Current Tax Regime Research Articles

The Voyage of Taxation in India-The One Tax, One Nation Policy

The present paper aims at providing a comprehensive study of One Tax, One Nation Policy that will maybe be implemented shortly in India. Taking FY 2023-24, this paper analyses how this new taxation system will benefit the Indian economy, compared to the current tax regime. It covers various disciplines including Mathematics, Statistics, Economics, Accounting and Finance. Furthermore, it provides a brief history of the journey of our taxation system, dating back to Kautilya’s time.

Corporate income taxation and multinational production

AbstractThrough the lens of a quantitative general equilibrium model of international trade and multinational production, this paper studies corporate tax competition and cooperation among asymmetric countries. The model theoretically supports the empirical regularities that corporate income taxation influences multinational firms' location and production decisions. Calibrating the model to three asymmetric countries for a hypothetical tax competition, I find that race to the bottom occurs in the Nash equilibrium. Furthermore, counterfactual analysis of the global minimum corporate tax shows welfare reduction compared to the equilibrium of tax competition but welfare improvement compared to the current tax regime.

International Taxation of Offshore Indirect Transfers of Mineral Assets: Legal Analysis Considering the Principle of Fairness and Sustainable Development

This article evaluates the current international tax regime that is applicable to gains on offshore indirect transfers (OITs) in the mineral industries against the concepts of fairness and sustainable development. It is first argued from a legal perspective that these two concepts encompass the principles of equality and legal certainty. Article 13(4) of the OECD (Organization for Co-operation and Development) and UN Model Tax Treaties and Article 9 of the Base Erosion and Profit Shift (BEPS) Multilateral Instrument for tax treaties are subsequently analysed to determine to what extent these provisions contribute to supporting tax equality among businesses and between countries as well as promoting legal certainty for both the taxpayers and tax authorities. It was determined that the structuration of mining operations in the form of joint ventures may pose particular challenges, including difficulties in valuing mineral assets or determining the sources from which interests derive value. In this respect, the inclusion of certain exceptions in Article 13(4) of tax treaties is proposed. One such instance could be the exclusion of the scope of the provision of gains made by alienators that hold a certain level of participation. The authors conclude that each country should determine whether to tax such capital gains, taking into account its own specificities and examining the tax system in its entirely. However, the current tax regime is a positive step forward towards fairer taxation and contributes to the fulfilment of specific sustainable development goals (SDGs), at least from the perspective of developing countries. Fairness, legal certainty, tax equality, offshore indirect transfer, sustainable development, tax avoidance, mineral industries, developing countries

The cost of a transition to electric vehicles in Africa: A case study of Ghana

This case study investigates the total cost of ownership (TCO) of four plug-in electric vehicles (PEV) compared with an internal combustion engine vehicle (ICEV) in Ghana over 20 years. The TCO model incorporated the manufacturer’s suggested retail price (MSRP), tax, fuel cost, charging cost, maintenance cost, social cost, and residual value including depreciation. A sensitivity analysis was used to determine the effect of the factors on TCO. Emissions of PEV were determined based on the emission factor of the energy mix. The results show that under the prevailing energy mix, the TCO of ICEV is higher than PEV by at least 30%. While the TCO of three of the PEV was consistently lower in each of the 20 years, but that of the Tesla Model 3 was not until the 12th year. High MSRP and tax regime were contributory factors. While the social cost of ICEV was found to be 164% higher, a renewable energy mix of below 20% was found to be detrimental to the environmental advantage of PEV in Ghana. For each ICEV replaced by an electric vehicle, one-third of emissions savings will be achieved under the prevailing energy mix. But at a renewable energy mix of 15% and below, PEV in Ghana will give more emissions than ICEV. Future expansion in the energy grid should focus on renewable energy. Import tax, if waived could reduce TCO by $0.12/mile. Consequently, the current tax regime on PEV in Ghana could be revised. It is also recommended that the price difference between electricity cost per kilowatt and fuel cost per gallon should always exceed $4 dollars to make PEV competitive.

