Differences In Tax Rates Research Articles

The Structure of Business Taxation in China

This paper documents facts about the structure of business taxation in China using administrative tax data from 2007 to 2011 from the State Taxation Administration. We first document the importance of different business taxes across industries. Although corporate income taxes play an important role for manufacturing firms, these firms also remit a large share of their tax payments through the value-added tax system, through the excise tax system, and through payroll taxes. Gross receipts taxes play an important role for firms in other industries, leading to spillovers that may affect the overall economy. Second, we evaluate whether the structure of China’s tax revenue matches its stage of development. A cross-country comparison of sources of government revenue shows that China collects a high share of tax revenue from taxes on goods and services and a high share of income tax on corporations. Finally, we study whether firm-level differences in effective tax rates can be an important source of allocative inefficiencies. Decomposing the variation in effective tax rates across firms, we find that government policies, including loss carry-forward provisions and preferential policies for regional, foreign, small, and high-tech firms, have significant explanatory power. Nonetheless, although effective tax rates vary along a number of dimensions, tax policy does not explain the large dispersion in the returns to factors of production across firms.

The role of tax system complexity on foreign direct investment

ABSTRACT We present new cross-country empirical evidence that tax system complexity affects the location of international investment. The evidence comes from a database of foreign direct investment (FDI) bilateral flows for all OECD countries over the 2013–2016 period, and from the Doing Business survey, which collects several measures of tax system complexity and effective tax rates. By means of a gravity model, we consider the impact of destination and parent country characteristics on firm investment decisions. An increase in the difference between tax complexity in the home country and the destination country is related with an increase in FDI outflows from home to destination. We do not find any significant impact of tax rate differentials on FDI outflows.

INNOVATSION-INVESTITSION FAOLIYATNI SOLIQLAR VOSITASIDA RAG‘BATLANTIRISHNING XALQARO AMALIYOTI

This article describes international practice of tax regulation, viz: promotion of innovative and investment activisms of companies. New forms, positive and preferential aspects of tax benefits and preferences have been studied in the research framework. In particular, such features and stimulating objects of preference as tax credits, investment tax credits, research tax credits, have been closely explored. At the same time, the article presents a review of literature on the topic and a comparative analysis of the classification of schemes designed for stimulating innovation via taxation. Moreover, the feasibility of applying international experience of tax incentives in the context of Uzbekistan has been reviewed. In particular, the practices of applying reduced or differentiated tax rates, paying taxes in the future, reducing profits proceeded from commercialization of innovative produce is being put forward in view to encourage the innovative and investment activisms of companies through tax incentives, in place of the practice of providing tax benefits in the form of a full exemption for an indefinite period and against no conditions. The research has provided relevant scientific conclusions and proposals as well as practical recommendations.

A CRITIQUE ON LEASE VERSUS BUY ANALYSIS AND GOVERNMENT TAX REVENUE

Motivation for leasing is often believed to be the tax rate difference between the lessee and the lessor, allowing both to save on taxes at the government's expense. These short notes challenge this conventional wisdom and demonstrate not only the tax rate difference but also other various leasing parameters that can have an impact on government tax revenue both analytically and numerically. This paper adds additional theoretical groundworks to the literature to support the claim that the positive-sum games do exist among the lessee, the lessor, and the government. 
 JEL Classification Codes: C6, G3.

Land is back, it should be taxed, it can be taxed

Land is back. The increase in wealth in the second half of 20th century arose from housing and land. It should be taxed. We introduce land and housing structures in Judd’s standard setup: first best optimal taxation is achieved with a property tax on land and requires no tax on capital. With positive taxes on housing rents, a first best is still possible but with subsidies to rental housing investments, and either with differential land tax rates or with a tax on imputed rents. It can be taxed. Even absent land taxes, one can tax it indirectly and reach a Ramsey-second best still with no tax on capital and positive housing rent taxes in the steady-state. This result extends to the dynamics under restrictions on parameters.

La mobilisation des ressources fiscales en Afrique subsaharienne: quel rôle des flux financiers illicites?

