Domestic Tax Research Articles

Directions for the development of socially oriented taxation of income of Russians

Personal income tax (hereinafter referred to as PIT), in interaction with other instruments, can have a significant impact on the implementation of social goals aimed at improving the quality of life of Russians, reducing poverty, overcoming monetary inequality, and supporting low-income citizens, including families with children. The article is aimed at studying the theoretical and practical aspects of taxation of personal income regulated by Chapter 23 of the Russian Tax Code. It reveals the significant role of the PIT due to its revenue potential for the budget system of the Russian Federation and its regulatory impact on socio-economic processes in conditions of geopolitical tension, describes the current system of tax deductions, the need and directions for its improvement. The methodological basis of the study is founded on the analysis of scientific publications and open data of public authorities posted on their official websites. The analysis has been conducted using comparison methods, systemic logical and semantic analysis, synthesis of theoretical and practical material. The purpose of the study is to propose a gradual improvement of the mechanisms for providing standard and social tax deductions by increasing their sizes, introducing a subsistence minimum as a non-taxable income for all categories of payers, expanding the scope of application with consideration to the results of the ongoing socio-economic policy. The conclusions and generalisations of the study can be used when legislative and executive authorities and the scientific community develop proposals for improving the provisions of Chapter 23 of the Russian Tax Code, which will create a socially oriented domestic tax system.

The Quiet Evolution in International Tax: Domestic Law and Double Taxation

This article describes the respective roles of international tax law (predominantly tax treaties) and domestic tax law and their relationship with each other. This is a complex and interdependent relationship, with treaties, as special law, generally overriding domestic law. The article discusses the founding principle of tax treaties preventing double taxation, reflecting the original purpose of tax treaties. Subsequent developments over time have vigorously established the second principle of treaties: that the purpose of tax conventions is also to prevent tax avoidance and evasion. Such an increasingly important principle heralds the rise of anti-avoidance rules, prevention of abuse and the preservation of domestic taxing rights. The thesis in this article is that domestic law has prevailed against the more specialized law of treaties and at an increasing rate. This evolution has occurred in situations where the special law of treaties is “watered down” by the principle that treaties should not be allowed to be abused or in situations where they facilitate tax avoidance. What are the implications of this trend on the development of international tax policy? The article reflects on the respective roles of international and domestic law and guides us to suggestions on how to preserve important international tax principles in good faith and limit expedient domestic tax law changes when they are not driven by taxpayers’ abusive actions.

Factor influencing taxpayer compliance on voluntary tax disclosure program initiative: Case of Kenya revenue authority southern region

Tax is the primary source of government revenue, its vital component in running daily government activities. Not collecting enough tax causes the government to strain or stalling of its mandates, therefore its role of every government to mitigate and maximize its tax collection scope. The research sought to investigate the factors influencing taxpayer compliance on voluntary tax disclosure program in Kenya Revenue Authority, case of Southern region. The specific objectives of these research included, to assess the effects of Tax Sanctions on the taxpayer on participation in a voluntary tax disclosure program. To determine the impact of subjective norms of taxpayer participation on the Voluntary tax disclosure program. To evaluate the influence of taxpayer knowledge on participation in a voluntary tax disclosure program. The main challenge that was thematic for investigation, why despite the opportunity to declare asset without punitive punishment, still there is few uptakes for the program. The geographical location of the research was in Southern Region Domestic Taxes department on its six tax office namely; Voi, Mombasa South, Lamu, Malindi, Mombasa North and Diani for the financial year 2023/2024. The study sought to use descriptive approach, where a sample size of 150 was derived from a population of 230 staffs in Compliance Domestic taxes. Data collection was done using online well-structured questionnaire via Kobo-Collect in a random sampling and analyzed using SPSS version 28. To test validity and reliability of the data pilot test was conducted and Cronbach alpha and KMO-test proved data to be reliable and valid. The output of the analysis showed the regression model whose covariates, Tax sanction (t=2.448, P<0.016) subjective norm (t=3.347, P<0.001) and taxpayer Knowledge (t=7.827, P<0.00) were all significant at 95% level. Moreover, the R2 =0.951 which means the exploratory variables explained 95.1% variation of Compliance to the Voluntary tax disclosure. The ANOVA result showed the data was fit to the model was good at (F=942.61, p<0.00). The study concluded indeed, Subjective norms, Tax Sanction and Taxpayer Knowledge influences greatly compliance of Taxpayer towards Voluntary tax disclosure. The research implied that proper use of tax sanction such us fines, penalties, and interest on taxpayers would increase compliance. Also educating taxpayer is essential as the decisions made by some taxpayers depend on the knowledge they have acquired. Also on subjective norms, some behaviors are traceable as some are based on influence of association hence compliance officer need to continuous encourage taxpayer to comply. This research recommends that the authority through the compliance officer, use of subjective norms, Taxpayer knowledge and Tax sanction as a mitigating strategy to mitigate on Voluntary tax disclosure, through this it will increase tax base and revenue mobilization and compliance status of Taxpayers.

