Direct Taxes Research Articles

Article: Anti-Avoidance Jurisprudence in Direct Taxation: The CJEU Between Politics and Certainty

Over a span of several years, the Court of Justice of the European Union (CJEU) developed a framework for anti-abuse in the context of European law and particularly established criteria for justifying restrictions on the fundamental freedoms in the tax context. In tax cases on anti-avoidance that are more recent, however, the court has demonstrated a notable change in its stance towards this issue that represents a disruption in the consistent development of its jurisprudence on abuse. While the court covers the contradictions in its case law by passing an impression of continuity between disparate decisions, it is remarkable how recent rulings draw from Organisation for Economic Co-operation and Development (OECD) language. This reliance on concepts from a non-EU institution, however, leads to legitimacy concerns. The increasing importance of international organizations and public opinion – for example, in reaction to the Panama Papers – in shaping the international tax landscape is undeniable. While high-profile projects like Base Erosion and Profit Shifting (BEPS) and Global Anti-Base Erosion (GloBE) highlight international tax issues, they also exert political pressure on judicial bodies such as the CJEU which leads to less methodological decisions that will align the court with political interests. In this context, the CJEU’s acting as a political player at the borderline of its competences is to be viewed critically, especially regarding the recent shift in its case law on abuse and tax avoidance that leads to concerns over legal certainty. Anti-abuse principle, anti-avoidance jurisprudence, CJEU, international organizations, international taxation, legal certainty, legitimacy, political influence

ФИСКАЛЬНАЯ ПОЛИТИКА РАЗВИТИЯ РОССИИ

With the sanctions restricting Russia's for-eign economic activity, high inflation re-mains, provoked by indirect taxes, which reflect the insufficient efficiency of material production in the system of distribution rela-tions. Direct taxes have a significant impact on the pricing strategy of a business. The fiscal policy of the state does not adjust the economy to high efficiency and social jus-tice. The profit is mainly obtained by infring-ing on the interests of buyers. Artificial re-striction of the physical volume of sales neg-atively affects employment. The tax system brings the fiscal function of taxes to the fore. It is necessary to create incentives to in-crease the return on funds, reduce the capi-tal intensity of production. The state should provide financial support, first of all, to those industries and companies that are ready to expand production with lower prices and in-creased profitability.

ФИСКАЛЬНАЯ ПОЛИТИКА И ЭФФЕКТИВНОСТЬ ХОЗЯЙСТВЕННОЙ СИСТЕМЫ РОССИИ

In Russia, demand inflation persists with an excess cash overhang, which is credited to deposit accounts in banks. The fiscal policy of the country does not adjust the economy to high efficiency and social justice. Distribu-tive relations are needed. Direct taxes affect the pricing strategy of a business, while indi-rect taxes provoke inflation. The fundamen-tal disadvantage of the immature market as a spontaneous regulator aimed at maximiz-ing unit profit and profitability, and not at maximizing the physical volume of sales, and capacity utilization is confirmed. The tax system brings to the fore the fiscal function of taxes, and does not perform a stimulating one. It should be taxed to stimulate the creation of business conditions characteristic of a competitive market.

An Analysis of the Growth of Corporate Tax in India

This paper examines a significant portion of the government's overall tax revenue which comes from the direct tax. The corporate tax makes up the largest portion of both the government's total tax collection and the direct tax, accounting for around 1/3 of both of the government's gross tax revenue. Studying the idea of corporate taxation, the rise in tax revenue, the expansion of the corporate assessment base, and the relationship between corporation tax and GDP are therefore crucial. This report provides insights into the growth prospects of corporate tax income and corporate assesses growth in India. In order to understand how sensitive corporation tax revenue is to the nation's GDP, this paper also discusses corporate tax buoyancy. The study has covered the period of 23 years from 2000-01 to 2022-23. The data has been taken from economic survey reports and the official websites of Income Tax, and Comptroller and Auditor General of India. The analyses of collected data have been carried out by using percentage, simple growth rate and compound annual growth rate.

