Corporate Income Research Articles

ANALISIS IMPLEMENTASI STRATEGI PERENCANAAN PAJAK (TAX PLANNING) SEBAGAI UPAYA PENGHEMATAN BEBAN PAJAK PENGHASILAN Studi Kasus Pada CV XYX

This research aims to analyze the implementation of a tax planning strategy to save corporate income tax in CV XYZ. This research used the descriptive qualitative method. Data collection techniques through documentation, interviews, and literature. Data analysis by analyzing the commercial financial statement, reconciling fiscal, analyzing fiscal income statement, and making tax planning. The results of this study are CV XYZ has implemented tax planning in financial statements, however, it has not been optimally, resulting in only minor savings. The implementation of the tax planning through directing the president director's personal advertising expense becomes the company's advertising expense only.

Does Laffer Curve Exist in Tax Structure of Pakistan? A Threshold Regression Analysis

Laffer curve is a trade-off between tax cuts and tax revenues. The study implies threshold regression to test the existence of the Laffer curve in Pakistan’s economy using time series data for a period of thirty years (1991-2020). The linear association between tax cuts and tax revenues was assessed using simple ordinary least squares technique. The tax structure of Pakistan mainly constitutes two components, direct and indirect taxes. This study examined nature of the Laffer curve using data on direct tax revenue and corporate tax rate. The study supported the evidence of the Laffer curve with a threshold tax rate of 26%. The existing corporate income tax rate in Pakistan is 29% which lies in prohibitive range of the Laffer curve. As a policy measure, the corporate tax rate is recommended to be reduced at least up to the threshold level in order to bring the maximum number of tax evaders and elites under the tax net to enhance the tax revenues of Pakistan.

Payroll tax shields and wage stickiness:evidence from China’s 2008 corporate income tax law

ABSTRACT Labor-cost adjustment has become an increasingly significant factor in enterprise development and economic growth, yet labor costs have proved ‘sticky’: more likely to rise with increasing revenue than fall when revenues decline. Although tax policies play an important role in wage determination, there is little research on how they affect wage stickiness. We treat China’s tax-reforming 2008 Corporate Income Tax Law as a shock and find that increases in nominal tax rates enhance wage stickiness in relation to ordinary employees but not executive compensation. The effect is most pronounced in enterprises with higher long-term debt ratios, state-owned enterprises, and labor-intensive industries.

Taxation of Electronic Commerce: Federal Income Tax Issues in the Establishment of a Software Operation in a Tax Haven

The advent of the Internet and other electronic means of conducting commercial transactions has created a new galaxy of ways to structure business operations and a concomitant range of novel tax issues. It is commonly said that, because of the diminished need for a vendor to have a physical presence in the country of the customer, one of the likely effects of electronic commerce will be to shift revenues away from source jurisdictions and towards residence jurisdictions. In fact, this may be only partially true. Income may be shifted away from the customers' countries all right, but into a tax haven jurisdiction rather than into the enterprise's home jurisdiction. A major issue for enterprises that use the Internet and their residence tax jurisdictions, therefore, will be whether controlled foreign corporation or similar legislation will operate to impose tax on any revenues that are shifted in this manner.The purpose of this paper is to consider how a hypothetical business operation structured to operate in a tax haven might be treated under United States federal income tax law, both under provisions taxing income at the source and under provisions taxing U.S. persons on tax haven income of foreign corporations, and then to reflect on what, if anything, this tells us about the need for change. Because the Internal Revenue Service has issued a regulation discussed below, specifically characterizing income derived from transactions in computer software (and not other types of transactions in electronic commerce), the paper will focus on a company delivering software over the Internet; but many of the issues presented will arise in the case of other Internet providers.

