Domestic Tax Research Articles

Effect of Tax Revenue and Foreign Grants on Government Activities: A Study in Nepalese Perspective

This study aims to examine the impact of previous years’ government expenditure, tax revenue, and foreign grants on determining Nepal's government activities or expenditures. The secondary data from used in the analysis. It includes 48 data points from 1974/75 to 2021/22, collected from the publication of Nepal Rastra Bank and economic surveys of Nepal. The descriptive and exploratory research designs are used in this study. Some statistical and econometric tools like descriptive statistics, Kolmogorov-Smirnov test, multiple regression analysis, analysis of variance (ANOVA), and residual analysis are used in this study. The previous expenditure determines the present government activities. Tax revenue, foreign grants, and previous years’ government expenditures are individually and jointly significant in determining the government expenditure. One unit increase in tax revenue and foreign grants resulted in a 0.177 and 0.046 unit increase in government expenditure in Nepal, respectively. 86.5 percent variation in government activities is determined by the previous year's government expenditure, tax revenue, and foreign grants. The positive impact of tax revenue is more than foreign grants on spending government activities. So, the policymakers must prioritize measures that increase domestic tax revenue.

Digitalization and cross-border tax fraud: evidence from e-invoicing in Italy

AbstractThe digitalization of transaction processes through tools such as electronic invoicing (e-invoicing) aims to improve tax compliance and reduce administrative costs. Another important aspect of digitalization is its potential to reduce tax fraud. We exploit the comprehensive introduction of e-invoicing in Italy in 2019 and examine the effect of increased domestic tax enforcement capabilities on cross-border value-added tax (VAT) fraud. As a proxy for this fraud, we make use of the discrepancy in trade data that are double-reported in both the importing and exporting country (trade data gap, TDG). We calculate the TDG for imports to Italy from all other EU countries at the most detailed product level. Our results suggest a significant decline in cross-border fraud in response to the introduction of mandatory e-invoicing, providing an important rationale for the application of this measure by other countries. Furthermore, we estimate that e-invoicing decreased the Italian VAT loss in 2019 by about € 2.2 billion to € 2.6 billion compared to 2018. In this context, we underpin the suitability of the TDG as an approach for the study of anti-fraud measures.

Ghana’s education and labour unions join civil society organisations to take on the IMF

ABSTRACT This article will explain how a series of educator strikes in 2022 in Ghana led to increased awareness of and calls for tax justice and debt relief from a growing movement of public sector workers and civil society organisations. We chart how the issues and demands of teacher organisations and other public sector workers shifted and increased over time, bringing in a new public imaginary to critique IMF driven austerity policies, build and link to global campaigns around debt relief, and signal new possibilities for generating more stable domestic public sector tax revenues. We examine the evolving strategies of growing educator strikes and show how unions are joining together with other civil society and advocacy groups to challenge fiscal austerity and government policies that affect not only their schools and classrooms but their lives and livelihoods. This case describing what Ghanaian teacher unions are doing to organise members to learn about and challenge austerity policies highlights the importance of public sector workers’ knowledge, understanding and engaging governmental macro-economic policies and offering alternative solutions.

Evaluating taxation’s dual impact on business and social development: A case study of the Cape Coast metropolis in Ghana

Tax revenue is an important public asset that contributes significantly to a nation’s economic development. The primary function of every government is to make provision in terms of infrastructure facilities, development, and better living conditions for its people. Due to the government’s limited resources, it is necessary to impose taxes on all residents and businesses to strengthen its financial situation because it is impossible for it to carry out this large task in an effective manner. Governments have always passed numerous tax laws, and they have been amended to withstand the test of time. Therefore, this study’s goal is to determine whether taxes have an impact on economic development in the Cape Coast Metropolis in Ghana. The study used the quantitative approach, survey technique, and questionnaire for the data collection process. A sample size of 115 respondents comprising the staff of the domestic tax revenue division’s workforce and owners of registered SMEs were engaged in the study. The data was analyzed using SPSS version 26. The results indicated that the majority of the staff of the Ghana Revenue Authority (GRA) considered payment of tax as beneficial to the state, while few of the staff did not consider payment of tax as beneficial to the state. In addition, the study outcomes show that respondents are aware of the extent to which tax revenue can be used by the government for economic development. Furthermore, the researchers recommended that the head of GRA create a strong regulatory framework to monitor how tax money is used for economic growth. They should also make an effort to ensure that the tax revenue generated will be wisely used for the growth of the metropolis. This will make taxpayers appreciate the need to pay their taxes because they know they will benefit from it in the end in the form of social and economic developments.