L'objectif de cet article est d'analyser la contribution des flux financiers illicites aux écarts de taux de pression fiscale en Afrique subsaharienne. Notre échantillon est constitué à la fois de 18 pays coopératifs et de 12 pays non coopératifs en matière de lutte contre le blanchiment des capitaux et le financement du terrorisme. L'utilisation de la décomposition d'Oaxaca-Blinder, montre que la différence en termes de flux financiers illicites explique les écarts de pression fiscale.

Albania: The impact of economic and fiscal policy in the agricultural sector

The development of the agricultural and rural sector is and has been throughout the history of the Albanian governments of importance for the economy, employment, but also wellbeing for Albania, given that this large sector currently contributes 18.4% of the country’s Gross Domestic Product and in the labor, market has a share of 36.1% of total employees. Investments in technology and innovative cultivation methods have significantly improved productivity rates over the 30-year period, as well as added value per worker. Growing exports, mainly to the European Union market are constantly increasing and new trade opportunities are emerging for the organized units of the sector. This could make the sector even more attractive for foreign investment. Given the problems that have accompanied the economic model and doing business in the agricultural sector, one of the major challenges for quality development remains the reform of the real estate regime, including agricultural land. This reform process, starting from law 20/2020, which aims to consolidate the property rights over agricultural land, is foreseen to be finalized at the end of 2028. Tax policy affects agricultural competitiveness through its impact on the levels and variability of farm incomes, agricultural workers, land investments and technology, on labor value and other activities related to the sector. Taxes on income, property and land, and capital transfers may affect structural changes, while differential tax rates on specific activities, resources, or use of inputs may affect sustainability. In this regard, in addition to tax policy, regulatory policies have a parallel impact, related to the adoption of farm regulatory practices. Given the great impact it has agriculture on the economy and the sustainability of the rural population, central government and local government stay focused in encouraging agricultural production through interventions towards higher levels of productivity and quality, as well as regulatory and tax policies.

THE PECULIARITIES OF INDUSTRIAL ENTERPRISES’ PROFIT TAXATION IN A DIFFERENTIATED APPROACH

This article studies the problem of improving enterprise profit taxation, the ways to solve it, and one of the main problems of the modern system of the enterprises taxation — how it is connected to the production efficiency. By solving it, we can determine the differentiation of the tax rates to the enterprises’ profit. Within its methodological framework, the author proposes to use the theory of surplus value. In order to spread the global methods for solving the issues of improving the taxation profit of enterprises and ensuring the economic efficiency and growth, the principles of neoclassic marginal theory are used. The system of indicators — signs and criteria — provides evidence for differentiating industrial enterprises into groups for a more optimal taxation of their profits. The author provides suggestions for forming the rate of the profit tax to stimulate the increase of production efficiency and reinvestment of funds for its development. The algorithm for calculating the profit tax rate assumes using the index of the norms of surplus value — profitableness of labor. This article proposes using a matrix for classifying industrial enterprises into groups, defining the level of the tax rates to profit for each of them based on the developed algorithm together with the level of production efficiency for 2018. For industrial enterprises, special industrial level of indicators — the signs differentiation — are considered: the structure of capital, the standard of profit, the profitableness of labor, and the results of their profit taxation using the method of free balance, the normative method, the modern and the proposed tax profit systems. In the case of the industrial enterprises, the relevance of the proposed reforms of the taxation of profit is explained. The results of research constitute the methodological basis of developing a more effective mechanism of taxing enterprises’ profit, which is especially necessary when realizing anti-crisis economic politics.

ECONOMIC ESSENCE AND ROLE OF PROPERTY TAXES IN UKRAINE

Introduction. The development of local self-government is one of the important prerequisites for the formation of a democratic state. Effective activity of local self-government bodies is impossible without a sufficient amount of financial resources, which are formed at the expense of the local budget’s own tax revenues. The local taxes and fees are the basis of financial independence of local authorities in the most developed countries of the world, the main among which are considered property taxes. The formation and development of national tax systems takes longer in the most developed countries than in Ukraine, which in its turn, affects the quality of tax legislation and as a consequence is accompanied by a misunderstanding on the part of society’s tax innovations. The construction of the taxation system should be based on the citizens’ awareness of the fiscal importance of property taxes in the formation of the revenue side of the state and local budgets. The purpose of the article is to determine the features of the collection of property taxes in Ukraine, research their role in the formation of the revenue side of local budgets and to outline areas for improving property taxes in Ukraine using foreign experience. Results. The general features of the evolution of the property taxation system are considered. It is argued that a key element of the real estate taxation mechanism if the procedure for determining the tax base, which is mostly the valuation of the object. It is necessary to review property tax rates, conduct an inventory and ensure the full functioning of the system of mass registration of real estate, introduce a correction factor to take into account historical, territorial and other characteristics of real estate, increase tax literacy and tax culture of the population. Prospects. The attention will be paid to the differentiation of property tax rates, the feasibility of introducing preferential taxation, the advantages and disadvantages of property taxation and more in further research,.