International Comity and the Foreign Tax Credit: Crediting Nonconforming Taxes

The combination of expanding international trade and climbing corporate income tax rates in the early part of this century required nations to evolve methods for reducing the level of international double taxation. While most countries came to rely upon a variety of techniques, two general approaches emerged to the taxation of the income of residents derived from foreign economic activity. Some countries adopted a territorial based system in which foreign source income is normally exempted from domestic tax. That system generally leaves the taxation of foreign income to the government within whose territory the activity occurs and thus avoids double taxation entirely. Other countries, including the United States, chose to impose their tax on the world-wide income of their individual citizens and residents and domestic corporations. That approach necessitated the development of specific mechanisms to reduce double taxation when the country within whose borders the income had been derived also imposed a tax on that income.The prevailing solution to this source of double taxation is for the residence country to allow its taxpayers to credit taxes paid to foreign jurisdictions against their domestic income tax liability. The extent to which such a foreign tax credit effectively relieves double taxation, however, depends in part upon the adequacy of the description of the foreign taxes that may be credited against the domestic tax liability. If the description is overinclusive, allowing too broad a range of foreign taxes to be credited, the foreign income will be taxed too lightly. Conversely, if the description is under-inclusive, double taxation will not be fully relieved and the foreign source income will be taxed more heavily than domestic income.

Book Tax Conformity for Financial Instruments

Since the introduction of the corporate income tax in the United States in 1909, both lawyers and accountants have discussed whether to allow corporate taxpayers to use income reported by corporations to their shareholders on their financial reports under Generally Accepted Accounting Principles (“GAAP”) as the basis for imposing corporate income tax. Similar discussions have taken place in other countries, particularly in Europe in recent years. As of today, several countries apply general book-tax conformity, while several others apply it only to financial instruments. In the United States, limited booktax conformity already exists, to some extent, in the tax law, under the clearreflection-of-income principle contained in section 446, and in other specific provisions. Commentators agree, however, that currently, a general book-tax conformity regime for corporate tax is not feasible. In addition, courts often discuss the different roles of tax and accounting rules, generally concluding that tax does not have to follow books in all cases.

Penerapan Perencanaan Pajak Atas Pajak Penghasilan Pada Perusahaan Jasa Pt. X

Tax planning is one way that can be done by taxpayers (either individuals or entities) to reduce the tax that must be paid. PT. X is a company engaged in rental services of heavy equipment and tools that support mining. This study aims to determine whether the company has carried out tax planning that is applied to corporate income tax and refers to applicable tax regulations. This research was conducted using qualitative research methods and conducting field research for data collection such as interviews, observation and analyzing the income statement. From this study the results that can be concluded are that the company has implemented tax planning for corporate income tax and has been implemented in accordance with applicable regulations.

The Dynamic Impact of Taxation on the Economic Growth of Sri Lanka: An ARDL bounds testing approach

Discussions on how a government can stimulate an economy through non-distortionary taxation and productive government expenditures have become prominent during the past three decades. Against this backdrop, this paper aims to analyse the short-run and long-run impacts of taxation on the economic growth of Sri Lanka. Some taxes can be distortionary, while others are not. Therefore, while analysing the effect of overall tax level on economic growth, we also estimated the distortionary nature of major tax categories on the economic growth of Sri Lanka. Sri Lanka presents a unique case to analyse the nexus between taxation and economic growth, as the economy was liberalized in 1977. Therefore, the impact of taxation level on economic growth was estimated using a linear Auto-Regressive Distributed Lag (ARDL) model under two scenarios: without controlling for economic liberalization (from 1960 to 2018) and the post-liberalized period (from 1980 to 2018). The results of both pre-and post-economic liberalization conditions suggest a significant long-run positive impact of tax level on economic growth. Similarly, the impact of consumption tax on short-run economic growth was significant. In addition, personal and corporate income taxes were non-distortionary, both in the short-run and the long-run, while consumption taxes were non-distortionary in the long-run. This suggests that increasing taxes is a viable policy option in achieving fiscal independence without compromising Sri Lanka's growth potential.
 Keywords: ARDL, Economic Growth, Fiscal policy, Public Sector, Tax Levels, Tax Structure

The Effect of Corporate Income Tax on Investment in Japan

The purpose of this research is to analyse and examine the effect of corporate income tax on the investment in Japan from 1987 to 2016. It is an associative-causal research. The secondary data are taken form International Monetary Fund, International Financial Statistics and data files using World Bank. The hypotheses were tested by using the multiple linear regression analysis. The results of this research showed that, simultaneously, corporate income tax rate and interest rate have highly significant effect on investment. After the research is conducted and it was analysed with partial test, corporate income tax rate negatively affects investment in Japan. It is highly recommended that Japan government should reduce the corporate income tax on companies so that there will be more investment in Japan.
 JEL Classification: E22, H32