Qualified Domestic Minimum Top-Up Tax: Should Developing Countries Adopt It?

The Qualified Domestic Minimum Top-up Tax (QDMTT) is presented as the preferred choice for developing countries. However, given its unfamiliar design, complexity, limited revenue gain, peer review and resource burdens, the QDMTT is unsuitable for developing countries. Instead, such countries should reform their tax incentives, and consider an across-the-board minimum tax.

Economic Performance of the Economy of Kosovo and Metohija

The problem of analysing the factors of the dynamics of the economic performance of every economy, which means the economy of the southern provinces of Serbia, the economy of Kosovo and Metohija, is continuously very current, challenging, significant, and complex. Adequate control of key factors can significantly influence the achievement of the target economic performance of any economy. The application of multi-criteria decision-making methods enables adequate control of the key factors of the economic performance of each economy. Taking this into account, this paper analyses the dynamics of the economic performance of the economy of Kosovo and Metohija in the period 2013 – 2022 based on the LMAW-DNMA method. In the top five years according to the economic performance of the economy of Kosovo and Metohija according to the LMAW-DNMA methods, it falls in the following order: 2022, 2021, 2019, 2017 and 2018. The worst economic performance of the economy of Kosovo and Metohija was achieved in 2020, partly due to the corona virus pandemic. Recently, the economic performance of the economy of Kosovo has improved significantly and Metohija. Adequate management of the analysed statistical variables (gross domestic product, inflation, agriculture, industry, export, import, capital, income, and taxes) influenced this. Similarly, the economic climate, foreign direct investments, the energy crisis, the digitalisation of the company’s entire operation, and other factors. Their adequate control can greatly influence the achievement of the target economic performance of the economy of Kosovo and Metohija.

Article: Resolving Conflicts Between Production Sharing Contracts and Tax Treaties in Indonesia

This article discusses the uncertain dispute settlement for a conflict resulting from applying a reduced rate stipulated in a tax treaty or a domestic withholding tax rate agreed to in a production sharing contract (PSC) on branch profit tax (BPT) in Indonesia. The contractor, the permanent establishment of a non-resident entity in Indonesia, interpreted that a reduced rate shall apply whereas the Indonesian tax authority adhered to applying the prevailing domestic withholding tax rate at the time that the PSC was signed. The ambiguousness between the tax treaty and the PSC led the disputed entity to choose litigation as the primary alternative of dispute settlement even though the tax treaty facilitates resolving the problem through a mutual agreement procedure (MAP) or another possible dispute resolution. Further, Indonesian civil law does not implement the jurisprudence. The dispute will continue if renegotiation is not reached. To reduce the chance of a potential dispute in the future, a stabilization clause to accommodate the change of the regulation during the period of the contract has been included, however, it only applies to the latest version of the PSC. Tax treaty, production sharing contract, branch profit tax

THE PAKISTAN FACTOR IN SOUTH ASIA AND CENTRAL ASIA RELATIONS

This article discusses the multilateral relations between Pakistan and Central Asia. Pakistan's experience of unstable development is the result of our over-reliance on foreign aid and exogenous factors. To ensure a stable and sustainable trajectory of high growth, we focus on endogenous factors of growth such as domestic resource mobilisation, tax reforms, science, technology and innovation, stimulating export growth and we attract foreign direct investment. Remittances have provided significant support for our financial needs, but their true potential has not been realized. We will introduce reforms to increase remittances by offering incentives. Nevertheless, in order to achieve this long-term goal, we need to build a solid and self-sustaining platform using external funding sources in the medium term.

Transfer Pricing Documentation Methods in Nigeria: A Critique of the Prime Plastichem Case Against International Best Practices

The quest to ensure that the tax planning activities of multinational enterprises operating in Nigeria do not erode the country's domestic tax base has led to the enactment and enforcement of the Transfer Pricing (TP) Regulations, 2018 in Nigeria. The TP Regulation provides for a comprehensive framework to ensure that the pricing of related party transactions is consistent with global best practices on TP. The enforcement of the TP Regulation in Nigeria was taken a step further in 2020 when the Tax Appeal Tribunal affirmed the imposition by the Federal Inland Revenue Service (FIRS) of liability of over one billion naira on Prime Plastichem Nigeria Limited for failing to apply consistent TP methods in the financial years 2013 and 2014. While this decision was hailed as Nigeria's first decision of the Tax Appeal Tribunal (TAT) dealing with transfer pricing, the decision has been criticised for failing to apply the global standards for TP documentation. This article seeks to critique the principles of TP documentation espoused in the Prime Plastichem case vis-à-vis international best practices on transfer pricing documentation.