CORPORATE TAXATION THROUGH THE INDIAN PRISM: CONSEQUENCES OF GST AND DTC

The Indian taxation landscape has witnessed significant reforms in recent years, with the introduction of the Goods and Services Tax (GST) and proposed changes in the form of the Direct Tax Code (DTC). This comprehensive analysis explores the dual facets of these reforms and their consequential impact on corporate taxation in India. The study encompasses a detailed examination of the implications of GST implementation and the potential effects of the impending Direct Tax Code on corporate entities. The Goods and Services Tax (GST) was introduced in India in July 2017, heralding a paradigm shift in the taxation system by replacing multiple indirect taxes. Simultaneously, the Direct Tax Code (DTC) has been proposed as a comprehensive reform of direct taxes, aiming to simplify and rationalize the existing tax structure. This analysis delves into the impact of these reforms on corporate taxation, considering the intricate interplay between indirect and direct taxes. The implementation of GST streamlined the indirect tax system, reducing cascading effects and enhancing overall tax efficiency. This, in turn, has had a direct impact on corporate taxation by simplifying compliance procedures and reducing the burden of multiple taxes on businesses. The analysis explores how these changes have contributed to increased tax compliance among corporate entities. GST introduced the concept of Input Tax Credit (ITC), allowing businesses to offset taxes paid on inputs against their final tax liability. This section assesses how the availability of ITC has influenced cost management for corporations, promoting a more transparent and efficient taxation system. The GST regime prompted corporations to reevaluate their supply chain structures to optimize taximplications. The analysis investigates how companies have adjusted their operations to align with the GST framework, leading to improved logistics, reduced lead times, and cost savings. The proposed Direct Tax Code envisions revisiting tax slabs and rates, potentially altering the corporate tax landscape. This section examines the anticipated impact of changes in tax rates on corporate entities, exploring the implications for businesses of varying sizes and sectors. The DTC proposes a reevaluation of existing tax incentives and deductions. The study analyzes the potential impact on corporate decision-making, investment patterns, and overall economic growth. It delves into the implications for sectors currently benefiting from specific incentives. The DTC aims to align international taxation principles with global standards, impacting the taxation of multinational corporations operating in India. The analysis assesses the potential challenges and opportunities for such entities, considering the implications for transfer pricing and cross-border transactions.

Специфика налога на сверхприбыль

The article discusses the specifics and legal nature of the excess profit tax. The legal construction of the excess profit tax as a one-time direct tax is analyzed. The place of the tax on excess profits in the system of taxation of organizations is considered. Conclusions are drawn about the significance of the excess profit tax for the mobilization of financial resources. Using the example of the excess profit tax, it is shown that the tax system is developing dynamically, responding to modern challenges, and ensures the functioning of the country's financial system.

Impact of New Direct Individual Tax Regime During Last Two Years

The New Individual Tax Regime was introduced on 1st April, 2020 with the objective of simplifying tax compliance and a lower rate of tax was announced on different slabs which have been increased from 3 to 7 slabs of income range. It is importance to understand how this new individual tax regime has affected the tax liability of the individuals or contributed in increasing the tax base or in increasing tax revenue. Hence an attempt is made to understand the impact of New Direct Tax regime on the options of the assesses, revenue generation and widening the tax base.

Corruption in Taxation System and Its Effects on Indian Gross Domestic Product : An Analysis Study

Abstract: Purpose: This study aimed to examine the impact of corruption on the relationship between taxation and Gross Domestic Product. It required determining whether corruption acts as a controlling factor that interrupts the positive association between taxation and Gross Domestic Product rate. The study employed fundamental analysis methods to establish a deeper understanding of the fundamental relationships between taxation, corruption, and Gross Domestic Product. Methodology: A well-structured questionnaire was distributed to teachers, Advocate, Engineer, Businessman and others in the Haryana, Delhi, Chandigarh and Rajasthan states for this purpose. The responses of 530 people were organised in a systematic way. These responses reflect the respondents' perceptions and attitudes. These perceptions represent respondents' attitudes about the corruption in direct tax system in India Findings: The F value and the corresponding E values of all the attributes which is less than 0.05 (E >0.05), the F value (26.997) is greater than the tabular value. This indicates that there is enough evidence to reject the null hypothesis (H0), that the perception of respondents regarding reasons for high level of corruption is different he result of Chi-Square .It is clear that the significance value (p value) of Pearson Chi- Square (0.047) and Likelihood Ratio (0.045) are less than the criteria value at 5% level of significance. They are statistically significant. Hence, the null hypothesis is rejected. So it can be inferred that there is a significant relationship between occupation/types of respondent and their opinion regarding corruption is prevalent in direct tax system

