Statistics Finland. Data on medication costs and hospital care costs for the 12-month period from 5 years before to 2 years after AD diagnosis were obtained from national registers. Associations of wealth indicators with costs were investigated with multivariate mixed-effect negative binomial regression. ResultsAfter adjustment for age, region, sex, marital status, comorbidities, expensive medications, use of psychotropic and antidementia medication, and highest occupational class before AD, people with higher levels of personal wealth indicators were more likely to have higher total health care costs along the whole follow-up period. The incidence rate ratios (IRRs), 95% CI for highest quintile vs lowest quintile were 1.17, 1.15−1.19 for disposable income, 1.10, 1.08−1.12 for taxable income, 1.18, 1.16−1.19 for supplementary income, 1.07, 1.06−1.09 for taxes, and 1.05, 1.04−1.07 for taxable wealth. Conclusions and ImplicationsOur observation on the association between income/wealth indicators and health care costs in a country with a strong public health care system call for more effective measures in targeting health inequalities in the aging population. Although the different indicators were not completely interchangeable, associations of different indicators were toward the same direction.

Effect of Deffered Tax Assets, Tax Expense and Current Tax on Earnings Management

effect of Deffered Tax Assets, Tax Expense and Current Tax on Earnings Management

Inequality: the scourge of the twenty-first century

ABSTRACT Rising inequality is a ubiquitous problem, encompassing every geographical region and nation in the world. Inequality can be contended to have replaced unemployment as our most vital economic issue. After nearly six decades of declining inequality from the time of the First World War, the process has reversed itself with a vengeance, and we may be about to surpass the very high levels of inequality that prevailed in 1914. The causes are multifarious, including accelerating globalisation, plutocratic politics, excessive emphasis on ‘meritocratic’ pay, declining public expenditure, and social protection combined with the high rates of return on ‘capital’ compared to the overall economy’s growth rate. Inequality between nation-states may be declining because of the rise of China, but within countries, inequalities are increasing everywhere. Excessive inequality prevents social mobility and contains the seeds of social conflict and even civil wars. Most crucially, excessive and rising inequality makes democratic politics and governance unsustainable. High inequality may be a causal factor behind the decline of democracy and the rise of autocracy and populism that we are witnessing globally. In the ultimate analysis, the reduction of inequality necessitates wealth taxes.

Deferred taxes in financial institutions: A review of empirical research and the role of tax effects in regulatory capital. Part 1

Subject. This article examines the industry practices of the regulation of deferred taxes in financial institutions. Objectives. The article aims to analyze the significance of deferred taxes for financial institutions (banks, insurance organizations) and determine the role of tax effects in regulatory capital. Methods. The research is speculative. For the study, I used the dialectical method of scientific knowledge, the method of collecting theoretical and regulatory information, the method of formalization, as well as analysis, synthesis, observation, and comparison. Results. The article finds that the preventive nature of the accounting revaluation of deferred tax assets controls the probability of their recovery at the expense of future taxable profits, and therefore they should be included in the regulatory capital. It determines that a full reversal of the active deferred tax position is possible if the accounting assets generate income with the profitability necessary to cover the deductible temporary differences in excess of the balance sheet valuation of the assets. Conclusions and Relevance. At present, the theoretical basis of deferred taxation continues to remain undisclosed. Deferred taxes are an artificial information construct that refines the measurement of assets at fair value. Deferred taxes alone are not able to generate cash flow, they reconcile the tax flow with the financial flow in relation to the fair value of assets in order to show how much value the assets will generate taking into account the current tax situation. The results of the study can be useful to practitioners in the field of deferred tax accounting and banking management, as well as analysts and researchers whose activities are focused on accounting, taxation, and other persons concerned who study the theoretical and financial aspects of deferred taxes.

Foreign investment and environment in developing countries: A perspective from agricultural subsidy with foreign capital taxation

It is often difficult to improve the environment when attracting foreign investment in developing countries. Therefore, this paper develops a policy concept of subsidizing agriculture financed by foreign-capital income tax in developing countries, and explores whether it can improve the environment while increasing the inflow of foreign capital. To this end, we propose a general equilibrium model comprising the characteristics of developing countries and, account for the economic and environmental effects of this policy by using that model. It shows that both wage subsidy and interest subsidy, whether in the long run or in the short run, improve the environment, and promote the welfare conditionally. Most importantly, in the long run, the inflow of foreign capital can be increased under certain conditions.

The social meaning of wealth taxes

Wealth taxes are back on the political agenda of developed democracies, but are subject to contestation. Given increasing inequality, middle classes may support wealth taxes so to redistribute wealth from the rich. However, asset appreciation has become central to the realization of life chances, so a political programme of ‘wealth taxes’ may appear threatening. This paper asks: what does the prospect of increased wealth taxes mean to the middle classes? Combining a relational theory approach with a qualitative focus group study in the United Kingdom, the paper highlights two especially salient meanings of wealth taxes: (1) that wealth is considered as a form of security that one builds through surplus income earned through work (thereby conflating income and wealth); which can then be (2) used to sustain an intergenerational family through the relations of inheritance. Consequently, wealth taxes take on a meaning as a double tax that penalize hardworking families.