Differences In Tax Rates Research Articles

Controlling Human Utilization of Failure-Prone Systems via Taxes

We consider a game-theoretic model where individuals compete over a shared failure-prone system or resource. We investigate the effectiveness of a taxation mechanism in controlling the utilization of the resource at the Nash equilibrium when the decision-makers have behavioral risk preferences, captured by prospect theory. We first observe that heterogeneous prospect-theoretic risk preferences can lead to counter-intuitive outcomes. In particular, for resources that exhibit network effects, utilization can increase under taxation and there may not exist a tax rate that achieves the socially optimal level of utilization. We identify conditions under which utilization is monotone and continuous, and then characterize the range of utilizations that can be achieved by a suitable choice of tax rate. We further show that resource utilization is higher when players are charged differentiated tax rates compared to the case when all players are charged an identical tax rate, under suitable assumptions.

A Scandinavian ‘high-tax, high-spend’ model for regions? The impact of enhanced regional fiscal autonomy

ABSTRACTThe fiscal powers of the Scottish government have increased significantly, resulting in the first (modest) regional differences in income tax rates within the UK. In fact, the current degree of fiscal autonomy would permit a radical shift towards a high-tax, high-spend ‘Scandinavian model’. It is found that the impact of such a change on the Scottish economy is likely to be positive only if the public value the increased public spending and are willing, and able, to accept a corresponding reduction in their take-home pay. It is concluded that the current bargaining system is unlikely to deliver such an outcome.

Pengaruh Kualitas Audit, Size, Leverage, dan Kepemilikan Keluarga pada Agresivitas Pajak

This study aims to obtain empirical evidence of the effect of audit quality, size, leverage, and family ownerships on tax aggressiveness. The population of this research is manufacturing company listed on the Indonesia Stock Exchange in 2013-2017. The method of determining sample using non probability sampling method with purposive sampling technique and obtained 125 observations. Data analysis techniques uisng multiple linear regression. The result of analysis shows that audit quality has a negative effect on tax aggressiveness measured by cash effective tax rate (CETR) and has positive effect on tax aggressiveness measured by book tax difference (BTD). Size has a negative effect on tax aggressiveness measured by effective tax rate (ETR) and book tax difference 9BTD). Leverage has a positive effect on tax aggressiveness measured by effective tax rate (ETR). Family ownerships has a positive effect on tax aggressiveness measured by cash effective tax rate.
 Keywords: audit quality, size, leverage, family ownerships, tax aggressiveness

The Political Economy of Indonesia’s Renewable Energy Sector and Its Fiscal Policy Gap

This research paper identifies fiscal policy gaps that occur in Indonesia’s renewable energy (RE) sector and analyses its political economy. Primary data from 37 stakeholders and secondary data from fiscal policies from Indonesia’s 2007–2017 taken from Ministry of Finance (MOF) and Ministry of Energy and Mineral Resources (MEMR) regulation databases. The fiscal policy data were analysed using a cluster approach and meta-synthesis method. The results show that Indonesia has experienced multi-faceted principal-agent problems between PT PLN, the agent with sole authority to manage electricity transmissions, and various principals, namely the Ministry of State Owned Enterprises (MSOE), the MEMR, the Ministry of Industry (MOI) as the intermediary between domestic and foreign RE industries, and the MOF. While changing the MEMR’s feed-in-tariff (FiT) policies sends an uncertain policy signal, the MOF’s fiscal incentive policies other than FiT to promote RE development in Indonesia remain sub-optimal; the fiscal policies required to incentivise a large volume of small- and medium-scale investment in RE are absent. Differentiated tax rates and tax-break periods for national and foreign companies on the micro, small and medium scales could significantly accelerate the development of RE by both domestic and foreign companies, supporting Indonesia in achieving its sustainable development goals and emission reduction targets under its nationally determined contribution.