Analysis of International Disputes over Digital Services Tax and Exploration of China’s Approach

With the continuous emergence of emerging information technologies, the digital economy is developing rapidly around the world. The global operations of multinational digital enterprises no longer rely on physical presence. The effectiveness of permanent establishment rules based on the traditional real economy settings has been questioned by market countries, which actively participate in Market countries where digital business value is created do not receive corresponding taxation rights. Multinational digital companies take advantage of loopholes in digital platforms and current tax rules to actively carry out tax planning, resulting in digital companies’ global tax burden being much lower than that of traditional companies. Tax sources cannot be fairly and reasonably distributed in the places where value is created and profits are taxed, which harms the tax interests of market countries. Against the background of slow progress in the OECD global unified solution, as a temporary unilateral measure to address the challenges of the digital economy, some countries have taken the lead in imposing digital service taxes on specific digital businesses of digital enterprises. On the basis of discussing the relevant concepts and theories of digital service tax, this article discusses the relevant concepts and theories of digital service tax, and analyzes the international development of digital service tax and the positions of various countries around the world. Further analyze the impact of digital service tax collection from three aspects: national fiscal revenue, tax trade disputes and international tax order coordination, and analyze the impact of digital service tax on digital enterprises. Then the perspective is focused on my country, sorting out and summarizing my country's relevant digital economy tax policies, and analyzing the impact of digital service tax on my country in the near term and long term based on the development of my country's digital economy. Finally, based on the previous comparative analysis and impact analysis, my country's tax system for promoting the development of the digital economy has gradually improved and actively participated in the reshaping of international tax rules, and my country's response strategies under the digital service tax have been proposed. The different levels of digital economic development between China and countries that have levied digital service taxes will inevitably lead to disharmony in the international tax order. The study found that the fiscal revenue brought by digital service tax is limited and has a certain degree of distortion effect. It is necessary to actively participate in international cooperation and make China's voice heard before reaching a consensus on international tax rules. In the long term, we should focus on the connection between the two-pillar plan and the domestic tax system, strengthen tax information exchange, improve the domestic digital tax rule system, and promote the healthy and sustainable development of my country's digital economy.

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.

The Effect of Tax Avoidance and Tax Evasion on the Performance of South African Economy

Using a quantitative longitudinal trends analysis, this study analysed the link between tax evasion and avoidance. The main aim was to assess the implications of evasion and avoidance of taxes on South African economy progress from 1994-2021. Publically secondary data available from South African Revenue authority were gathered. The data gathered provided us with basis of longitudinal statistical analysis of the extent of tax evasion and or tax avoidance affected the economic growth in the years 1994-2021. The Eviews 10 Results was used to estimate elasticities and buoyancies for major taxes with respect of South Africa’s economic growth for years 1994-2021. The natural logarithm of the gap between total budgeted tax income and realised tax income was also employed as a metric of tax evasion and avoidance in South Africa for this key research work. Ordinary Least Squares Regression (OLS) regression analysis was employed to evaluate whether the link between Gross Domestic Product (GDP) and tax evaded and avoided is strong or weak. Test for stationarity to see whether the parameter does not vary over time and for OLS was performed. The overall analysis of tax evasion and avoidance upon South African economy showed the increased tax revenue resulted in surpluses between tax revenue budgeted, tax revenue collected and economic growth (GDP), meaning tax evasion and avoidance in South Africa are minimal. The study's findings disprove prior studies that suggest that tax evasion and tax avoidance seriously affect Gross Domestic Products (GDP) and refute the null hypothesis of this study. However, the study’s results further revealed that increasing tax rates was said to have triggered a positive trend towards economic growth or GDP (actual revenue collected is more than expected taxation revenue annually to cover tax evaded and avoided. As far as policy is concerned the conclusion is reassuring that tax evasion and avoidance has minimal effect upon economic growth as long as tax rates are being risen. The results of this study provide implications for government that specific insights should allow policy makers to gain a better understanding on the key variables that are potentially associated with tax evasion and avoidance. Finally, the study contributes knowledge that is pertinent to an emerging country and provides much needed insights into the magnitude of the extent of tax evasion and avoidance on the county’s economic growth progress.

