Dual Tax Research Articles

Dual Taxation

Dual Taxation

Taxation of Self-Employed in Russia: Potential Discrimination

In 2018 the Russian government introduced an option for the self-employed to pay a newly designed professional income tax instead of the ordinary personal income tax. This new tax regime has been widely examined by Russian scholars; however, the potentially discriminatory nature of the tax has not been studied. The tax is based on citizenship, and the authors’ principal hypothesis is that it conflicts with the fundamental principles of Russian tax law because it is not consistent with the principle of non-discrimination in Russian law. The article studies the issues arising from taxing the self-employed (i.e. the professional income tax) in a cross-border scenario and the potential for tax discrimination on grounds of nationality, tax nexus, and citizenship in taxing the self-employed in Russia. Moreover, the article raises the question of “general” tax discrimination among employees caused by the professional income tax. The authors use academic studies and judicial findings to examine the way other countries define the relationship between citizenship and taxation in order to clearly establish the discriminatory character of the professional income tax, and they conclude that the citizenship or nationality of the taxpayer is primarily a political connection rather than an economic one. The tax reflects an economic connection and should be understood as a payment for the “consumption” of public goods. In the contemporary understanding of taxation, the citizenship-based approach should be regarded as discriminatory in principle. The political ambitions of Russia in promoting integration across the EAEU cannot justify the restriction of the self-employed status only to citizens of EAEU member states. The authors recommend redesigning the professional income tax on the basis of residence and revising treaties pertaining to dual taxation in order to extend their provisions to the professional income tax.For citation: Ryabova E.V., Machekhin V.A. (2020) Taxation of the Self-Employed in Russia: Potential Discrimination. Pravo. Zhurnal Vysshey shkoly ekonomiki, vol. 15, no. 2, pp.149– 172 (in English). DOI:10.17323/2072-8166.2022.3.149.172.

Still the Lands of Equality? Heterogeneity of Income Composition in the Nordics, 1975–2016

Abstract According to standard measures of income inequality, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income composition, meaning the heterogeneity in individuals’ factor income shares. We show that, for all countries, a shift in capital incomes toward the top since the early 1990s causes rising heterogeneity in individuals’ factor income shares. To explain this result, we highlight the role of dual taxation systems. For Denmark in 2009–2013, Finland (1990–2007), and Norway (1991–2005), rising capital shares contributed to changes in personal income inequality, while for Sweden our results lead to disregard the capital share as a determinant of increasing income inequality.

Expansion of the Totalization Program using Simplified Agreements to Eliminate Dual Taxation

Expansion of the Totalization Program using Simplified Agreements to Eliminate Dual Taxation

Between Denmark and Moscovia: the Kola Sámi in the border conflict of the second half of the sixteenth – first quarter of the seventeenth century

ABSTRACT We examine the problem of the double taxation of the Sámi of the Kola Peninsula, who were in the dual tax jurisdiction of Denmark and the Russian state in the sixteenth – early seventeenth centuries. The origin of double taxation is associated with the unestablished borders in the Far North of Europe: each country considered Finnmark and the Kola Peninsula as part of its sphere of influence. We conclude that the double taxation of the Sámi of the Kola Peninsula was started in the second half of the sixteenth century as a consequence of the escalation of the conflict between the two states. Denmark and Russia used taxation as a means of fighting for disputed territories. In the 1590s, Denmark drove out Russian tax collectors from Finnmark. At the beginning of the seventeenth century, the Russian state took similar measures, prohibiting Danish tax collectors from entering the territory of the Kola district. Nevertheless, the double taxation of the Sámi of the Kola Peninsula with Danish and Russian tax persisted even after the introduction of a ban on entry into the disputed lands. This measure was a compromise, hindering the development of a possible military conflict with the Danish kingdom.

Impacts of dual tax system on foreign capital status*

AbstractForeign enterprises in China have long enjoyed ‘super‐national treatment’. This paper aims to explore the role of tax benefits in observed transitioning from domestic into foreign enterprise. Using firm‐level data, we find that the preferential tax policies enjoyed by foreign firms increase the probability of transitioning from domestic to foreign firms. To examine the effects of imported foreign direct investment (FDI), we separate introduced FDI into ‘genuine’ and ‘fake’ types according to the share of the host firm's registered capital, and it is seen that only ‘genuine’ FDI can improve the targeted firm's productivity and financial situation.