Effect of tax avoidance on accounting conservatsim of listed non-financial firms in Nigeria

The study seeks to ascertain the effect of tax avoidance on accounting conservatism of listed non-financial firms in Nigeria. The independent variable, tax avoidance was proxied by Generally Accepted Accounting Principle Effective Tax Rate (GETR), Cash Effective Tax Rate (CETR) and Book Tax Difference (BTD), while the dependent variable accounting conservatism was measured using Negative Accruals (NA). The control variables utilized were leverage, Return on Asset (ROA) and Firm Size (FS). The study covered a period of seven years (2014-2020) and a population of forty-eight listed non-financial firms on the Nigerian stock exchange. The data was analysed using panel regression technique. From the findings, it was discovered that GETR and BTD significantly affect unconditional conservatism with a negative relationship between the variables. Overall, this paper shows that taxation is a determinant of financial reporting conservatism in Nigeria.

ПОДАТОК НА ДОДАНУ ВАРТІСТЬ В УКРАЇНІ: ПОТОЧНИЙ СТАН ТА ШЛЯХИ РЕФОРМУВАННЯ

The article explores the theoretical and methodological foundations of the system of taxation by value-added tax in Ukraine. The economic essence of the value-added tax is determined. The current method of taxation by value-added tax in Ukraine, as well as the impact of this tax on the level of revenues of the state budget of Ukraine is analyzed. A number of examples of international experience in regulating the system of taxation by value-added tax are given. It is established that the current model of recovery of value-added tax has a number of shortcomings, which relate, first of all, to a significant artificial overestimation of household consumption expenditures. In order to eliminate the shortcomings, the concept of reforming the value added-tax in Ukraine is proposed, which provides for the introduction of differentiated rates of this tax depending on the group of goods and services. Value-added tax is a national indirect tax that is accrued and paid in accordance with section V of the Tax Code of Ukraine. Value-added tax is included in the price of goods and services and is actually paid by the end user. Value-added tax aims exclusively at the fiscal function and actually leads to a violation of the law of supply and demand. In Ukraine, value-added tax today is the main source of budget revenues (more than 35% of total tax revenues), which does not contribute to the economic growth of the country. The basic value-added tax rate in Ukraine is 20%, which roughly coincides with the EU countries, but does not take into account the relatively low level of purchasing power of the population in the country. The concept of reforming the value-added tax system in Ukraine provides for the creation of differentiated tax rates depending on the group of goods and services – the object of taxation on the basis of the elasticity of their demand for income, as well as the abolition of the preferential rate of 14% for operations for the sale of agricultural products. The main goal of such reform of the value-added tax in Ukraine is to reduce the tax burden for low-income taxpayers while minimizing the reduction of tax revenues to the state budget of Ukraine.

Assessing Profit Shifting in Lithuanian Firms

Research background:Multinational enterprises (MNEs) employ tax avoidance by ability to use differences in tax systems of various countries to successfully incur effective tax rate that is lower than the statutory one. Literature analysis revealed that previous research rarely concentrated on profit shifting practices in small economies. It mostly covered large countries (USA, Germany) or regions (e.g. Europe). Research on Lithuania, as a small open economy characterized by lower corporate income tax rates, is a relevant case for the analysis.Purpose of the article:The purpose of the article is to assess profit shifting via transfer mispricing in Lithuanian companies.Methods:Regression analysis with fixed effects was applied to a sample of 3,563 Lithuanian companies for the period of 2010–2018. The data was retrieved from Amadeus database.Findings & Value added:The results of testing profit shifting channel – transfer mispricing – showed that tax incentives significantly affect earnings of MNEs in the sample while results of domestic firms are puzzling. Earnings of multinationals in the sample are strongly affected by statutory tax rate difference between the subsidiary operating in Lithuania and the parent company in a foreign country. Such results may imply that in small economies like Lithuania (characterized by lower tax rates and lower tax avoidance costs) profit shifting via transfer mispricing is used by MNEs as a channel of corporate tax avoidance.