Multinational Corporations transfer Pricing Policies and Economic Growth in Nigeria

With Nigeria's abundant natural resources the control of a substantial portion of oil production by multinational corporations (MNCs) raises concerns about transfer pricing manipulation. Part of revenue leakages of the government in Nigeria which are needed to boost economic growth can be attributed to tax evasion practices by MNCs through their transfer pricing activities. Studies that focused on tax evasion practices of MNCs such as sharp practices in the area of transfer pricing practices in Nigeria are scarce. This study examined the effect of multinational corporations transfer pricing policies, corruption and economic growth in Nigeria from 1986 to 2022. The study adopts an ex-post factor research design, utilizing an autoregressive distributed lag modelling and bound testing cointegration as the estimation techniques. The inferences were made at 5% significant level. The inferences were made at 5% significant level. The findings revealed that domestic non-oil revenue shows a significant and positive effect on Gross Domestic Product, suggesting a potential positive association between domestic non-oil revenue and Gross Domestic Product over the long term. In the short run lagged differences in Gross Domestic Product exhibit a positive and marginally significant coefficient, suggesting a persistence effect. In conclusion, in the examination of transfer pricing policy on Gross Domestic Product, the long-run estimates reveal a significant effect of transfer pricing on Gross Domestic Product (Adj. R2= 0.229, F (4,37) = 30.94, p< 0.05)), The study concluded that transfer pricing contributes valuable insights to the on economic growth in Nigeria. The study recommended that policy maker should center on promoting transparency and fairness in multinational corporations' transfer pricing practices through the implementation of stringent regulations and monitoring mechanisms, collaboration between domestic and international tax authorities to detect and deter potential manipulations, and the fostering of international cooperation to establish standardized guidelines, aiming for an equitable and consistent approach across jurisdictions.

An Investigation of the Array of Domestic and Foreign Tax Haven Location Decisions for U.S. Multinational Firms

An Investigation of the Array of Domestic and Foreign Tax Haven Location Decisions for U.S. Multinational Firms

Borderless offices : Opportunity for tax optimisation?

The prevalence of telework, or working remotely or from home, has grown significantly in recent years, in which the COVID-19 pandemic played a major role. This paper focuses on a narrower subsection of remote work arrangements, and analyses employees’ possibilities for tax optimization and potential taxation risks in the context of cross-border remote work or telework. Major obstacles to the spread of remote work are identified by investigating the challenges associated with cross-border remote work from an employer’s perspective. As a further objective, the paper aims to explore how jobs offered in the Hungarian labour market, but performed remotely from abroad influence domestic tax revenues. Three scenarios were developed which reveal that the budget of Hungary suffers at least HUF 46 billion loss in fiscal revenues if 10% of remote job vacancies are filled from across Hungary’s borders. If only 50% of remote/workfrom-home job vacancies are filled within borders, the potential loss in revenue from taxes and contributions is HUF 229 billion. The research conducted under this study highlights the tax consequences of technology-driven changes in the labour market for individuals, employers and central budgets. States need to consider these factors when shaping their tax systems to ensure sustainable tax revenues.

ТЕНДЕНЦІЇ РОЗВИТКУ ПОДАТКОВОЇ ПОЛІТИКИ: ВІДНОВЛЕННЯ ПІСЛЯ ВІЙНИ

The article is devoted to the study of trends in the development of domestic tax policy. The author analyzes the importance of the tax system for the recovery of Ukraine's economy after the war, since the military conflict and the unstable political situation in the country put serious pressure on the economic system and require strategic decisions on tax policy. Based on a report by the European Business Association and other sources, the current state of the tax system and its impact on the Ukrainian economy are analyzed. After reviewing the current economic situation in Ukraine, the article highlights the negative consequences of the military conflict, including significant damage to infrastructure, disruption of production, and labor migration. The increase in defense spending during the conflict also creates additional financial pressure on the state budget. It is noted that these changes require a positive review from international partners to ensure the financial stability of the country. The article discusses proposals for combating the shadow economy and optimizing tax revenues by creating favorable conditions for the return of emigrants to Ukraine and attracting funds from Ukrainians working abroad. The article also presents the main provisions of the National Revenue Strategy of Ukraine until 2030 regarding the internal reform of tax and customs authorities, restoration of taxpayers' confidence in tax authorities, and implementation of tax and customs policy measures. Particular attention is paid to the principles of reasonable management of tax audits in times of crisis. The article analyzes the methods and strategies aimed at ensuring compliance with the law and maintaining trust in the tax system in an unstable environment. The author also emphasizes the importance of reasonable management of audits in the context of military conflict. It is noted that effective regulation and supervision of tax audits can help reduce risks to business and maintain confidence in the tax system. The article identifies the key areas for tax reform in Ukraine, including measures to increase tax revenues, improve the tax system and ensure sustainable economic development of the country in the context of military conflict. Overall, the article provides an in-depth analysis of the current state of Ukraine's tax system and suggests constructive strategies for tax reform in the context of the crisis, with the aim of supporting the country's economic recovery and stability.