Taxation and competitiveness of the Greek travel agencies

The purpose of this study is to investigate the impact of the tax burden on the travel agencies in Greece as compared to the corresponding effect of taxes on the travel agencies of the competitive countries, Spain, Italy, Croatia, Malta, Cyprus and Turkey. The aim of this paper is to reveal the impact of taxation on the tourism sector of Greece in relation to the travel agencies of the competitive countries. A primary research was conducted in the travel agencies of Athens metropolitan city. The results of the research showed that the gross sales increases with a decreasing trend in the years 2014–2016. Furthermore, package tours sales are falling with the highest decrease being recorded in external package tour sales (-6.17 %). The sales of internal package tours record a decrease of 1.44 %. The Greek travel agencies believe they have financial losses and competitiveness decline because of the increase in income tax and Value Added Tax (VAT). They consider that have experienced a fall of approximately -53.33 % in gross sales, as a results of losses from Cyprus, Turkey and Spain. However, the Greek travel agencies appreciate that the level of their competitiveness (based on the differences in income tax and VAT rates) is the lowest in relation to the aforementioned competitor countries, assessing the most competitive travel agencies to be those of Cyprus, Turkey, Spain, Croatia, Italy and Malta. The limitations of this work include the issue of fiscal policy which focuses on and explores the main taxation of income and VAT and their rates, ignoring other “secondary” taxes, fines, etc.

Differences in Inward FDI Performance Between the Southern Eurozone and Eastern EU Members: A Panel-Data Analysis Over 2004-2016

Abstract The aim of this paper is to examine the factors that explain the observed differences in inward foreign direct investment (FDI) performance between the peripheral southern eurozone countries (namely Greece and Portugal) and the eight Eastern EU members (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia) that joined in 2004. The empirical analysis, which is based on the estimation of a panel-econometric model during the 2004-2016 period, provides for Greece and Portugal policy relevant insights with respect to improving the international competitiveness and attracting more FDI inflows vis-a-vis Eastern EU countries, which have outperformed the two southern eurozone members. The results indicate that, among other factors, positive differences in labour costs and corporate tax rates between southern eurozone members and Eastern EU member states largely explain the observed differences in inward FDI performance among those two country groups. The higher labour costs and corporate taxation in Greece and Portugal exhibit a strong negative impact on their relative inward FDI performance vis-avis Eastern EU members. Furthermore, differences in economic openness and integration into vertical production networks also have a significant effect on inward FDI performance.

Tax Planning and Firm Value: Evidence from Malaysia

The main objective of this study is to determine the impact of tax planning on firm value of firms listed in Bursa Malaysia. Tax planning proxies in this study are the Effective Tax Rate (ETR) and Book Tax Differences (BTDs). The 387 samples data were collected from the DataStream from period of 2014 to 2016. After controlling the firm size, leverage, asset tangibility, firm age and dividend, the regression results show that ETR has a significant and positive relationship with firm value while BTDs has insignificant negative relationship with firm value. Firm with less tax planning activities may signal investors that the firm is more transparent in publishing their financial information. Most of our control variables such as leverage, asset tangibility, firm age and dividend have negative relationship with firm value. This study suggests that ETR proxy is suitable to determine firm value rather than BTDs. For future research, this study can be expanded by using more sample size from a longer time frame of research.

Class Altruism and Redistribution

Why do tax rates vary so much across countries? We study the role of other-regarding preferences and ethnic fragmentation in redistribution. The government of a two-party democracy is elected by altruistic voters and decides on a redistributive income tax. Social identification directs voters' altruism toward specific social groups. We identify three main factors that lead to low levels of redistribution in the political equilibrium: (i) strong in-group altruism of the rich voters---which we refer to as class altruism; (ii) weak universal altruism among all voters---in particular the rich; and (iii) ethnic fragmentation among poor voters. Using survey data, we document evidence on the pattern of altruism in the United States and the European Union and find that our model predictions are consistent with the observed differences in tax rates.

Economic impact of the change in tax rate on small enterprises of manufacturing and construction sectors: Evidence from Russia 2006-2014

The hypothesis about positive influence of lower tax rate was tested on the Russian small businesses of construction and manufacturing sectors. The period from 2006 to 2014 includes the three-year gap, during which the net income tax rate was the same for all Russian regions, and the six-year interval of regionally differentiated tax rates. Quantitative estimates of the consequences of tax change without time lag, with time lags 1 and 2 year were made on the basis of double logarithmic regressions with fixed effects. Positive effect of lower tax rate was documented. The number of enterprises was the indicator, which was influenced most. A regional tax rate decrease by 1 per cent results in an increase of the number of small enterprises by 0.1-0.2%. This effect becomes evident in the first year of regional tax rate change and remains on the same level during the following two years. 1% decrease in tax rate led to 0.1% increase in the turnover of the company. Tax stimulus led to an increase of employment in manufacturing industry (the coefficient of elasticity is 0.1), while the impact on employment in construction sector was not identified. There is a potential for expanding tax revenues to the Russian budget system by increasing the taxation base with the help of the positive effect from tax rate reduction.