General literacy and effective taxation system in Africa

ABSTRACT This inquiry provides empirical evidence on the effect of general literacy on tax revenue mobilization in Africa over the period 1996–2021. This evidence is important given the low level of taxation in Africa and the lack of clarity on the nexus between a country’s literacy level and taxation effort. The paper employs a simultaneous quantile regression, and uses three different indicators of tax revenue mobilization as a percentage of GDP. The motivation for quantile regression technique is primarily based on two essential reasons: (i) the argument that the effect of literacy on taxation effectiveness is dependent on the existing level of tax revenue mobilization; (ii) tax revenue mobilization policies, to be effective, need to be adapted differently across countries with low, intermediate, and high levels of existing tax mobilization effort. Results show that improvement in general literacy appears to promote tax mobilization effort, and that the effect of general literacy on taxation is stronger for direct taxes than for indirect taxes (in terms of both significance and magnitude). Furthermore, in most of the results, the impact of general literacy is slightly stronger in the upper quantiles of the general literacy distributions. The results remain robust over alternative econometric estimation techniques.

Features of taxation of rational environmental management as a factor of sustainable growth in Russia

The article is devoted to the study of the problems of fiscal regulation of the rational use of natural resources to achieve the goals of sustainable economic growth and improve the quality of life of the population. According to official statistics, it should be noted that it is difficult to identify individual problems on the impact of direct taxation of the use of natural resources on the effectiveness of environmental management in Russia. Great practical importance in theoretical and applied economics is attached to strengthening the environmental component in taxation. The purpose of the study was to analyze the prospects for the development of the implemented directions of the tax policy of rational environmental management to ensure the environmental safety of Russia. In modern tax systems, a separate aspect highlights the directions of tax regulation of the use of natural resources, providing a fiscally significant effect on budget revenues at all levels and increasing the environmental potential of rational environmental management. Various general scientific methods were used in the research process, including: abstract-logical, comparative analysis, generalization, as well as tabular and graphical methods. When studying the practical experience of tax regulation of effective environmental management, SWOT analysis methods, as well as variable and trend analysis are used. The authors provide a systematic analysis of the practice of ensuring budget revenues of the subjects of the Russian Federation and their compliance with the policy of rational environmental management, as well as determining the causal relationship of the considered features of taxation of the use of natural resources in Russia. The procedure for taxation of environmental management is important for the formation of fiscal sustainability and ensuring high efficiency of tax policy in the field of rational environmental management. The state policy of taxation of environmental management should be based on the principle of preserving the interest of investors in investments in environmental protection measures, providing tax incentives and preferences for the introduction of new waste-free production technologies. The prospects for further development of tax regulation of effective environmental management should be aimed at activating public-private partnerships by stimulating private investment in the creation of new and modernization of existing assets of the "green" economy, as well as optimizing environmental monitoring.

Article: The European Triangle: On the Relationship between Primary EU Law, Secondary EU Law and National Law in the Field of Direct Taxation

National tax law provisions, EU Directives’ provisions and primary EU law interact. National rules may be based on EU law, EU law may prohibit national legal requirements, and sometimes secondary EU law can be contrary to primary EU law. The three sources of law that, in concert, form a triangle by connecting the three sources,affect each other, especially for interpretational purposes. The author analyzes the relation between the different sources of law, taking each side of the triangle as starting points, and critically addresses flaws in the current approach towards interpretation of EU law, direct effect and the compatibility of secondary EU law with primary EU law. Especially with an increasing number of forthcoming EU Directives in the field of direct taxation, the determination to what extent a directive is an acceptable political compromise or is contrary to fundamental principles is getting increasingly important. EU Law, Directives, Interpretation, Implementation, Harmonization, Direct effect, Fundamental Rights, manifest error, ATAD, DAC

The Optimal Tax Structure from GDP-growth Perspective

The tax multiplier in macroeconomics assumes a negative relationship between the volume of tax revenue in a country and its GDP. However, it may also be relevant to GDP growth whether the same volume of tax burden is levied in a different structure. Can the fiscal government stimulate the GDP growth by restructuring the tax revenues? The following study analyses the linkage between GDP growth rate and the structure of tax revenues. A database contains data from 25 EU countries which are open economies in the European single market. The period starts in 1996 and lasts until 2018. The Eurostat classification is used for tax types. Dynamic GMM tests are applied for GDP equations based on expenditure and output approach and extended with taxation category determinants. The conclusions are that tax structure based on consumer taxes on production and income tax can support the economic growth, meanwhile higher weight of social contribution is a destructive factor for income expansion. The policy recommendation is to reweight the tax structure toward indirect taxes from direct taxes if economic growth is a preference in the tax system in a trade-oriented open economy. Novelty of the research: Application of Arellano-Bond version of Dynamic GMM test, comparable results for Solow-Swan and augmented Cobb-Douglas approaches, the composition of database, the falsification and verification of statements of the existing literature.