Towards a Digital Revolution: Investigating the Impact of GDP, Tax Collection, and Interest Rates on Cashless Economy in India

The rapid advancement of digital technologies have propelled economies worldwide towards a transformative shift to cashless transactions. In the context of India's ambitious journey towards a digital revolution, this research aims to investigate the impact of Gross Domestic Product (GDP), tax collection, and interest rates on the adoption and usage of a cashless economy in India. The objectives of the study were to explore the relationships between GDP and the cashless economy, tax collection and the cashless economy, and interest rates and the cashless economy. Three hypotheses were formulated to test these relationships, positing that as GDP, tax collection, and interest rates increase, the adoption and usage of cashless payment methods in India. Using OLS multiple regression analysis through STATA software, data from the years 2001 to 2020 were meticulously analyzed. The research findings revealed a significant positive correlation between GDP and the cashless economy, indicating that as India's economy grows, there is an increased inclination towards digital payment methods. Similarly, effective tax collection initiatives were found to play a pivotal role in promoting formal financial transactions and driving the adoption of cashless payments in the country. However, contrary to the hypothesis, the study results showed that the impact of interest rates on cashless payment adoption was not as prominent as anticipated. This research contributes valuable insights into the dynamics of India's digital revolution, emphasizing the role of key macroeconomic factors in shaping the cashless ecosystem. The findings offer strategic implications for policymakers, financial institutions, and businesses in devising evidence-based strategies to accelerate India's transition towards a robust and inclusive cashless economy.

The Effect of Tax Revenue Mobilization on the Economic Growth of Ethiopia

A study on the long run and short run effects of tax revenue mobilization on the economic growth of Ethiopia was conducted using an explanatory research design and mixed research approach. Secondary data from world development indicators spanning from 1990 to 2021 were analyzed using Auto regressive distributive lag (ARDL). The study found no long run causal relationship between taxation, different tax classifications, and economic growth in Ethiopia during the study period. However, in the short run, the current period of tax revenue had a positive and significant impact on economic growth, while a one-period lag in tax revenue had a negative and significant effect. Specifically, the one-period lag in direct tax negatively affected economic growth. Indirect tax did not show a significant effect in both the short run and long run. Based on these findings, the study recommends that the Ethiopian government and the Ministry of Revenues review the tax system and implement mechanisms to shift tax revenue sources from direct tax to indirect tax. This can be achieved by introducing strong tax collection methods and emphasizing the collection of domestic indirect tax.

A Discussion on the International Tax Issues Arising in Chinese Enterprises’ Investments to Brazil

Brazil is a member state of the Golden BRICS and the biggest economy in South America. China is also a member state of the Golden BRICS and the second biggest economy in the world. To enhance mutual economic cooperation in trading and investment is in line with the interests of both countries. Against this background, this paper discusses a few tax issues arising in the cases concerning Chinese enterprises’ investments in Brazil from the perspective of double tax treaty and the protocol signed in 2022. Due to the differences in double tax treaties and domestic tax systems, for Chinese investors, to invest in the European Union Member States such as Poland and to invest in Brazil will translate into different tax issues. The differences in tax issues would lead to different tax plans. Most of the tax practitioners in China could not speak Portuguese. This is a realistic obstacle preventing Chinese tax experts or Chinese enterprises from managing the tax risks arising in the Brazilian market. Macau as an area once having so close link with Portugal and nowadays still having some residents able to speak Portugal hopefully might build up a bridge between China and Brazil, if Macau has a plan to sign a double tax treaty with Brazil that is attractive to Chinese enterprises, and also if it has a competitive domestic tax regime.

The New Horizons of Tax Law between Energy Policies and Ecological Transition: the Case of Energy Communities

In view of the objectives of environmental sustainability and climate neutrality, advocated by the Paris Agreement and the “European green deal”, energy taxation represents a fundamental tool for the gradual replacement of traditional fossil fuels with renewable ecological sources in a cost-saving manner. Moreover, it enables us to rethink energy supply models. The reflection considers measures developed at both EU and domestic levels, examining tools, mechanisms and tax incentives designed to facilitate an environmentally-friendly energy transition. Particular focus is given to energy communities – a form of energy system democratization allowing users to become producers, consumers and managers simultaneously, transforming the energy market, still reliant on fossil fuels and organized around centralized production and distribution networks, from a “green” perspective.