Real Exchange Rate Depreciation and Domestic Tax Revenue Performance in Kenya

Purpose: Taxation plays a critical role in raising the resources needed for financing government activities in developing countries. On the other hand, the volatility of real exchange rates (RERs) has generated significant concern among academics and policymakers in view of its effects on macroeconomic variables such as tax revenue generation. This study therefore focused on real exchange rate depreciation on domestic tax revenue performance in Kenya. The study was guided Theory of Constraints. Methodology: The study employed an explanatory research design. Secondary data was collected from the CBK, KRA, and the World Bank. In this study time series data ranging from 2003 – 2023 was used to analyze the determinants of domestic tax revenue performance in Kenya. The hypotheses were tested at a significance level of .05 using the multiple regression analysis. A multivariate time series ARDL regression analysis model was used to analyze the data. Results: The study ARDL model concluded that Real exchange rate depreciation led to a notable decrease in domestic tax revenue performance, with β = -0.223945 and p = 0.000 < 0.05. This effect is intensified when considering the lagged impact, where a one-period lagged depreciation results in an even greater reduction in tax revenue performance, β = -1.927412 and p = 0.0004 < 0.05. Conclusion: The study recommended that government of Kenya should stabilize the exchange rate and prevent excessive depreciation by fostering a favorable trade balance and maintaining investor confidence. Additionally, future research could focus on the effects of fiscal Policy Changes on domestic tax revenue performance. Also, future studies could examine Impact of Global Economic Shocks on Domestic Tax Revenue.

Effect of Excisable Goods Management Systems on Domestic Tax Compliance Among Small and Medium Enterprises in Thika Sub-County

Purpose: Despite the rapid adoption of e-filing in Kenya, the filing system is still unreliable especially at peak period and on voluntary usage which lead to low level of compliance perceived by taxpayer. The aim of the study was to determine the effect of excisable goods management system on domestic taxes compliance among small and medium enterprises in Thika town, Kenya. The study was anchored on the standard economic theory. Methodology: The explanatory research design was employed. The target population was 2052 small and medium enterprises in Thika town with sample size of 334 small and medium enterprises. Primary data was collected using structured questionnaires out of the 334 issued questionnaires, 261 filled the questionnaires and submitted them accordingly, resulting in a 78.1% response rate. The data was analyzed using descriptive and inferential statistics. Results: The study found that excisable goods management system had a positive and significant effect on domestic tax compliance β = 0. 179 and p = 0.004. Conclusion: The government should invest in further enhancing the Excisable Goods Management System to ensure it is user-friendly and accessible to SMEs

Current paths of tax for business entities: Financial, economic and legal aspects