Expansion of the Totalization Program using Simplified Agreements to Eliminate Dual Taxation

Expansion of the Totalization Program using Simplified Agreements to Eliminate Dual Taxation

Flaws in taxation of transnational corporations using the transfer-pricing rules

The subject of this research is the transfer-pricing rules applied in various countries, their peculiarities and flaws from the standpoint of approach to taxation of transnational corporations overall; as well as practical issues of implementation of transfer-pricing rules for transnational corporations and fiscal authorities, namely the problems of avoidance of taxation by the representatives of transnational corporations and ambiguity of the applied approaches towards regulation. The author examines differences in the rules applied by various jurisdictions, as well as law enforcement problems emerging thereof. Relevance of the topic is substantiated by high significance of transfer-pricing rules for taxation of transnational corporations, as well as the need for ensuring universality in international taxation. The main conclusions lie in determination of substantial ambiguity in the transfer-pricing riles, associated with the lack of information on comparable transaction in the available information systems, as well as assessment of rules with regards to each individual situation. The mechanism employed by the Organization for Economic Cooperation, aimed ate elimination of flaws in transfer-pricing rules, such as consensual procedure, are expensive and often ineffective for transnational corporations. Therefore, elimination of dual taxation is achieved only in some situations. Differences of legislation on transfer pricing in various jurisdictions can also lead to dual taxation of transnational corporations. Moreover, the “arm’s length” principle do not allow reflecting synergetic effects that emerge in the context of activity of transnational corporation, and thus, definition of taxation base within the framework of acting transfer-pricing rules is incomplete.

Tax information acquired from foreign jurisdictions in the practice of arbitration courts of the Russian Federation

The subject of this research is the established in arbitration courts of the Russian Federation practice of implementation of provision of Multilateral Convention on Mutual Administrative Assistance in Tax Matters and provisions of the agreements on the avoidance of dual taxation, related to cooperation of fiscal authorities in the form of exchanging tax information. In particular, the author examines the questions of the period of validity of the provisions of international acts; forms information transfer; compliance with the requirements on legalization and apostiling of transferred documents; rights of taxpayers to appeal against the request on them to foreign jurisdiction; correlation between the provisions of international acts on the exchange of tax information and provisions of legislation on personal data protection. A conclusion is formulated that since the exchange of tax information is primarily regulated by the international acts, there is no need in adoption of normative act on the national level that would contain additional regulation, except a separate act for regulating the system of supplementary guarantees of private entities, involved into the exchange of tax information. Summarization of the formulated by courts legal positions on the level of the Supreme Court of the Russian Federation is relevant.

Direitos humanos, meio ambiente e tributação: seus impactos sobre a natureza e desenvolvimento

This article analyzes the importance of taxation throughout history, in the beginning as an instrument of wealth accumulation of the state, and recently as a basis to enforce fundamental rights and environment maintenance. The article will broach the concept of fiscal and parafiscal functions of taxes (art. 155, I of brazilian Constitution) and their relevance in the enforcement of fundamental rights. It analyzes the interlacing of fiscal and parafiscal functions of taxes and the dual tax purpose of the Contribution of Intervention in the Economical Domain - CIDE, its effectivity from the perspective of the environmental protection, as well as the budget’s purpose deviation from CIDE-Fuels, the diminishing of its aliquots, aiming to control the prices of fuels and its loss of effectiveness as an instrument of environmental protection. The study outlines how the tax system can contribute to the sustainable development and the environmental protection, encouraging non-polluter behaviors, even though the connection between Tax Law and Environmental Law is difficult to understand. Lastly, the study broaches the effective control of the rightful allocation of environmental taxes’. The deductive method will be used, starting from a broad analysis of bibliographical research in sites, magazines, newspapers, doctrines, jurisprudences and legislation to draw private conclusions.