Problems of development and economic evaluation of production of natural hydrocarbons on the offshore of the Arctic Seas

The purpose of this article is to substantiate taxation models that have contributed to an increase in the efficiency of offshore oil and gas fields that are at the stage of mature development in the harsh Arctic conditions. The development of Arctic fields under the current tax regime is on the verge of profitability. As an experiment, an economic assessment of the main economic indicators of the option for the development of the Prirazlomnoye field was carried out, taking into account various tax mechanisms used to assess the effectiveness of the development of offshore oil and gas fields. The calculation results showed that the application of the tax regime in force in Russia makes the development of the Prirazlomnoye field efficient, but with a relatively low profitability for the license holder. As an alternative, the tax mechanisms laid down in the production sharing agreements in China and Russia were used, which showed a high economic effect with a low level of risk. It can be concluded that the use of taxation models, which are similar in nature to a production sharing agreement, significantly increases the efficiency of the Prirazlomnoye field development, and can bring greater financial benefits to the license holder in comparison with the current tax regime in the Russian Federation.

The Impact of Fiscal Policy on Income Inequality: A Case Study of Pakistan

This study investigates the impact of various fiscal policy instruments on the income inequality of Pakistan using an Auto Regressive Distributed Lag (ARDL) model on annual data. We find that direct taxes reduce income inequality, measured using the Gini index, while indirect taxes increase disparities. As the major portion of tax revenues are indirect taxes, the current tax regime of Pakistan does not achieve income redistribution. Similarly, development expenditures have significantly reduced income inequality, likely through the creation of employment opportunities. On the other hand, the overall fiscal deficit increases income inequality, due to a rising public debt financed by (regressive) indirect taxes. This study suggests that in the case of Pakistan, where direct taxes are low, a large shadow economy exists, and weak tax administration prevails, an increase in development expenditures and broadening of the tax base of direct taxes should be the main fiscal policy tools for income redistribution. Moreover, persistent high fiscal deficits in the long run should be avoided. Finally, governments should reduce educational inequalities and promote democratic values in the country in order to promote greater fairness in distribution of income.

НАЛОГОВАЯ ПОЛИТИКА РЯДА НЕФТЕГАЗОДОБЫВАЮЩИХ СТРАН

The article discusses tax models of various oil and gas producing countries. Their comparative analysis was carried out on the basis of a technical and economic assessment of the development efficiency of one of the fields in the Perm Territory. An assessment of the current tax regime showed that the development of the field is on the verge of economic efficiency. Therefore, to assess it, a reduction in the tax burden is required. It is shown that the easiest way to increase the flexibility of the tax system is to differentiate tax rates depending on the level ofproduction and prices. It is concluded that it is necessary to resort to the payment of Royalties or to use an alternative taxation mechanism in Kazakhstan.

A Transparent, Numerical Solution to the Joint Estimation of Imputation Credit Value and Cash Dividend Value

Multiple regression analysis leads to coefficient estimates that need to be jointly interpreted. This holds even if correlation amongst independent variables is at a level that researchers typically consider to be tolerable. In estimating the value of imputation credits using multiple regression, experts and regulators have typically considered estimates of the value of imputation credits in isolation. They apply the credit value estimates to pricing models under the assumption that cash is fully valued by the market. We call this problem selective interpretation. We address the challenge of selective interpretation by conducting an advanced “if-then” analysis. We ask if cash and credits are truly valued by investors at x and y, then what range of regression coefficients would occur if the regression could be repeated over and over again? This allows us to estimate confidence intervals for the value of cash dividends and imputation credits by making transparent assumptions about the independence of observations and the non-constant variance of error terms. Our paper has application to any research that relies on multiple regression analysis. The practical implication is that in the current tax regime, under which investors can receive a cash rebate for imputation credits, the market value of imputation credits lies within the range of 0.01 to 0.15. A dollar of cash is valued by the market at somewhere between 87 cents and 92 cents. But, at the lower end of the cash value (0.87), credits are worth between 0.13 and 0.15, and, at the higher end of cash value (0.92), credits are worth between 0.01 and 0.10. The value of imputation credits has moved over time in a direction consistent with the changing tax treatment. Prior to the introduction of the 45-day rule, credits had an estimated value within the range of 0.07 to 0.24, but the value decreased to a range of just 0.00 to 0.02 once the 45-day rule was introduced. Upon the introduction of the cash rebate, the value of credits has increased to a range of 0.01 to 0.15.