Перспективи розвитку екологічного оподаткування в Україні

The development of technologies entails the deterioration of both the global environmental situation and at the regional level. The solution of environmental issues is directly related to the use of natural resources, as well as the utilization of the economic system, including through the transformation of waste into raw materials for energy production, various materials, reduction of toxic emissions into the air, water, biodiversity, etc. The main economic instruments of environmental protection and improvement of the ecological situation, which are used in world practice for these purposes, are analyzed. Among them are special taxes, pledge-refundable schemes and expanded business responsibility. The analysis of economic instruments of state regulation of nature management and sources of funding for environmental measures in Ukraine suggests that it needs to be revised and systematized with a scientifically sound definition of the parameters of mandatory payments in favour of the state and the proportions of natural distribution resource payments between the parts of the budget system to prevent the scattering of financial resources and their targeted use to finance environmental protection programs and improve the environmental situation in Ukraine. The expediency of strengthening the integration of such payments into the structure of existing taxes on goods (excise tax on gasoline), while maintaining environmental incentives, in particular, coordination with the taxation of corporate profits, for example, in the form of a reduction factor in the case of their include cost. In this case, the environmental component of taxation should correspond to the scale of environmental damage and is the basis of the mechanism for calculating tax payments or other economic incentives. This can be ensured by deepening the differentiation of tax rates depending on the damage to the environment, as well as the conditions of use of natural resources, the availability of certification of nature management enterprises according to ISO 14000 standard.

Tax factors affecting FDI allocation in the EU post-socialist states

ABSTRACT The aim of the paper is to reveal the parameters of tax systems – in both the investor and the recipient state – that influence FDI allocation in post-socialist EU countries and cross-border flows of selected types of payments. Our results confirm that investors from EU countries strive to take advantage of both tax rate differences and aggressive tax planning strategies. Regression model estimates show that the investor’s national tax system is of key importance if it allows for the non-taxation of interest income, application of lower rates to royalties and use of special purpose entities. Moreover, the size of FDI is relatively strongly linked to the amount of payments for advisory services and royalties which are often used for aggressive tax planning. The estimated elasticity of FDI to the tax rate is around 1.1 and 1.9 for statutory and effective rates, respectively.

PROBLEMS AND PRINCIPLES OF OPTIMIZING THE SOCIO-ECONOMIC EFFECT OF THE PERSONAL INCOME TAX IN UKRAINE

Abstract. This article is devoted to estimating and explaining the extent of social priority implementation in fiscal policy in Ukraine and defining the reserves, caused by placing the personal income tax in Ukrainian tax system, which would be used to improve taxing impact on social welfare. The comparative analysis was used as key method for estimate the actual tax pressure level and its structure deviation from desired, based on OECD countries experience, indicators of aggregate tax burden on economy and its structure. Based on the results conducted comparative analysis, the vision of the disadvantages, inherent to Ukrainian current tax system was defined. First, a rather high level of tax pressure (Ukraine is positioned above the trend line expressing dependence «GDP per capita — the share of taxes in GDP»), our country combines with the unfavorable tax structure to ensure the «targeting» of the tax burden distribution. As a result, the governability of the tax pressure distribution is reduced and the government loses the ability to implement social priorities in fiscal regulation. Second, there are two parameters, which are the determining factors for the distribution of tax burdens between groups of taxpayers on personal income in Ukraine: the minimum amount of non-taxable income and the absence of rising tax rates for incomes far higher than average in economy. Their effect causes that even income in the size of the subsistence minimum is liable for significant taxation, but for income much higher average size tax burden remains very low compared to European countries. In Ukraine, to compensate for the underutilization of the fiscal potential of high-income recipients, the tax burden is shifted to broad sections of wage earners in the formal sector of the economy (who have minimal opportunities to evade income tax and social security contributions). This, in turn, exacerbates the negative impact of taxation on the growth rate of wages and the conditions for the reproduction of economic activity of the general population. We tend to consider the only possible means to overcome these two disadvantage of Ukrainian tax system is to increase the differentiation of tax pressure (in particular, by introducing additional differentiation of income tax rates for various taxpayers groups), which should ensure that the actual tax pressure is brought into line with the solvency (fiscal potential) of taxpayers. Keywords: tax system, personal income taxing, tax burden, tax incidence, progressive taxation. Formulas: 0; fig.: 2; tabl.: 2; bibl.: 17.