Linguistic dual tasking reduces emotionality, vividness and credibility of voice memories in voice-hearing individuals: Results from a controlled trial

Dual taxation of the working memory during recall is an effective strategy to reduce the emotionality and vividness of visual intrusive memories and potentially changes dysfunctional beliefs associated with the memories. This study tested the hypothesis that dual tasking decreases emotionality, vividness and credibility of auditory intrusive images (i.e., memories of auditory hallucinations) with a two-level (time: pre and post; condition: dual tasking and recall only) within-subjects design. Thirty-seven voice-hearing participants selected two negative voice-hearing experiences. They recalled one of these experiences while performing a lingual dual task (i.e., language game on smartphone app) and recalled one memory without a dual task (in counterbalanced order). During the pre-test and post-test, emotionality and vividness of the voice-hearing memories were rated, as well as the credibility of the voice statements. There was a significantly greater decrease in emotionality, vividness and credibility during dual tasking than during recall only. This study provides proof of principle that the salience and credibility of the content of auditory hallucinations can be reduced by dual tasking; the clinical implications are also discussed.

Single-Tier or Dual-Tier Tax Systems: Implication for Petroleum Project Economics in Nigeria

Summary In this work we evaluate the effects of the single-tier tax system (STS) at its current rate in comparison to the proposed dual-tier tax system (DTS) in the National Petroleum Fiscal Policy in Nigeria on project economic performance. We also expound on the arguments between two schools of thought (single tax and dual tax proponents) toward understanding the rationale underlying the divergent viewpoints. The methodological approach applies the discounted cash flow modeling framework to evaluate the performances of terrain-based projects using selected metrics, such as internal rate of return, discounted payout, net present value, and government take (GT) under the two tax systems. This approach calibrates the unit technical cost for typical deepwater projects in Nigeria and imposes the current and proposed fiscal terms. Varying cost treatment options and alternative allowables//incentives are investigated in the modeling framework using global best practices. We conclude that whichever tax system is adopted, it is possible to achieve equivalent economic metrics. However, the DTS presents a better, more flexible option over the STS because one of the split rates—especially the hydrocarbon resource tax—could serve as an instrument to incentivize investment, promote conservation, and expand the resource base through technology innovation more easily without denying the mineral owner an outright revenue through taxation. In a classical case such as Nigeria, in which the national fiscal budget is largely financed using hydrocarbon revenue, the DTS seemingly offers a better option for revenue sharing among the stakeholders—the resource owners and the Federal Government—than the current single upstream tax system. Our discussion in this paper bridges the gap between the divergent viewpoints on the taxation system in Nigeria by proffering a pathway. We suggest that the overall objectives of stakeholders could be achieved using either STS or DTS metrics if the mechanics in designing the fiscal system is better understood. This will lead to progressive application in achieving divergent expectations.

A special feature of corporate income taxation in Portugal: the autonomous taxation of expenses

PurposeThe purpose of this paper is to discuss the following research questions: Is the Portuguese corporate income tax (CIT) losing its internal consistency by extending the autonomous taxation of expenses (ATE)? Are receipts derived from autonomous taxes so relevant that what began as an exception is gradually becoming a permanent feature of the income tax? Given the constitutional principle that corporate taxation should be fundamentally based on income, is the taxation of expenses unconstitutional? Is Portugal an international outlier, in applying this type of taxation to corporate expenses?Design/methodology/approachThe methodology used in the paper is a blend of legal research method and case study analysis. The interpretation of legal texts and the ratio legis discussion (hermeneutical side), the evaluation of advantages and disadvantages of autonomous taxes (argumentative approach) and the use of aggregate data to gauge an impression of autonomous taxes’ impact on global tax receipts (empirical side) will, jointly, be used to analyse the topic. Autonomous taxation is a case study on how a (albeit distortive) solution is being applied in an European Union (EU) country to significantly enhance corporate-related tax revenue.FindingsThe authors conclude that autonomous taxation is a relevant source of revenue and its elimination is not foreseeable, at least in the medium term. Moreover, the extension of the tax base is gradually transforming CIT in a kind of dual tax, by charging profits and some expenses. The Constitutional Court, stressing the equity principle, has not ruled autonomous taxation unconstitutional, invoking usefulness against tax evasion. Finally, with the exception of some Portuguese-speaking countries, no other comparable international experience is observed.Practical implicationsThe autonomous taxes (ATE) and its progressive enlargement imply, on the one hand, that the CIT has been slowly, but inexorably, losing its sole purpose of taxing profits, and imposing a tax penalty on an increasing set of accounting expenses. On the other hand, the growing number of expenses subjected to taxation leads some authors to ponder if the Portuguese tax regime is losing attractiveness. By increasing ATE’s scope, the effective rate tends to move upwards, countering reductions in the statutory rate. Finally, tax law will increasingly influence managers’ daily decisions, given the set of expenses targeted by autonomous taxes.Originality/valueTaking into account the aim of this study, the discussion of a Portuguese particular feature of corporate taxation can highlight useful policy points to a broader audience. Many Organization for Economic Cooperation and Development (OECD) countries face a dire situation in public finances. Therefore, given the pressure to increase tax receipts, the ATE can be a case study on how a (albeit distortive) solution is being applied in an EU country to significantly enhance corporate-related tax revenue.