Impact of goods and services tax on Indian economy

Goods and services tax is nothing new, but a well desired value added tax that covers both goods and services. Goods services tax is a tax that is levied on the valve added to a purchased supply before it is sold again. Goods and services tax is defined as the giant indirect tax structure designed to support and enhance the economic growth o f the country. Goods and services was based on the nation ‘one nation, one market, one tax’. Goods and services tax would change the current tax regime of production based taxation to a consumption based system. Goods and services Tax (GST) is essentially a tax only on valve of addition at each stage. GST will be on the transaction value, i.e. taxes will be levied on the price actually paid or payable. Hence, resulting in the contribution of making the Indian economy stronger and powerful. GST is proposed system of indirect taxation in India merging most of the existing taxes into single system of taxation. The main purpose of this paper is to study Impact of Goods and Services Tax on Indian economy. This research paper highlights the positive and negative impact of the GST in the Indian tax system. This study was done based on secondary data collected from multiple sources of evidence, in addition to books journals websites and newspapers.

Indian Income Tax Law & Protracted Litigation – A Study

Indian Income Tax Law & Protracted Litigation – A Study

Impact of gst on common man

Goods And Services Tax (gst), hailed as one of the most powerful tax reformswhich india has ever seen, purports to do away with the multiple tax regulations on most ofthe goods and services. gst would change the current tax regime of production-based taxationto a consumption-based system. there is no doubt that the corporates would benefit once thegst has been rolled out. however, the advantages to the common man are still speculative. wehope that the end consumer would also reap the benefits of the new tax regime, once thebusiness houses have transitioned completely to the new tax structure and start to pass on thebenefitsto the average indian. the proposed date for gst implementation is the 1st of july2017.

Tourism Taxation, Politics and Territorialisation in Tanzania's Wildlife Management

Tourism activities occurring on communal lands such as Wildlife Management Areas (WMAs) are increasing in Tanzania. This is the result of natural resources governance reforms aimed to empower communities to manage and benefit directly from resources found in their jurisdictions. This article explores the impacts of taxes imposed on tourism activities occurring on communal lands and the emerging politics of resource and revenue sharing among WMA member villages. In the process, we use empirical data gathered from two WMAs in northern Tanzania between 2006 and 2016. We find that while the current high tax rates on tourism businesses occurring at the grassroots level reduce revenue earned by communities, the main challenge facing the studied WMAs is the model of revenue sharing among WMA member villages. Currently, as the result of WMA regulations, villages which had prior arrangement with tour operators in their land have suffered revenue losses as they have to share revenue equally with other members of the WMA. We argue that the current tax regime coupled with the contested cost and benefit sharing model not only lower returns to grassroots communities--which in turn discourage their much needed participation in conservation-tourism initiatives--but also generate new forms of struggles over resource control.

Tax Inversions: Time to Take a Look in the Mirror Reflections on the Inversion Phenomenon

This article aims to utilize the evolution of the inversion phenomenon and its countermeasures as a mirror which can be held to the current tax regime, both globally and locally, in order to highlight some of the issues which it faces. Whilst the US has typically favoured a direct, reactive method of countering inversions, the UK has largely relied on more generalized anti-avoidance principles to achieve the same aim. Although the inversion phenomenon seems to have slowed, it remains to be seen whether these differing approaches have eradicated the practice completely. This article posits that the story of the inversion phenomenon up to this point is illustrative of many of the problems which the tax regime must deal with both presently and in the future. In particular, it is suggested that the allure of tax competition seems too strong for the optimism of increased international cooperation, notably in the form of the BEPS project, to overcome in the near future.