ОСОБЕННОСТИ МЕТОДИКИ ИССЛЕДОВАНИЯ ИСПОЛНЕНИЯ ОБЯЗАТЕЛЬСТВ ПО ИСЧИСЛЕНИЮ НАЛОГА НА ПРИБЫЛЬ ОРГАНИЗАЦИЙ

The article is devoted to the peculiarities of the methodology for the production of judicial tax examinations. The issues of tax examinations are very little covered by specialists. The article discusses the main and additional elements of expert studies of the fulfillment of obligations on corporate income tax. Differences in the procedure for the production of tax examinations and tax audits for income tax are determined. As a result, the features of the methodology that affect the discrepancies in the amount of unpaid income tax determined by the tax authorities and forensic experts are highlighted.

US AND OTHERCOUNTRIES APPROACHES TO A GLOBAL MINIMUM TAX RATE

The idea of a global minimum tax rate, pointing at the tax competition between countries, has been discussed a lot during the talks led by the Organization for Economic Cooperation and Development, European Commission, G 20, G 7. The paper focuses mainly on the international tax agenda, comparisons of corporate income tax rates, the approaches to a global minimum tax rate, the United States proposal and how tax policy could be adapted to meet challenges of minimizing global taxation of capital. Despite some common trends, there have been serious differences across countries regarding corporate income tax rates – nominal, average and effective which shows the percentage of income from a marginal investment that is to be paid in taxes. OECD’s database shows that corporate income tax rates vary greatly across countries, and the last year’s trend showed a number of countries announcing tax increase, which were both on temporary basis and permanent one. As to the United States proposal authors, establishing a global minimum tax would make it possible for the country to be competitive in the tax field even after proposed tax increase. The United States proposal before G 7 summit was supported by its members. At the same time negotiations on the new tax challenges from digitalisation with participation of different jurisdictions are going on.

Whatever Happened To Subpart F? U.S. CFC Legislation after the Check-the-Box Regulations

The U.S. Congress, in 1962, enacted provisions commonly known as subpart F, under which U.S. shareholders of controlled foreign corporations (CFCs) are taxed on their ratable shares of some corporate income, whether or not distributed. A U.S. shareholder is a U.S. person who owns at least 10% of a foreign corporation's voting stock, directly, indirectly, or constructively. A foreign corporation is a CFC if more than 50% of its stock, by vote or value, is so owned by U.S. shareholders.Apart from subpart F, the United States taxes shareholders on corporate income only as it is distributed to them as dividends.Because domestic corporations are taxed on their worldwide incomes, the lack of a shareholder-level tax on undistributed corporate income does not insulate this income from U.S. taxation. However, a foreign corporation is subject to U.S. tax on only [*187] income effectively connected with the conduct of a trade or business in the United States and certain income from U.S. sources, even if its shareholders are U.S. persons. Thus, apart from subpart F, the United States imposes no tax on foreign income of U.S.-owned foreign corporations until it is distributed to the shareholders or the shareholders sell their shares.

Fiscal Stabilization in the United States: Lessons for Monetary Unions

The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and its relevance has suddenly increased further, after the recent Covid-19 shock. The analysis of fiscal stabilization in the United States, a monetary union equipped with a common fiscal capacity, has often informed the literature on the European EMU and could serve as a reference for its possible future reforms. This paper expands that literature in three ways: first, by measuring stabilization not only as inter-state risk-sharing of asymmetric shocks, but also as intertemporal stabilization of common shocks; second, by doing this for specific items in the US federal budget, both on the revenue and on the expenditure side; and third, by also measuring the impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. Corporate and personal income tax, on the revenue side, and social security benefits and federal grants, on the spending side, are the most effective items. The US federal system of unemployment insurance provides great stabilization in the event of a large shock, in particular when enhanced by the discretionary program of extended benefits. These findings imply that a proper design of the budget can maximize its stabilization effect, when it helps bridging the gap between higher mobility of capital and lower mobility of labor, by collecting revenues based on the income of the most mobile factor (corporate income tax) and providing support to the income of the least mobile factor (social security).