Political Regime Types and Income Inequality in Pakistan

Rising income inequality is one of the major issues in the Pakistani economy. It has been investigated in different dimensions. Different cross-sectional and panel studies have extensively examined the connection between political regime types and income inequality over a specific period. The findings have displayed significant variations across countries and regions. This study delves into exploring the relationship between political regime types and income inequality, specifically in Pakistan, utilizing time series data spanning from 1972 to 2019. To measure political regime types, the Polity index is employed, while the Gini-Coefficient serves as the metric for income inequality. Additionally, this research takes into account various factors, such as GDP per capita, the ratio of direct taxes to GDP, the percentage of government expenditure on education relative to GDP, and the percentage of government expenditure on community and social services relative to GDP, in order to control for their direct effects. The stationarity of the data is assessed using the augmented Dickey-Fuller test, while the autoregressive distributive lag (ARDL) model is employed to examine the cointegrating relationship among the variables in the model. The empirical findings from the estimation affirm the presence of a lasting correlation between Pakistan's political regime types and wealth disparities. The findings show that different political regimes have a notable detrimental effect on the nation's economic disparity. To be more precise, a one percent increase in the Polity score is associated with a 0.45 percent long-term and a 0.25 percent short-term fall in the Gini Coefficient. This suggests that Pakistan should work toward a stable democratic political framework and put into place sustainable economic policies in order to successfully address income disparity and achieve a desirable level of income distribution

Council

This overview highlights the Council’s (i) approval of the report on tax issues and conclusions on progress by the Code of Conduct Group during the Spanish Presidency; and (ii) identification of direct tax priorities under the Belgian presidency of the Council for the first semester of 2024.

Exploring Tax Policy Changes and Foreign Direct Investment Inflows in the Indian Economy

The Indian Economy has been witnessing growth since the onset of 21st century at a phenomenal pace in which Foreign Direct Investment inflows has played a significant role. Foreign Direct Investment and taxes are two distinct phenomena where taxes are dependent on the macroeconomic regulatory framework subject to amendments from time to time. Foreign Direct Investment covers a broad perspective where it is affected by numerous macroeconomic and global phenomena. However, it also involves foreign investor’s perception regarding the tax structure of the host country. This paper tries to establish a relationship between taxation and FDI inflows in the context of Indian Economy. This paper further attempts to study the implications of tax structure and its changes in Foreign Direct Investment inflows in Indian Economy. This study explains the significance of taxation as a determining variable in Foreign Direct Investment inflows. Key Words: Foreign Direct Investment, FDI inflows, Taxation, Tax Implications, Tax Structure, Indian Economy.

Tax Administration Reform: End of Tax Disputes in India?

A long-due Indian direct tax administrative reform for removing the taxpayers’ plight and widening the tax base gained momentum by introducing the faceless assessments and appeals scheme coupled with taxpayers’ tax charter. Following a descriptive approach, the study assesses whether the reform would end the tax disputes. Albeit, ideally, any tax system should be simple, efficient, transparent, and free from conflicts. The Indian taxation saga indicates an infamous tug-of-war between the taxpayers and the revenue-seeking tax officers. Serving strange tax demand notices and retrospective amendments of the tax laws created a phobia of ‘tax terrorism’ in honest taxpayers’ minds. Considering this, the government followed the digital route with no physical interaction between the taxpayers and tax officers for tax assessments and appeals. Moreover, fixing the responsibilities of the taxpayers and tax officers would minimize tax disputes substantially if addressing the apprehensions and teething problems appropriately, addressing the apprehensions and teething problems.