Tax evasion in Spanish Personal Income Tax by income sources, 2005–2008: from the synthetic to the dual tax

This paper estimates Spanish Personal Income Tax (IRPF) evasion by income sources, between 2005 and 2008, applying the methodology of Feldman and Slemrod (Econ J 117:327–352, 2007) to the IRPF Taxpayers Panel database published by the Instituto de Estudios Fiscales (Spanish Institute for Fiscal Studies). From the estimates carried out, four conclusions can be drawn. First, that the greatest tax compliance throughout the period is found in labour income and the lowest in income from movable capital. Second, that the level of compliance is, in general, lower in 2008 than in 2005. Third, that, with the exception of income from movable capital, compliance is greater for the top 50% of taxpayers. Fourth, that the lowest level of compliance is found in the group of regions with better structural economic characteristics: Aragon, Catalonia and Madrid.

Capital Taxation in an Age of Inequality

The standard view in the U.S. tax law academy remains that capital income taxation is both a poor idea in theory and completely infeasible in practice. But this ignores the first-order importance of political economy issues in the design of tax instruments. The pervasive presence of gifts and bequests renders moot the claim that the results obtained by Atkinson and Stiglitz (1976) counsel against taxing capital income in practice. Taxing capital income is responsive to important political economy exigencies confronting the United States, including substantial tax revenue shortfalls relative to realistic government spending targets, increasing income and wealth inequality at the top end of distributions, and the surprising persistence of dynastic wealth. It also responds to a new strand of economic literature that argues that “inclusive growth” leads to higher growth.A flat-rate (proportional) income tax on capital imposed and collected annually has attractive theoretical and political economy properties that can be harnessed in actual tax instrument design. As a proportional tax, it applies at the same marginal and effective rates to both income and losses, thereby preserving the symmetry on which rests the theoretical analysis of returns to risk. A progressive consumption tax, by contrast, abandons this, and in doing so can burden the returns to waiting. Moreover, a flat-rate capital income tax is a progressive tax in application: because only high-ability taxpayers or those who are the beneficiaries of gifts and bequests can afford to defer consumption indefinitely, the increasing “tax wedge” on savings over time introduces a measure of top-bracket progressivity along the margin of time. In other words, what some see as the fatal flaw of capital income taxation in fact is a feature, not a bug.The separation of a taxpayer’s income into capital and labor components, and the application of separate rate schedules to each, are hallmarks of “dual income tax” instruments, of the sort explored in practice most comprehensively by several Nordic countries. Building on earlier work on dual tax systems and capital income tax structures, I propose a novel and reasonably accurate flat rate tax on capital income that builds on well-understood tax policies, that achieves integration between corporate and investor income, and that successfully distinguishes capital from labor income. I term this tax instrument the Dual Business Enterprise Income Tax, or Dual BEIT. Its virtues also include minimizing the relevance of the realization doctrine, eliminating distinctions across different forms of capital investment, and offering business enterprises a profits (consumption) tax environment in which to operate.To make the project more tractable, the two themes just advanced – the why and the how of the Dual BEIT – are each the subject of a separate paper. This is the “why” paper. Together, the two demonstrate that the Dual BEIT satisfies theoretical concerns, once those are filtered through the political economy imperatives of the quotidian world, and is straightforward to implement and administer.