Intra-school district capitalization of property tax rates

While previous studies have attempted to measure property tax rate capitalizations by proximate housing prices, disentangling school quality, and its associated amenities, from tax rates has impeded accurate estimation. I overcome this issue by investigating school districts containing varying tax rates. Identification is derived from the use of school and spatial-temporal boundary fixed effects to eliminate unobserved variation associated with tax districts that can confound capitalization estimates. Results from the primary model provide evidence of a negative capitalization of tax rate levels that corresponds to full capitalization at discount rate of nearly 3.5 percent. Further, property fixed effects are uniquely incorporated within the boundary identification method to show that tax rate changes are capitalized similar to baseline tax rate differences.

Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms

The purpose of this study is twofold. First, it examines the association between income‐shifting arrangements consisting of transfer pricing aggressiveness, tax haven use and foreign tax rate differentials, and Financial Interpretation No. 48 (FIN48, now ASC740–10‐25) unrecognized tax benefits (UTBs). Second, it analyzes the impact of audit specialization on the association between income‐shifting arrangements and UTBs. Using a dataset of 286 US multinational firms over the 2007–2016 period (2,097 firm‐years), our regression results show that income‐shifting arrangements represented by transfer pricing aggressiveness, tax haven use and foreign tax rate differentials are significantly positively associated with UTBs. We also observe that audit specialization magnifies the positive association between transfer pricing aggressiveness and UTBs, and foreign tax rate differentials and UTBs. Finally, in additional analysis we provide some evidence that the positive association between income‐shifting arrangements and UTBs is magnified in the post‐2010 uncertain tax position reporting requirement period. Overall, our study extends prior research on the topic of audit characteristics (i.e., audit specialization) and tax aggressiveness.

Minimizing Taxes: Keeping it All in the Family

Households can reduce taxes by transferring taxable income generating assets from high income family members to those in lower tax brackets. Parents, for instance, may exploit differences in the marginal tax rates that they face and those that apply to their children. But under progressive taxation, the marginal tax rates may converge upon transferring large sums from high to low income members as the income of the recipient is pushed into higher tax brackets, thereby limiting the tax arbitrage benefits of intergenerational transfers. As an alternative, and under a more effective form of income splitting, high income family members may create trusts for the benefit of other family members, and divide the transferred assets among a large number of trusts so as to subject the income from each trust to the lowest possible tax bracket. The Tax Reform Act of 1986 modified the treatment of trusts such that the maximum individual tax rate became applicable at very low levels of trust taxable income thereby erasing much of the benefits of transferring income through this vehicle. This paper provides an overview of the tax treatment of income received by individuals and that of trusts, and provides evidence on how changes in differential tax rates introduced in 1986 altered the use of trusts as means to splitting income and sheltering it from taxation.

State ownership, performance evaluation and tax avoidance

ABSTRACTIn 2004, the central and local State-owned Assets Supervision and Administration Commission (SASAC) announced how to evaluate the performance of management of state-owned enterprises (SOEs) that are under its control. This article examines how the different performance evaluation systems in different provinces influence the tax avoidance behaviour of SOEs. We find that only four of them – Shanghai, Guangdong, Zhejiang and Fujian – adopt after-tax profit as the evaluation index, while all the other provinces use before-tax profit. We believe that SOEs which use after-tax profit as an evaluation index have higher incentives to reduce the tax burden than those which use before-tax profit as an evaluation index. Following previous literature, two measurements of tax avoidance are used in this paper: effective tax rate and book-tax difference. Based on 8426 observations from 2007 to 2015, we have two main conclusions: (1) compared with SOEs that are evaluated using before-tax profit as the evaluation index, SOEs that are evaluated using after-tax profit have lower effective tax rate (ETR) and higher book-tax difference (BTD); (2) compared with SOEs that are evaluated using before-tax profit as the evaluation index, SOEs that are evaluated using after-tax profit have a higher level of substitution between debt financing and tax avoidance.

Base Erosion and Profit Shifting Case Studies to Examine Conflicting Views on Taxation

Multinational corporations have contributed to the unfair phenomenon of tax base erosion and profit shifting by taxation planning and transferring profits into countries or territories with low tax rates. The OECD, under the push from G20 member countries, launched 15 action plans for BEPS (Base Erosion and Profit Shifting), as an attempt to drive reforms in tax systems across different countries for a just and efficient taxation system. As part of this global initiative, the Taiwanese government is also amending its tax laws for better consistency, substance, transparency and fairness. This paper examines Google, Amazon and Starbucks headquartered in the U.S. and Feng Tay headquartered in Taiwan and analyzes how multinational corporations leverage the difference in tax rates in different countries and the existence of bilateral tax agreements for tax planning and profit shifting. The European Commission holds the view that such practices violate the laws of the European Union. This paper conducts an in-depth analysis on the arguments from both sides and develops suggestions on the basis of tax fairness, moral issues and research findings. It is hoped that taxations and profits travel in a just and efficient environment so that taxation fairness benefits economic developments and effective use of resources.

