Complex Tax Structure Research Articles

Tax Aggressiveness and Corporate Financialization in Brazil

Objective: This study investigates the relationship between tax aggressiveness and corporate financialization in companies listed on Brazil's B3 Stock Exchange from 2009 to 2022.
 Method: We employed a panel linear regression model, adjusting for fixed effects related to individual companies and specific years. We used metrics such as abnormal book tax differences (BTDA), effective tax rate (ETR), and Comprehensive Value-Added Tax Rate (CVATR) to measure tax aggressiveness.
 Results: Our findings show a positive correlation between tax aggressiveness and corporate financialization. Firms employing aggressive tax strategies exhibited increased financialization. For robustness, dummy variables targeting aggressively taxed firms were introduced, confirming the initial relationship. CVATR emerged as a particularly effective metric in the Brazilian context due to its complex tax structure.
 Originality/Relevance: This study is pioneering in exploring the nexus between tax aggressiveness and corporate financialization in Brazil, contributing valuable insights for local researchers, investors, policymakers, and financial analysts.
 Theoretical/Methodological Contributions: Our research introduces innovative approaches for measuring financial assets tailored to Brazil's unique market conditions. It also enriches the current body of literature by confirming CVATR as an effective metric for capturing tax aggressiveness in Brazil.

The Big Four and corporate tax governance: From global dis‐harmony to national regulatory incrementalism

AbstractThe Big Four professional services firms – PwC, Deloitte, KPMG and EY – promote, sanction, and regularise the behaviour and practices of business and government. This is especially the case in the area of multinational tax avoidance. This large, and growing, sector of the Big Four's business model places them at the centre of both causing and addressing the problem. Their role is not limited to advising MNCs on complex tax structures. They also advise governments and international organisations on regulatory reform of the global tax system. This article examines their role in so doing through an analysis of Australian Senate Inquiry hearings and responses to the OECD reform programme on the digitalisation of the economy. We show that advice provided by the Big Four is not purely technical, but is intended to achieve a global corporate tax system that is either globally dis‐harmonised or a matter of national regulatory incrementalism. This is despite their claims of supporting global regulation based on multilateral agreements. Ultimately, we demonstrate that the Big Four use their significant structural power to discursively undermine the ideals of the OECD, the leading international organisation working to reform global taxation.

'You cannot touch taxes easily': making the case for tobacco taxation in India.

India represents over 1.3 billion people with >100 million adult smokers. The catastrophic health costs of smoking are staggering; and estimates show that even modest increases in taxes on cigarettes and bidis would both raise substantial revenues for the government and save ∼69 million years of healthy life over the next four decades. Karnataka represents a good example of tobacco control efforts and their impact. This case study examines the factors that have contributed to tobacco control policy in Karnataka based on 23 semi-structured interviews with key informants engaged in tobacco policymaking and decision-making, tobacco control/taxation research and advocacy. Their narratives indicate that: (i) Domestic taxation policy is complicated by the complex tax structure and centralized control over taxation with the introduction of Goods and Services Tax; (ii) Implementation of legal frameworks is a challenge, due to conflicts with powerful industry and farmer lobbies. A vigorous civil society backed by the Courts is necessary to garner political support; (iii) Action on taxation is hampered by weak leadership and mixed messaging; and (iv) There is a need for innovative policy solutions to promote both demand- and supply-side measures for tobacco control. Tobacco control advocates need to recognize the political economy of tobacco control and generate strong, reliable and scientifically sound evidence to support their arguments. Working for incremental 'wins' in terms of more stringent application of existing legal frameworks can make a substantial difference even in contexts where enhancing tobacco taxes is a challenge. Promoting multisectoral action is critical, at both policy and the ground levels, by expanding ownership and responsibility for tobacco control to sectors beyond health. Finally, the health sector needs to recommit to its role as a champion for tobacco control. Failure to do so would amount to a failure on multiple fronts-public health, economic, fiscal and ethical.

PAJAK TEMBAKAU: PERMASALAHAN PRODUKSI ROKOK ILEGAL DI INDONESIA

Tax which can influencea country’s economy and society’s prosperity, namely through increasing health and revenue objectives (UN 2018 p. 40), such as tobacco tax. In Indonesia, the revenue from tobacco tax had been increasing from 2007 to 2018. This paper argues that Indonesia should tax the informal tobacco firms based several strategies. The contributors of Indonesian illicit cigarettes are 90 percent from domestic industries and 10 percent from oversea industries. The possible factors which cause the illicit cigarettes are Indonesian complex tax structure and negative behaviour of cigarettes firms. To solve the issues, the Indonesian government should conduct several strategies. First, analysing cost and benefit of taxing the informal sectors. Second, after deciding to tax the informal sectors, five tax reforms policies should be implemented by the Indonesian government, namely the capability of the revenue administration, the pragmatic approach, technical approach, firms’ incentive approach, and political and administrative incentive approaches.
 Key words: Tobacco tax, Informal Sector, National Revenue