The article aims to investigate the ways of optimizing taxation for business entities in Ukraine to enhance the efficiency of the domestic taxation system and analyze the economic and legal aspects of establishing a new model of relations between businesses and fiscal authorities in alignment with European tax standards. The authors examine the economic and legal dimensions of current trends in tax optimization for profits generated from business activities, value-added goods and services, transactions involving excisable goods, as well as taxation on various forms of income, property, and property rights of business entities. Legislative improvements related to taxation and financial mechanisms for determining and collecting specific taxes, such as income tax and a single tax, are discussed. This study addresses the pressing issues surrounding legislative provisions on business entity taxation and proposes methods for enhancing tax optimization strategies within each entity. The authors emphasize the significance of developing a tailored tax policy for businesses to manage financial stability, guide economic activities, and ensure compliance with tax obligations. The authors present applicable recommendations for optimizing taxation practices and enhancing financial mechanisms for tax assessment and collection within business entities. Their insights shed light on the importance of strategic tax policy development to navigate tax responsibilities and plan for future financial obligations effectively. This research provides practical recommendations for policymakers and business leaders to improve tax optimization strategies, ensuring that businesses can operate efficiently while fulfilling their tax obligations in a manner that aligns with European standards.

Potential Tax Discrimination against Italian-Sourced Dividends and Capital Gains Received by Foreign Investment Funds Not Compliant with EU Regulatory Framework

This article delves into the complexities of cross-border taxation of Italian-sourced dividends and capital gains paid to Italian and foreign investment funds. More specifically, the authors scrutinize whether Italy’s current domestic tax laws violate the EU fundamental freedoms, particularly regarding foreign funds that, despite not being subject to the UCITS or AIFM Directives, are subject to a regulatory framework similar to that imposed on Italian funds.

The Military Function of the Pastoral Colonization. In Search of the Byzantine Institutional Patterns in a Venetian Administrative Environment

The main research question of this study is the imitation of a Byzantine institutional model by the Venetians, that of the stratiotes. The research area concerns the Byzantine Despotate of the Morea and the Venetian possessions in the Greek peninsula. During the 14th–15th century, the lack of cultivators and defense needs forced the Venetians to settle Albanian and Vlach nomads in exposed coastal areas and near fortified locations; the Byzantines have used both legislation and settlement practices while coping corresponding problems. In reference to relevant Byzantine sources, the Venetian documents help us determine the nature of the relationship of the military units camped in rural areas with their pastoral inhabitants and/or newcomers and moreover, whether we could argue for a Byzantine model or a Byzantine background while forming this relationship. We comment on the typology of choices available to the Venetians, and their attempt to convert the local peasants into a cavalry militia through legislation ‒ such as the replacement of a domestic tax or tax exemptions ‒ or integration practices, such as land concession, land reparcelling, concession of hereditary rights and mixed marriages’ license.

Triumph in taxing times? Linked transatlantic two-level games and the taxation of the digital economy

ABSTRACT In October 2021 136 countries reached a political agreement to transform the global tax regime for the first time since its creation. The disconnect between the digitalized economy and the global tax system was a key driver of the agreement, but it was not sufficient as negotiations only a few years earlier had failed to address the problem. This article advances a three-part explanation to resolve this puzzle. First, developments on one side of the Atlantic changed the default conditions and so increased support for compromise in the other. Second, those changes enhanced the bargaining power of higher-tax jurisdictions relative to lower-tax ones. Third, the Biden administration saw securing a multilateral agreement on minimum corporate taxes as a way to realize domestic tax objectives. The linking of the issues gave it an incentive to compromise on taxing the digital economy and paved the way for agreement.