International Corporate Income Tax Reform: Issues and Proposals

While details have changed from time to time, the basic treatment of foreign source income in the United States tax code has remained essentially the same as that in 1918, when the foreign tax credit was introduced. All worldwide income is currently taxed, with a credit for foreign taxes paid, but income of subsidiaries incorporated in foreign jurisdictions is not considered part of that worldwide income until it is repatriated. As a result of a revision in 1962, certain passive income of foreign subsidiaries is subject to current taxation under Subpart F of the Internal Revenue Code. This system produces a number of economic distortions as well as opportunities for tax avoidance. Those continuing issues, along with the increasing integration of the global economy, have led to proposals for reform. These proposals fall roughly into four categories: narrow proposals aimed at tax avoidance concerns, proposals to move the system towards a pure territorial (or source-based) system, proposals to move the system in the opposite direction towards a current world-wide tax system, or proposals to retain the current system but lower the corporate tax rate with revenue offsets.In evaluating these proposed tax changes, two issues, which are related but nevertheless not identical, should be considered. The first is the real effects of current law and of a revision on economic activity. When investment responds to tax differentials, it affects the allocation of capital which in turn has implications for efficiency and income distribution (the extent to which the tax burden falls on capital versus labor incomes). In a closed economy with a fixed capital stock, the burden of the corporate tax falls on capital income in general. If the U.S. corporate tax does not apply in the foreign jurisdiction, capital can flow abroad with the result that some of the burden on the tax falls on labor (depending on the mobility of capital).3 Thus, the international tax system has implications for the overall welfare of the United States, and the world, and for the division of that welfare between those with primarily labor income, who tend to have lower incomes, and those with primarily capital income, who tend to have higher incomes.

Corporate Expatriation: A Case Analysis

During the 1990s and early 2000s, several large U.S. companies reincorporated abroad. Corporate expatriations can take many different forms. One form is a stock inversion.In an inversion, a U.S.-based multinational corporate group forms a foreign subsidiary, typically in a country that imposes little or no corporate income tax. Then the group reorganizes. The new foreign subsidiary becomes the parent of the group, and the existing U.S. parent becomes a subsidiary. As the term suggests, the corporate structure inverts. The parent’s place of incorporation changes to a foreign country.An inversion involves only a change in the group’s legal structure. It has little or no effect on the company’s operations. The group does not need to move its headquarters or its other business operations.This article describes a typical stock inversion, using the 2001 Ingersoll-Rand reorganization as a model. The article examines how, under the law at that time, the transaction saved substantial taxes, immediately and into the future.

How Do Carbon Taxes Affect Emissions? Plant-Level Evidence from Manufacturing.

This paper investigates how carbon taxes affect emissions by examining British Columbia’s revenue-neutral carbon tax in the manufacturing sector. We theoretically demonstrate that carbon taxes can achieve emission reductions while increasing production. Recycling carbon tax revenues to lower corporate income tax rates encourages investments, allowing plants to emit less per unit of output. Using detailed confidential plant-level data, we evaluate this theoretical prediction by exploiting the treatment intensity through plants’ emission intensity. We find that the carbon tax lowers emissions by 4 percent. Furthermore, we find that the policy had a positive output effect and negative emission intensity effect, suggesting that the carbon tax encouraged plants to produce more with less energy. We provide initial evidence showing how a revenue-neutral carbon tax may achieve emission reductions while stimulating the economy.