Determinanty napływu bezpośrednich inwestycji zagranicznych do wybranych krajów Europy Środkowej

The aim of the article is to assess the determinants of inflow of foreign direct investment (FDI) to Central European countries (Poland, the Czech Republic and Slovakia), and in particular the impact of changes in corporate income tax rates, both for the investor and the host country in relation to bilateral flows of foreign capital in 2010-2015. The study was based on the gravity model, which is widely used in international management research. The following variables were used for the study: inflow of foreign direct investment (current prices, EUR), GDP (current prices, EUR), geographical distance between capitals, GDP per capita (current prices, EUR), difference in corporate tax rates between Individual countries as well as binary variables defining, inter alia, means of payment between states and whether they share a common border or not.

Cross-Country Differences in Corporate Tax Rates, Multinational Operations, and Tax Avoidance

Cross-Country Differences in Corporate Tax Rates, Multinational Operations, and Tax Avoidance

Taxpayer Responses for Housing Acquisition differential tax rates

Taxpayer Responses for Housing Acquisition differential tax rates

Commuting and Taxes: Theory, Empirics and Welfare Implications

We examine the effect of interstate differences in income taxes on commuting times. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commuting patterns, but the sign of the effect depends on whether taxes are residence-based or employment-based. Empirically, tax differentials have a large effect on commuting times for affluent households and mobile households. We show that commuting times are a sufficient statistic to measure the spatial welfare effects of tax policy. The model and empirical design can be used by economists to study other policy differences. This article is protected by copyright. All rights reserved.

Research on Transfer Pricing and International Tax Avoidance of Chinese Enterprises: An Empirical Test on Commodity Export Trade

Multinational enterprises that shift profits and thus conduct international tax avoidance through transfer pricing mode have aroused widespread concern in developed countries. In recent years, China continues to expand foreign direct investment scales, but accompanying phenomenon of international tax avoidance has not aroused enough attention. According to the model established by Bernard et al. (2006), and considering the specific provisions of Chinese anti avoidance system, this paper puts export amount and tax rate difference into the decision equation of price differences, so that it can theoretically explain the existence and heterogeneity of international tax avoidance in Chinese foreign investment enterprises through transfer pricing and anti avoidance effect. Then it uses Chinese customs export data from 2000 to 2006 and DDD method to conduct an empirical test. It comes to the results as follows: firstly, Chinese foreign investment enterprises use transfer pricing to do tax avoidance in the export trade, and the greater tax differences between destination countries and China lead to deeper degree of differences of transferred prices deviating from prices of fair trade; secondly, the level of tax avoidance varies with enterprise ownership and industries to some extent, namely tax avoidance of domestic enterprises and capital intensive industries are more serious than foreign enterprises and labor intensive industries respectively; thirdly, tax treaty plays a very limited role in anti tax avoidance focusing on transfer pricing. This paper provides a way of thinking to help us to understand current going-out behavior of Chinese enterprises from a perspective of tax avoidance motivation and also a reference for current Chinese anti tax avoidance system.

Distributional and Environmental Effects of an Emissions-Differentiated Car Sales Tax

European countries introduced a combination of demand-side fiscal policies and mandatory supply-side emissions standards to reduce CO2 emissions rates of new cars. I quantify the equilibrium response to one of the most drastic demand-side policies, the Finnish CO2 differentiation of automobile sales tax rates. Despite having a drastic market impact, this environmental tax reform did not drive the observed decline of new-car CO2 emissions rates, given the concurrent introduction of mandatory EUCO2 emissions standards for manufacturers. The CO2 tax-rate differentiation however led to increased local pollution by promoting the sale of diesel-powered cars. The tax reform had a positive net welfare effect as it lowered tax rates on average. It was nonetheless also a regressive policy with large tax revenue losses and a disproportional benefit to high-income consumers. Optimal fiscal policy aiming to balance environmental and public finance goals needs to consider both the market structure as well as other concurrent policies on different levels of government.