Welfare implications of switching to consumption taxation

We evaluate a reform of the US tax system switching to consumption taxation instead of income taxation. We do so in an environment that allows for progressivity of consumption taxes through differential tax rates between basic and non-basic consumption goods. The consumption tax system that maximizes aggregate welfare involves a 4% subsidy on basic consumption goods and a 68% tax on non-basic goods. Such a tax scheme generates 10% higher output in the long run, with a small increase in inequality. Nonetheless, the benchmark with progressive income taxes and mild consumption taxes provides higher welfare on aggregate in the steady state, and even more so if we consider the transition.

Tunneling and Tax Aggressiveness

In Brazil, there are no mechanisms to identify cases where controlling shareholders might be using tax aggressiveness as a strategy to expropriate value from minority shareholders, the practice known as tunneling. This deserves attention because investors should be able to understand when tax aggressiveness is not designed to generate the purported value. Hence, this study analyzes the relation between tax aggressiveness and tunneling in companies listed on the Brazilian securities exchange (B3), in the period from 2010 to 2017. The data were obtained from the Economática® database and were submitted to analysis by ordinary least squares in two stages. The results show that tax aggressiveness, measured by the differential effective tax rate (DETR), is statistically significant to explain tunneling since the coefficient of aggressiveness is significant and positive at 5%. Therefore, on average firms in the sample considered to be more aggressive (based on DETR) presented greater tunneling. The coefficient of the variable DETR allowed inferring that a 1% increase in tax aggressiveness is associated with an increase of 0.46% in the proportion of accounts receivable from related parties concerning assets. Thus, tax aggressiveness can reduce the probability of generating value for minority shareholders. This result agrees with the finding of Chan, Mo and Tang (2016), who identified direct evidence of the existence of tax aggressiveness related to tunneling.

The Jock Tax: How the National Football League Can Level the Playing Field

There are thirty-two NFL teams located across twenty-three different states. State and local tax rates assessed in the different locations range from 0% to 13.3%. NFL teams play at least sixteen games every year, eight of which are played at opposing team’s locations. Due to this, NFL players can be required to file upwards of nine different state and local tax returns per season. This study analyzes the effects the difference in tax rates have on the competitive landscape of the NFL and proposes a solution to eradicate the competitive advantage state and local taxes currently create within the NFL. Specific player contracts and hypothetical player movements are analyzed to demonstrate the actual effects of state and local taxation on NFL players.

Foreign Capital Participation and Tax Aggressiveness in Brazilian Companies

This study explores the relationship between tax aggressiveness and foreign capital participation in Brazilian companies listed on the BM & F BOVESPA from 2010 to 2015, using the concept of tax aggressiveness as a reduction of taxable income through tax management and planning (Chen et al., 2010). Observing that previous studies show a significant relationship between tax aggressiveness and ownership structures, this research seeks to understand whether this relationship is significant if there is foreign capital participation in the company. The sample was composed of Brazilian companies listed on the BM&F BOVESPA. Two metrics of tax aggressiveness were used to investigate this relationship: effective tax rate (ETR) and book-tax difference (BTD). The use of these metrics was inspired in a review on tax research by Hanlon and Heitzman (2010), who concluded that ETR and BTD could capture the reduction of taxable income through tax planning. The results showed no significant relationship between foreign capital participation and tax aggressiveness, demonstrating that the origin of equity capital is not a factor of tax aggressiveness.

On the Time Inconsistency of Optimal Monetary and Fiscal Policies with Many Consumer Goods*

AbstractIn this paper, we study the time consistency of optimal policies in an environment where agents use cash to purchase many consumer goods and where those goods might be taxed at differential rates. Our main result is that optimal monetary and fiscal policies are, in general, time‐inconsistent, because the number of bond instruments is insufficient to influence all future fiscal decisions. However, there is one special case where optimal policies are time‐consistent, which is when differential tax rates across cash goods are optimally zero.