An Assessment of Impact of GST on India’s Online Retail Sector

The online retail market in India is relatively new and still adapting to the global business environment. Also, conventional tax regime was neither able to cover all e-commerce transactions nor give it a proper space to flourish. The launch of Goods and Services Tax (GST) changed the taxation scenario in India from a very complex tax structure comprising of around 500 different kinds of taxes to a simpler tax regime with just 3 broad tax categories while having both positive and negative impacts on industries operating in organized and unorganized manner. The objective of this exploratory, qualitative, and non-empirical paper is to explore and present the consequences of the introduction of GST on the Indian Economy with special reference to the online retail industry in India. Researchers reviewed the reports of various departments of Government of India (such as the Central Board of Excise and Customs); the GST Council reports up to 30th meeting held on September 28th 2018; Honorable Finance Minister’s speech on GST; and interviews of government officials. This paper may provide useful insights to the online retailers, suppliers and most importantly, the common buyers in understanding the changes brought by GST and help the GST Council in making further amendments in the Act.

Rethinking the Pfähler–Lambert decomposition to analyse real-world personal income taxes

We provide a generalization and adaptation of the decomposition methodology by Pfahler (Bull Econ Res 42:121–129, 1990) and Lambert (The distribution and redistribution of income, 1st edn, 1989, The distribution and redistribution of income, 3rd edn, 2001), designed to assess the redistributive effect of personal income taxation. In particular, we generalize the methodology to several deductions, allowances, schedules or tax credits, making it suitable for real-world complex tax structures, especially dual income taxes. Additionally, we avoid the problem of sequentiality on the measurement of partial redistributive effects and also take into account the re-ranking effects of tax treatments not related to income. Finally we illustrate the utility of the methodology by carrying out an empirical analysis for the 2007 Spanish Personal Income Tax, which meant a shift from a quasi-comprehensive to a semi-dual income tax.

Challenges associated with the Greek SMEs in the basin of Athens-Greece: an exploratory study

The paper attempts to identify the motivation for business ownership, the factors contributing to success and problem areas and developmental issues attached to entrepreneurship related to small medium enterprises (SMEs) particularly in Athens, Greece. The first phase of the study attempted to identify the problem areas of entrepreneurs by an extensive review of the existing literature. The second phase incorporated a ground survey with groups of entrepreneurs (n = 113) for assessing the factors related to entrepreneurship. The prime motives for starting a business were to increase income, to obtain job security, and to secure independence. The entrepreneurs identified problems in the areas of securing long term and short term finances for establishing and running SMEs, confusing and complex tax structure, too much competition, government bureaucracy, and a weak economy as major bottlenecks. The paper is an important study taken in the entrepreneurship context in Athens, Greece.

INVESTIGATING TAX DISTORTIONS: AN APPLIED MODEL OF PETROLEUM EXPLORATION AND EXTRACTION DECISIONS

Abstract A numerical model is proposed for the testing of distortions caused by petroleum fiscal systems on the exploration and extraction activities of a profit‐maximizing firm. Traditional models have not been capable of testing for the distortions caused by the complex tax structures most often used by governments. Two tax combinations, as well as certain other taxes, are analyzed for distortions in the model. The model is parameterized using generic data because specific jurisdictions are not considered. The distortions due to rentals and royalties are as expected by theory. Property taxes show a new distortion result where production tilting is ambiguous.

Eliminate Black Money

Black money can be totally eliminated if a new tax called TOP Tax system is adopted and implemented by all nations. Excerpt: - We all know that black money is being generated by tax evasion through unreported/shadow/hidden accounts and also by corruption and fake currency. Tax evasion is being caused by the indirect result of high tax component on commodities and services, multiple taxes, complex tax structures, cumbersome accounting, auditing and tax returns. In the present economic system, there is huge money in physical form (bills/notes). For example in India, there is an estimated physical currency of 10,72,020 crores with the public out of total money supply of 77,25,560 crores excluding fake currency in the economic (As at 2012 - June 29 ). This physical currency is about 13.8% of the total money supply in the economic system. The percentage of physical money may vary from country to country. There are reported to be plenty of cases of lootings, robberies, homicides, extortions, ransoms, and bribes across the world in almost all nations because of this huge money in physical form. This physical money, in huge amounts, is being transferred from one hand to the other eluding all tax nets in transactions of commodities or goods. The unaccounted GDP is said to be too heavy and varies from country to country depending upon the corruption level that exists in that country. In addition to this black money there are also huge amounts of fake currency that has contaminated the genuine currency. The combined effect of the black money and fake currency is playing havoc with economies of many countries. This paper explains comprehensively, in both theoretical and graphical forms, how this new tax shall be operated solely by banks at minimum operating cost with limited paper currency (0.3%) and non- physical money( 99.7%) of the total money supply available in the economic in order to eliminate black money, tax evasion, fake currency, corruption and extortions.