The Pillar 2 Directive and the Qualified Domestic (Minimum) Top-up Tax Puzzle

The article argues for using a teleological interpretation of the Pillar 2 Directive to allow EU Member States to comply with Pillar 2’s soft law requirements for the qualified domestic minimum top-up tax (QDMTT) and its safe harbour (SH). This interpretation is necessary because the directive’s text is not aligned with certain requirements under Pillar 2 soft law since the directive was adopted before the Inclusive Framework issued any administrative guidance. Without the teleological interpretation, EU Member States cannot comply with the qualified domestic top-up tax (QDTT) requirements and, therefore, cannot attain its SH. This would decrease taxpayers’ legal certainty and undermine EU Member States’ fiscal interests.To pursue the argument, the article analyses Pillar 2’s soft law, i.e., the model rules, the commentary, and two sets of administrative guidance related to the QDMTT and its SH, and compares their provisions with the relevant provisions of the Pillar 2 Directive. Consequently, the study offers solutions to discrepancies between these two sets of rules and joins a broader discussion regarding the relationship between EU tax law and soft law.

Inter-Nation Equity And The Regulation of Tax Competition via the Global Minimum Tax Rule: A Case for Improvement

The Organization for Economic Co-operation and Development (OECD) is an institution that influences policymaking in international tax law, and it is changing the international tax architecture to deal with tax competition by encouraging countries to adopt a global minimum tax rule. This emerging rule – called Pillar Two in international tax circles – is inadequate for dealing with poverty and inequality in an asymmetrical global context. The rule is premised on the notion and argument that tax competition is a problem for international tax law. Notwithstanding, there is existing research and evidence to show that tax competition can also be a solution to the enormous challenge of poverty and inequality as it can have a redistributive effect. This is a valuable factor amid the inefficiently asymmetrical global society with extreme poverty in many countries and enormous wealth in a few others.This article submits that the Pillar Two minimum tax rule – the Global Anti-Base Erosion (GloBE) Rules encompassing the income inclusion rule (IIR), undertaxed payment/profit rule (UTPR), and qualified domestic minimum top-up tax (QDMTT) – should incorporate inter-nation equity to prevent exacerbating global inequality and poverty. Pillar Two intensifies these for at least two reasons: (1) it restricts the positive redistributive effects of tax competition on an inefficiently asymmetrical global society, and (2) it encourages tax competition more suited for high-income countries (HICs) and less suited for those that are low-income countries (LICs). There is latitude to incorporate a differentiated principle deriving from inter-nation equity into this new Pillar Two rule designed to regulate tax competition globally. This proposal requires that the emerging rule be disenabled in certain circumstances to enable LICs to choose whether to apply the rule without being worse off. The article’s proposal seeks to allow LICs room for effective tax competition needed to attain sustainable development goals.

Firms’ location decisions, supply chain disruptions and government subsidies: A dynamic game

This paper develops a dynamic game to study the interaction between firms’ production location decisions and a government subsidy policy. On the one hand, firms consider the cost of shielding their production capacity from (potential) supply chain disruptions. On the other hand, the government is interested in curbing production offshoring to increase domestic tax revenues. The location decision of each firm is affected by the government subsidy policy and the location choices of other firms, while the share of firms producing domestically influences the government’s decision on whether and to what extent to provide subsidies to firms. We show that government subsidy policy must target a sufficiently large number of firms to encourage production reshoring and achieve the Pareto-efficient equilibrium. However, a subsidy policy providing a high number of low subsidies is likely to be ineffective in increasing domestic production, highlighting the importance of careful fine-tuning of the policy. Finally, in some scenarios, industrial policy becomes crucial to increase the resilience of domestic supply chains and foster reshoring.