Allocating Business Profits for Tax Purposes: A Proposal to Adopt a Formulary Profit Split

The current system of taxing the income of multinational firms in the United States is flawed across multiple dimensions. The system provides an artificial tax incentive to earn income in low-tax countries, rewards aggressive tax planning, and is not compatible with any common metrics of efficiency. The U.S. system is also notoriously complex; observers are nearly unanimous in lamenting the heavy compliance burdens and the impracticality of coherent enforcement. Further, despite a corporate tax rate one standard deviation above that of other OECD countries, the U.S. corporate tax system raises relatively little revenue, due in part to the shifting of income outside the U.S. tax base.In this proposal, we advocate moving to a system of formulary apportionment for taxing the corporate income of multinational firms. Under our proposal, the U.S. tax base for multinational corporations would be calculated based on a fraction of their worldwide incomes. This fraction would be the sum of (1) a fixed return on their expenses in the United States and (2) the share of their worldwide sales that occur in the United States. This system is similar in significant respects to the current “residual profit split” method of the U.S. transfer pricing regulations and the OECD Guidelines, as well as to the current method that U.S. states use to allocate national income across states. The state system arose due to the widespread belief that it was impractical to account separately for the economic activity supposedly earned in each state when states are highly integrated economically. Similarly, in an increasingly global world economy, it is difficult to assign profits to individual countries, and attempts to do so are fraught with opportunities for tax avoidance.

Stimulating innovation in Russia: Limitations and opportunities of tax policy

The purpose of the study is to identify institutional and regulatory restrictions and the possibilities of using instruments of tax policy in Russia to stimulate innovative activity of enterprises. The article examines the importance of institutional constraints and factors of innovative development. The factor of international tax competition in the sphere of innovation is investigated, and the data of international trade in innovative services are analyzed. Based on the data of tax and statistical reports in Russia and data from the financial statements of the largest Russian companies, the analysis of the actual demand for key instruments of tax regulation of R&D in Russia has been carried out. It is concluded that there are shortcomings that do not allow to fully use the potential of existing measures on income tax to stimulate innovative activity. Among the main shortcomings we identify: the lack of focus, complex regulation and administration, a limited scope of the applied incentives to R&D on corporate income tax. This makes the current tax incentives inaccessible to a wide range of taxpayers and leads to an outflow of resources from Russia to foreign countries with better regulatory conditions.

THE IMPACT OF CORPORATE INCOME TAX AND TAX HOLIDAY POLICY ON DIRECT FOREIGN INVESTMENT IN INDONESIA

Foreign investment has an important influence on a country's economy, it is also considered to be more resilient to crises because investors generally have a long-term perspective when investing in a country. However, the economic crisis in Indonesia caused the inflow of foreign direct investment to experience a drastic decline which led to a slowdown in economic growth in Indonesia. To increase interest in foreign investment in Indonesia again, it is necessary to have an incentive policy in order to attract foreign investors. Therefore, this study aims to examine whether the corporate income tax rate set by the government and the tax holiday policy determine foreign direct investment. Based on purposive sampling, a sample of 38 foreign direct investment inflows from 1981-2018 was obtained. The results show that the corporate income tax rate has a significant negative effect on foreign direct investment, but the tax holiday is not proven to have an effect on foreign direct investment. The results of this study indicate that in determining tax rules and policies, especially corporate income tax rates, it is necessary to consider the interests of foreign investors in order to attract more foreign direct investment to Indonesia.

The U.S. and Chile Tax Treaty and Its Impact on Foreign Direct Investment

The tax treaty signed between Chile and the United States will reduce withholding rates applicable to interest, royalties, and capital gains and will exempt certain income derived from pension funds, services, and business profits not attributable to permanent establishments. This Article concludes that the exemption and reduction of withholding taxes may have a positive impact on Chilean foreign direct investment (“FDI”) in the United States since Chilean investors and pension funds will benefit from this exemption or reduction and from the fact that a broader type of investment income (interest, capital gains, and services) will be available for tax credits under the Chilean Income Tax Law. However, it is not altogether clear whether the loss of revenues from the reduction of taxes applied to income accrued by U.S. residents in Chile will be rewarded with greater FDI from the United States in Chile. This conclusion is mainly based on the fact that unless the U.S. investor has an excess tax credit position, such reduction will be offset by the higher U.S. corporate income tax on the income. Furthermore, the loss of revenues can be especially relevant for Chile as a result of applying the most favored nation clause included in several tax treaties signed with other Organisation for Economic Co-operation and Development (“OECD”) members.