Rethinking Taxation of Privately Held Businesses

This article proposes the repeal of current Subchapters K and S, as well as the removal from the ambit of Subchapter C of all privately held corporations and the replacement of the current tax regime for privately held business with a new regime under which all privately held businesses (including wholly owned corporations and limited liability companies, and unorganized sole proprietorships) would be taxed at the entity level under a uniform rate schedule, regardless of the form of organization. All publicly traded companies, and their controlled corporate subsidiaries, would continue to be governed by all of the structural rules of Subchapter C (and any other relevant Code sections outside of Subchapter C.) Nevertheless, the profits of privately held companies subject to the entity-level tax would not be double taxed upon distribution. Rather, a single-level tax, at the owners’ tax rates would be achieved by applying the imputation-credit model for corporate tax integration to all distributions (including profits of a sole proprietorship that have not been reinvested) to the equity owners of the entity. As a consequence of the abolition of pass-through taxation and the imposition of an entity-level tax, entity losses no longer could be passed through to the entity’s owners to offset positive income from other sources. This proposal emanates from decades-long problems with the administration of Subchapter K, governing the taxation of partnerships, and the incoherence of having three separate regimes — Subchapter C, Subchapter K, and Subchapter S — apply to privately held businesses depending of the form of organization and available elections. While it does not originate as a refinement of recent proposals to reduce the corporate tax rate and to clean up the base, its adoption would facilitate such a move. Because such a high percentage of U.S. business income is now earned by unincorporated business, it would avoid increased distortions in the choice of business entity due solely to tax planning.

Policy Choices in Iran's Current Tax Regime

In this article, the author considers recent developments in the Iranian tax system from the specific perspective of tax policy. In particular, he focuses on the limited attempts to extend the tax base, whilst subsidizing lower earners and encouraging domestic industry.

Casino Taxation in Macao: An Economic Perspective

Macao's gaming industry has experienced dramatic growth for 8years, yet with certain social costs due to compulsive gambling. The government has come under pressure for tax cuts even though its gaming receipts are falling relatively to the casino retained revenue. The request for tax relief is triggered by a recent decline in net profit despite fast growing gross gaming revenue under favorable market conditions. This is very likely caused by a substantial hike in casino operating costs due to increased competition and might also signal the presence of the principal-agent problem. Given the regressivity of gaming tax with respect to net profit, it is no surprise that casinos with lower profitability are more prone to seek tax cuts. The source of Macao gaming profit hinges on three distinct factors: rising demand from China, monopoly location for casinos, and market structure of oligopoly. These factors provide economic justifications for the current tax regime of Macao with a strong ability to pass tax burdens on to massive visitors. The government relies on casino tax revenue to deal with gambling related problems and promote local diversified development. Pushing for tax variability may create policy instability, business uncertainty, and unpredictable prosperity in the long term.

Regulating the Political Speech of Noncharitable Exempt Organizations after Citizens United