TOP Tax System – A New Taxation System

All Direct and Indirect taxes accompanied by tax laws, accounting, auditing and tax returns, can be abolished if a new tax system called “TOP Tax system” is adopted and implemented by all nations. TOP Tax system will relieve 7 billion people of the world from the cobweb of ambiguous and complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing, tax returns and consequent quagmire of all tax related cases.Salient features of this new tax system Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments and money supply into the economy are unified and integrated in the banking system. In this new tax system there will be no Direct taxes, Indirect taxes, tax laws, tax returns, tax collection departments, tax enforcement agencies and tax tribunals. Citizens need not maintain separate account books and submit tax returns annually for paying either Direct taxes on personal incomes or Indirect taxes while running business or industry. Yet, the tax revenues collected by banks from single tax called TOP Tax will be 30 to 40% more when compared to total tax revenues accrued from all taxes in the present tax system.TOP Tax system” will make the budget preparation of any country to be simple, easy and time saving exercise. Down load and read full article.

TOP Tax System - A Common Tax System for All Nations

Tax system is a new tax system which can be used as a common tax system for all nations. This new tax system will be without present tax system’s all Direct and Indirect taxes accompanied by tax laws, tax exemptions, multiple tax collection departments to relieve 7 billion people of the world from the cobweb of ambiguous and complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing, tax returns and consequent quagmire of all tax related cases. Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments; distribution of subsidies, implementation of welfare schemes and money supply into the economy are unified and integrated in the banking system. There will be no tax collection expenditure for the Governments and no tax compliance costs for the people either. Citizens need not maintain separate account books and submit tax returns annually for paying either Direct taxes on personal incomes or Indirect taxes while running business or industry. Yet, this new tax system envisages 20 to 30 % more revenues from single tax called TOP Tax” - than presently accruing revenues from multiple taxes collected by different tax collection departments/agencies. The present day trade barriers between the manufacturers and consumers; between the Stares within the country and between the nations can be totally removed to make the whole world into one fully open market.

Tax Reforms - Taxes Without Tax Laws

This paper suggests a new tax system without multiple taxes, tax laws, tax returns, tax collection departments, tax tribunals and tax enforcement agencies. In this new tax system, citizens need not maintain separate account books and submit tax returns annually for paying either Direct taxes on personal incomes or Indirect taxes while running business or industry. The present day trade barriers between manufacturers and consumers; between the states within the country and between the nations can be totally removed. Yet, this new tax system envisages 20 to 30 % more revenues than presently accruing from multiple Direct and Indirect taxes collected by different tax collection departments/agencies. It suggests a single tax called “TOP Tax” (Transfer Or Purchase Tax) for both Centre and States combined in place of present multiple Direct and Indirect taxes with different slab rates on different goods/commodities/services and multiple Direct taxes with different slab rates, relieving 7 billion people of the world from the cobweb of ambiguous and complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing, tax returns and consequent quagmire of all tax related cases. Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments and money supply into the economy are unified and integrated in the banking system. This paper vividly explains how this new tax system can be operated solely by banks at minimum operating cost with limited physical currency (0.3%) and non-physical money (99.7%) of the total money supply available in the economy in the particular country, while totally eliminating black money, tax evasion, fake currency, corruption and extortions.

The Base for Direct Taxation

The traditional starting place for a study of tax reform is a definition of an ideal tax base, which is then adjusted in light of additional issues. After arguing briefly that this is not a good starting place, the essay reviews the optimal taxation literature inferences for tax base policy, focusing on three questions. - If there is annual non-linear (progressive) taxation of earnings, how should annual capital income be taxed - not at all, linearly (flat rate, as in the Nordic dual income tax), by relating the marginal tax rates on capital and labour incomes (as in the US), or by taxing all income the same? - If there is annual non-linear taxation of earnings, should there be a deduction for net savings? - If there is annual non-linear taxation of earnings, is it worth having a more complex tax structure, particularly age-dependent tax rates? Would greater use of age-dependent rules in capital income taxation be worthwhile? The essay presents the Atkinson-Stiglitz and Chamley-Judd results that capital income should not be taxed, but concludes that the required conditions are too restrictive and not robust enough for policy purposes. Hence there should be some role for including capital income as a part of the tax base. The essay discusses some empirical underpinnings for two key elements in the conclusion - differences in savings propensities and the shape of earnings (and uncertainty about earnings) over the lifetime. The conclusion that capital income should be taxed does not lead to the conclusion that the tax base should be total income, the sum of labour income and capital income. The chapter leans toward relating marginal tax rates on capital and labour incomes as opposed to the Nordic dual tax. Also examined are age-dependent taxes (for example different taxation of earnings for workers of different ages).