Effect of Transfer Pricing on Corporation Tax Compliance Among Multinational Corporations in Nairobi Kenya

Purpose: Tax is a compulsory contribution that is made by the citizens of a country to the government for the provision of public utilities. It is evident from the National Tax Policy, 2024 that the Kenya Revenue Authority (KRA) and the government at large have recently shown a lot of interest in multinationals due to the complexity of their operations and the tendency for them to come up with complex tax avoidance mechanisms. This has also been complicated by the widespread abuse of transfer pricing models adopted when dealing with multinational corporations operating in Kenya. This study looked into effect of transfer pricing on corporate tax compliance among multinational corporation companies in Kenya. The study was guided by the following theories, AS theory, the Slippery Slope Framework, and the theory of the planned behavior. Methodology: The study employed an explanatory research design. The target population was 221 multinational corporations’ companies and a sample size of 142 respondents. Questionnaires were used to collect primary data and analysis was descriptive statistics include frequency, percentage, and mean while inferential statistics included correlation and multiple regression. Results: The study findings found out most companies in Nairobi, Kenya have transfer pricing policies that are moderately but not adequately in line with domestic tax statutes. Most companies will use transfer pricing as a tool to reduce their tax liabilities. Further, KRA is moderately but not adequately efficient in monitoring and regulating transfer pricing practices in our company. Conclusion: The study results concluded that transfer pricing affects corporation tax compliance Based on the findings, the study recommends there is a need for exchange of information and more international collaborative efforts from a policy, legal, and academic front to address aggressive tax avoidance practices from MNCs. Therefore, future studies can be conducted on the impact of Dispute resolution mechanism on corporation tax performance.

"Context as a Reason for Exclusion of the Application of Domestic Tax Laws Under the Tax Treaty"

"Context as a Reason for Exclusion of the Application of Domestic Tax Laws Under the Tax Treaty"

Factors Militating against the Efficacy of the Mutual Agreement Procedure: A Comparison between South Africa, Kenya, Uganda and Ghana

The effective resolution of transfer pricing disputes has been identified as one of the primary challenges to eliminate double taxation and/or double non-taxation as well as to enhance the free flow of trade and investment. This article investigates the unique challenges faced by selected African countries, including South Africa, Kenya, Uganda and Ghana, which militate against the use of the mutual agreement procedure (MAP) as a preferred Organisation for Economic Co-operation and Development (OECD) transfer pricing dispute resolution mechanism. The research used a qualitative legal review of existing literature in the selected regimes by comparing the domestic tax law framework in these countries. Transfer pricing manipulation is a significant source of illicit financial flows of capital as identified in the research by Global Financial Integrity on Africa, which drew from Ghana, Kenya and Uganda as case studies. South Africa and Kenya are considered as the gateways to Africa with many multinational enterprises (MNEs) taking residence in them before expanding to the rest of Africa. The article focuses specifically on a number of guidelines that should be in place for the effective use of the MAP in the resolution of tax treaty disputes. It also demonstrates how the absence of guidelines, or the lack of clarity thereof, discourages both taxpayers and revenue authorities from effectively using the MAP to resolve transfer pricing disputes. The absence of guidelines has resulted in many aggrieved taxpayers opting to approach the courts as opposed to using the MAP as a mechanism to resolve tax treaty disputes. Furthermore, it highlights the importance of how resolved transfer pricing disputes eliminates double taxation. The article recommends that the same benefits enjoyed under the domestic dispute resolution process be incorporated into the MAP. It also makes recommendations on how jurisdictions with a low tax treaty network can address this challenge to enable them to effectively use the MAP as a tax treaty dispute resolution.

How Appropriate Are Domestic Minimum Top-Up Taxes in Africa?

In this article, the author argues that concerns around a proliferation of domestic minimum top-up tax regimes in Africa may be exaggerated. Potential additional revenue collections from Pillar Two do not justify the required additional capacity investment. The primary focus, for Africa, should be to reassess preferential tax regimes.