Fiscal policy and dimensions of inequality in South Africa: A time‐varying coefficient approach

AbstractSouth Africa continues to face high inequality levels despite its progressive tax and extensive social protection systems. We compare the dynamic impact of fiscal policy on the distribution of incomes, wages and wealth in South Africa from 1993 to 2019. For this purpose, we use a time‐varying parameter vector autoregression to estimate the impact of direct tax revenue and total transfer spending on three distinct inequality datasets. The analysis of various dimensions of inequality is the main contribution of the paper as the literature typically focuses on income inequality. A second contribution lies in the incorporation of time‐varying effects, which enables the analysis of the changing relationship between fiscal policy and inequality. The results suggest that this relationship is indeed time‐varying and that the impact of direct taxes and transfers differs markedly across the inequality dimensions, both in terms of magnitude and sign. Overall, we find that both transfers and direct taxes have not significantly reduced income, wage or wealth inequality in South Africa.

Short-term and long-term effects of foreign direct investment on tax revenue: empirical evidence from an emerging economy

PurposeThis paper examines the short- and long-run effects of foreign direct investment (FDI) on tax revenue in Ghana.Design/methodology/approachThe paper adopts the autoregressive distributed lag approach to estimate FDI’s long-run and short-run effects on tax revenue. The study uses time-series data from 1983 to 2019 for Ghana, mainly obtained from The Bank of Ghana, the World Bank and the IMF.FindingsThe results show that, in the short-run, FDI has no significant effect on direct tax revenue and total tax revenue but significantly hurts indirect tax revenue. In the long run, however, the results show that FDI has significant positive effects on indirect tax revenue and total tax revenue but no significant effect on direct tax revenue.Originality/valueEmpirical studies often fail to analyse the short-run and long-run effects of FDI on tax revenue. This study contributes to the mixed literature by analysing the short-run and long-run effects of FDI on tax revenue in an emerging market context. Additionally, this study employs three tax revenue measures in analysing the nexus.

ANALYSIS OF SYSTEM TAXATION TO LATVIA: BASIC LINES AND ESSENTIAL ASPECTS FOR MODERNISATION OF TAX SYSTEM OF UKRAINE

The article considers the taxation system and its impact on the intensification of entrepreneurial activity, conducts a comparative analysis of the current taxation systems of Latvia and Ukraine, highlights their shortcomings, advantages, impact on the development of the country, activities of business entities and welfare of citizens, analyses the tax administration procedure and the mechanism of taxation by direct and indirect taxes. The issue of using foreign experience of tax reforms in the framework of harmonisation of the Ukrainian tax system with the global one is extremely relevant, especially in the current economic environment. As a result of the study, the author analyses the current tax legislation of Ukraine, which is embodied in the provisions of the Tax Code, in comparison with the tax legislation of Latvia. Using the model of the Latvian taxation system as an example, the author substantiates its effectiveness when using a sufficiently high level of tax deductions. To achieve this goal, the author analyses the state of the Latvian taxation system in 2017–2023, and studies the economic freedom index of Latvia in dynamics and its impact on the development of entrepreneurial activity. It is noted that the taxation process should contribute to the implementation of employment policy, influence the distribution of income in the direction of ensuring equity, and create a barrier to the use of shadow tax schemes. Prospects for further research in this area are the development of measures to improve the domestic taxation system.

Trends and Development of Fiscal and Monetary Policies of G7 Countries During the Post-Pandemic Era

This study aims to provide a comprehensive analysis of the fiscal and monetary policies enacted by the G7 countries in the post-COVID-19 era, and to investigate their impact on economic recovery. This research is set amid the global disruption during the COVID-19 pandemic, which compelled governments around the world to enact unprecedented measures to stimulate economic activity and prevent financial collapse. The objective of our research analysis is to assess the efficacy of these policies in promoting economic recovery while considering the diverse strategies adopted across the G7 nations. The primary research content revolves around a comparative evaluation of monetary strategies—such as interest rate cuts and quantitative easing—and fiscal measures—such as direct payments, loan guarantees, and tax deferments. This study primarily relies on data sourced from major global agencies and central banks, which serve to quantify the effects of these policies on key economic indicators, such as GDP growth, employment rates, and inflation. The study also takes into account recent forecasts from the IMF and OECD, offering a nuanced view of the prospects for economic recovery among the G7 countries. This analysis can be useful in providing a deeper understanding of the complexities involved in policymaking at a macroeconomic level. The analysis identifies notable disparities in the economic recovery rates across G7 countries, which can be attributed to the variations in the scale, scope, and nature of their fiscal and monetary interventions. Consequently, the study offers valuable insights into the requisite policy calibrations necessary for more targeted and effective economic stimulation.