Municipal tax structure and accounting disclosure

Two competing hypotheses have been developed in the public economics literature to explain the growth of government spending. The first, termed the fiscal illusion hypothesis, holds that governments have incentives to induce a misperception in the population about the cost of government. By constructing complex systems of taxation that obscure the true cost of government services, governments can lead the taxpayer to demand a larger quantity of services. The other hypothesis, the fiscal stress hypothesis, holds that tax complexity diversifies revenues, leading to less revenue variability and, hence, lower costs. Taxpayers, then, demand more government services. The two hypotheses make very different assumptions about the incentives of governments in regard to an informed electorate. The fiscal illusion hypothesis suggests incentives to obscure information, while the fiscal stress hypothesis suggests incentives to reveal true costs.Accounting and financial reporting can play a role in revealing fiscal information to taxpayers, directly or indirectly, through information intermediaries. If the fiscal illusion hypothesis describes the behavior of governments, we would expect that such governments would attempt to protect the information advantage that is conveyed by a complex tax structure by minimizing accounting disclosures. On the other hand, the fiscal illusion hypothesis suggests that a government with a complex tax structure has no reason to minimize disclosure, and may have incentives publicize lower service costs.This study examines the association of tax complexity and financial disclosure. We find that there is more disclosure in cities with more complex tax systems, a result that supports the fiscal stress hypothesis.

General equilibrium and optimal taxes

It is shown that if subsidies are not excessive, there exists a general competitive equilibrium in the presence of a complex tax structure. Furthermore, under certain continuity assumptions, a tax structure which is optimal from the social point of view can be determined. Procedures maximize quasi-concave after tax profit functions. Consumers have convex budget sets reflect- ing their income from sales and profits minus taxes on fixed income and progressive sales taxes. Their preferences are interdependent, intransitive and incomplete. The government provides public goods and determines the optimal tax regime on the basis of its preferences on the final competitive consumption allocation.

TAXES, CORPORATE FINANCIAL POLICY AND RETURN TO INVESTORS

IN [1] A SERIES and [2], of Franco papers Modigliani beginning with and [1] an [2], Franco Modi liani an Merton Miller unsettled both practitioners and students of corporate financial policy by demonstrating that, in the absence of distortions to market processes due to the existence of taxes, the cost of capital to a firm could not be affected by purely financial operations. In a series of subsequent papers [3], [4] and [5], Modigliani and Miller (hereafter abbreviated simply as M-M) expanded their earlier thesis to measure the impact on optimal corporate financial policies and capital costs of certain specific aspects of the U.S. tax structure. Throughout M-M's treatment, however, there runs an assumption that the basic arguments established in [1] and [2] are self-evident, and that taxes represent nothing beyond an unwelcome imperfection in otherwise efficiently functioning market processes. Experience teaching this material to a broad range of students convinces the present authors that the concepts embodied in M-M's analysis are quite subtle and difficult to communicate at an abstract level. They also are difficult to embody in a (more complex and realistic) corporate and individual income tax structure. Surprisingly, such pedagogic * The authors who are, respectively, Associate Professor of Finance in the Sloan School of Management, Massachusetts Institute of Technology, and Assistant Professor of Business Administration in the College of Business Administration, Boston University, wish to acknowledge support from the Ford Foundation's grant to the Sloan School for research in business ?nance. success as the authors have enjoyed usually arises from discussions of the impact on M-M's argument of the very tax induced distortions that appear most unwelcome to their basic propositions. Accordingly, an attempt will be made here to acomplish two fairly limited objectives: first, the effect on investment value of different tax structures will be used pedagogically to illustrate the basic theses propounded by Modigliani and Miller; and second, an attempt will be made to broaden this structure to one that more closely approximates the combination of corporate, personal income and capital gains taxes encountered in the U.S. today. The paper proceeds by developing a series of increasingly complex tax structures and examining their impact on a hypothetical corporation's optimal debt and dividend policies. Case 1 discusses the no-tax world laid out in [ 1 ] by Modigliani and Miller. Case 2 examines the impact on their propositions of corporate income taxes alone; essentially the argument presented by M-M in [3]. Case 3 considers the impact on rational debt and dividend decisions of differential personal income and capital gains taxes; considered partially by M-M in [2]. And Case 4 integrates the preceding material by considering corporate, personal income and capital gains taxes simultaneously. A summary completes the exposition. As always, rational behavior by both corporate and private investors, operat-