Overseas production or domestic production? Impacts of tax disparity and market difference

Overseas and domestic production are two commonly employed strategies for multinational firms (MNFs) to manage their global production operations. Recent tax-cutting initiatives have made domestic production an attractive option for MNFs. We aim to investigate whether such initiatives can effectively induce MNFs to produce domestically, especially when they cater to both domestic and foreign markets. In this study, we develop a game-theoretical model that considers an MNF with two subsidiaries - a production subsidiary and a retail subsidiary - located in different markets, and a third-party seller that resells the MNF's product in the domestic market. We take into account two important differences between the two markets, namely the tax disparity and the market potential difference. Our analysis reveals that a higher foreign market potential can strengthen the MNF's tax-saving incentive under the domestic production strategy. We find that a relatively lower domestic tax rate may not induce the MNF's domestic production even if the foreign market potential is low. On the other hand, when the domestic channel competition is intense, a higher domestic tax rate may still incentivize the MNF to produce domestically. These results depend on the tradeoffs among the tax-saving benefit, the third-party seller's free-riding, and the channel competition. We caution that promoting domestic production through a low tax rate may harm domestic consumer surplus, highlighting the need for policymakers to carefully consider the impact of tax policies on consumers.

Ways To Improve The Development Of Tax Policy In Uzbekistan

This study addresses the current challenges in the tax policy of Uzbekistan, identifying critical gaps in the existing framework. Utilizing a comprehensive analysis of domestic and international tax strategies, the research employs a mixed-methods approach, including both qualitative and quantitative assessments, to explore the effectiveness of current tax laws and their impact on economic stability. The findings reveal significant areas for improvement, particularly in aligning tax rates with economic goals and enhancing compliance mechanisms. The study concludes with practical implications for policymakers, suggesting reforms to optimize tax collection and foster sustainable economic growth.

Taxation of MNE profits in an R&D driven economy: Beneficial tax havens and minimum taxes

AbstractResearch and development (R&D) by multinational enterprises (MNEs) generates substantial positive cross‐country spillovers. With R&D incentives primarily provided by the MNEs' host countries, these nations bear the entire cost of incentivising R&D but only reap a fraction of the benefits, resulting in inefficiently low R&D incentives and investment from a global perspective. Allowing MNEs to shift their profit to a tax haven shelters the firms' profit from foreign taxation and increases the net returns to R&D without reducing the domestic tax base. In this setting, tax havens can be welfare beneficial because they help to internalise the positive cross‐country spillovers of R&D. The optimal effective minimum tax balances a reduction in wasteful profit shifting and more efficient R&D incentives for MNEs. Regardless of the welfare effect of R&D, a strictly positive minimum tax is optimal for each country. Uncoordinated minimum taxes may be excessively high, if R&D investment has a strong impact on productivity. Under certain circumstances, IP boxes are a welfare‐improving substitute for tax havens.

DEVELOPMENT OF APPROACHES TO THE TAXATION OF CRYPTOASSETS IN THE MODERN WORLD

In the article the dual economic nature of cryptocurrencies was analyzed same as investment assets and means of payment in foreign countries and Ukraine. It has been established that the asset and means of payment in foreign countries and Ukraine. It has been established that the classification of crypto-assets and their functions are of key importance for the introduction of their effective taxation. Approaches to the taxation of crypto-assets in various European countries, also in the USA, Malaysia, Singapore, Australia, India and other countries of the world have been studied. Taxation of such asset doesn’t have a unified nature and depends on the type of operation with them. According to research by Western scientists, it has been established that in modern word, cryptocurrencies are more often used for shadow operation than for tax evasion. The main principle that should be followed in the taxation of virtual assets is the principle of neutrality: taxation of cryptocurrencies should be carried out in the same way as similar traditional financial assets. In Ukraine, the legal framework for taxation of income operation with virtual assets (further – VA) is the stage of formation. In the work both draft laws “On the Legalization of Virtual Assets in Ukraine”, which were adopted at the end of 2023, are examined. Ones are proposing changes to the Tax Code of Ukraine regarding the procedure for taxation of VA and providing an opportunity to launch legislative regulation of the procedure for taxation of VA market. The differences between draft law on taxation of virtual assets have been highlighted in the work. Thus, it is proposed to tax VA according to the rules for securities or investment assets, which corresponds to the specifics of the domestic tax field