The role of noncharitable exempt organizations was perhaps the key feature of this year’s election. Senator Baucus as Chairman of the Senate Finance Committee, for example, sent a letter calling upon the IRS to survey major noncharitable 501(c) organizations to ensure that they are obeying the rules regarding political activity, including limits on politicking. In Citizens United, however, the Supreme Court decreed that “[ o sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.” Nowhere does Citizens United acknowledge the tax limits on political speech or address their constitutionality. Supreme Court cases predating Citizens United have justified these tax limits on the grounds that government has no duty to subsidize political speech. To the extent that “no duty to subsidize” is and remains the justification, nothing in Citizens United explicitly threatens the current tax regime. Nonetheless, we must ask whether the reasoning of Citizens United has undermined Regan v. Taxation with Representation of Washington (“TWR”), the key ”no duty to subsidize” case. In addition, the rules regarding politicking by tax exempt entities have changed significantly since TWR. As a result, the standards as announced in the case and interpreted by its progeny may call for a different conclusion today. Furthermore, this piece will explore both the tax rules that are, and some that might be, applicable to the political speech of noncharitable tax exempt organizations. Part I will review TWR, its ancestors and its progeny as well as Citizens United. Part II will describe the current tax rules regarding lobbying and politicking applicable to exempt organizations that can engage in unlimited lobbying and politicking as part, but not the primary purpose, of their activities: section 501(c)(4) social welfare organization, section 501(c)(5) labor organizations, and section 501(c)(6) trade associations. The discussion will include consideration of treatment of contributions to such organizations for gift tax purposes and the special tax that may be applicable to membership dues because of lobbying and politicking by such organizations. Part II will also review the history of section 527, the section governing political organizations, with particular attention to the 2000 amendments that added registration and disclosure requirements. Part III examines the possible impact of Citizens United on the tax law’s current approach to political speech. It highlights the difference between the definitions of lobbying provided in the Internal Revenue Code and Treasury regulations and the uncertain “facts and circumstances” approach employed by the Internal Revenue Service (“IRS” or “Service”) in identifying politicking. It offers a reconciliation of seemingly contradictory language in Taxpayers With Representation and Citizens United regarding use of affiliates to conclude that Citizens United has not sub silentio overturned TWR’s “no duty to subsidize” holding. It defends, albeit unenthusiastically, the 2000 amendments to section 527. Part IV proposes a number of possible additional disclosure requirements for noncharitable exempt organizations engaged in lobbying and politicking. They include requiring applications for exemption, establishing a new category of exempt organizations for organizations primarily engaged in lobbying and expanding disclosure of contributors for all or for some noncharitable exempt organizations. It also explores the possibility of taxing the politicking expenditures of noncharitable tax exempt organizations not conducted through a separate segregated fund, whether or not the organization has investment income. The piece concludes by reminding us that the tax law regulation cannot substitute for campaign finance regulation.

Long-Run Growth Versus Welfare: The Importance of Transitional Dynamics When Assessing Alternative Fiscal Policies

This paper analyzes the effects of distortionary taxes on growth and welfare in an endogenous growth model with a public capital externality. The model is calibrated to the U.S. economy, and experiments are run under which the tax regime is shifted from the current mix of capital income, labor income, and consumption taxes to a fiscal policy regime with complete reliance on a single source of taxation, including lump-sum tax. We find that tax policy changes that induce higher growth rate do not necessarily result in higher welfare due to different transitory effects. In fact, a shift to capital income tax while delivering highest long-run growth results in lowest welfare. Furthermore, long-run gains take many years - a generation - to start getting realized. Among different sources of taxation, we find that, in the long run, complete reliance on a consumption tax dominates the current tax regime; however, the current tax regime dominates an exclusive labor income tax, which in turn is less welfare-reducing than an exclusive capital income tax. These results are due to the fact that taxes on labor income and capital income distort investment decisions in reproducible capital, i.e., human capital and physical capital, and therefore have cumulative effects that do not result from a tax on consumption. Unlike previous studies, we account for the welfare effects of transition using optimal decision rules all along the transition path.

Tax incentives on foreign direct investment

The authors provide an overview of tax incentives available to foreign direct investment and their administration under the current tax regime.

Securing Jobs or the New Protectionism? Taxing the Overseas Activities of Multinational Firms

Tax policy toward American multinational firms would appear to be approaching a crossroads. The presumed linkages between domestic employment conditions and the growth of foreign operations by American firms have led to calls for increased taxation on foreign operations - the so-called end to tax breaks for companies that ship our jobs overseas. At the same time, the current tax regime employed by the U.S. is being abandoned by the two remaining large capital exporters - the UK and Japan - that had maintained similar regimes. The conundrum facing policymakers is how to reconcile mounting pressures for increased tax burdens on foreign activity with the increasing exceptionalism of American policy. This paper address these questions by analyzing the available evidence on two related claims - i) that the current U.S. policy of deferring taxation of foreign profits represents a subsidy to American firms and ii) that activity abroad by multinational firms represents the displacement of activity that would have otherwise been undertaken at home. These two tempting claims are found to have limited, if any, systematic support. Instead, modern welfare norms that capture the nature of multinational firm activity recommend a move toward not taxing the foreign activities of American firms, rather than taxing them more heavily. Similarly, the weight of the empirical evidence is that foreign activity is a complement, rather than a substitute, for domestic activity. Much as the formulation of trade policy requires resisting the tempting logic of protectionism, the appropriate taxation of multinational firms requires a similar fortitude.