Bracket Creep Revisited – with and without r > g: Evidence from Germany

Using German income distribution in 2009, this article studies the redistributive and revenue effects of bracket creep under various inflation scenarios. We develop a tax micro-simulation model for the newly available Panel on Household Finance (PHF) data. The simulation yields an inverted U-shaped overall redistributive effect of the income tax and social insurance contribution system with respect to the inflation rate, which contrasts with Immervoll (2005), who finds that fiscal drag always enhances the equalising effect. The nominal income growth as well as the deterioration of tax progression at the middle and top of the income distribution between 1998 and 2009 can be the impetus for this change. This result implies that delaying adjustment might reduce redistribution. We also suggest that these results might not be restricted solely to Germany. Additionally, when we introduce the empirical evidence that capital income grows faster than non-capital income r > g, the dual tax system with a flat capital income tax implemented in 2009 further disequalises the after-tax income substantially. Allowing inflation compensation to lean towards the poor by boosting their share of capital income may not be favourable to redistribution.

Bracket Creep Revisited - with and Without R>G: Evidence from Germany

Using German income distribution in 2009, this paper studies the redistributive and revenue effects of bracket creep under various inflation scenarios. We develop a tax micro-simulation model for the newly available Panel on Household Finance (PHF) data. The simulation yields an inverted U-shaped overall redistributive effect of the income tax and social insurance contribution system with respect to the inflation rate, which contrasts with Immervoll (2005) who finds that fiscal drag always enhances the equalising effect. The nominal income growth as well as the deterioration of tax progression at the middle and top of the income distribution between 1998 and 2009 can be the impetus for this change. This result implies that delaying adjustment might reduce redistribution. We also suggest that these results might not be restricted solely to Germany. Additionally, when we introduce the empirical evidence that capital income grows faster than non-capital income 􀝎 > 􀝃, the dual tax system with a flat capital income tax implemented in 2009 further disequalises the after-tax income substantially. Allowing inflation compensation to lean towards the poor by boosting their share of capital income may not be favourable to redistribution.

Bracket Creep Revisited With and Without R>G: Evidence From Germany

Using German income distribution in 2009, this paper studies the redistributive and revenue effects of bracket creep under various inflation scenarios. We develop a tax micro-simulation model for the newly available Panel on Household Finance (PHF) data. The simulation yields an inverted U-shaped overall redistributive effect of the income tax and social insurance contribution system with respect to the inflation rate, which contrasts with Immervoll (2005) who finds that fiscal drag always enhances the equalising effect. The nominal income growth as well as the deterioration of tax progression at the middle and top of the income distribution between 1998 and 2009 can be the impetus for this change. This result implies that delaying adjustment might reduce redistribution. We also suggest that these results might not be restricted solely to Germany. Additionally, when we introduce the empirical evidence that capital income grows faster than non-capital income r>g, the dual tax system with a flat capital income tax implemented in 2009 further disequalises the after-tax income substantially. Allowing inflation compensation to lean towards the poor by boosting their share of capital income may not be favourable to redistribution.

Investment Decisions under a Dual Tax System

This paper develops a theoretical model with a dual tax system that provides preferential treatments for foreign investment. The study suggests that in order to benefit from the preferential tax incentives and gain better property rights, high-productivity domestic firms intend to disguise as foreign firms via a practice of round-tripping. These preferential policies not only lead to government revenue losses; they also impose a higher tax rate on low-productivity and small firms. In addition, the study uses numerical simulation techniques to illustrate the impact of China’s corporate income tax reforms in 2008. We find that China’s domestic investment could decrease along with FDI under the unified system, though the tax rate on domestic firms falls.

A Theoretical and Practical Study on Linear Reforms of Dual Taxes

We extend the linear reforms introduced by Pf¨ahler (1984) to the case of dual taxes. We study the relative effect that linear dual tax cuts have on the inequality of income distribution -a symmetrical study can be made for dual linear tax hikes-. We also introduce measures of the degree of progressivity for dual taxes and show that they can be connected to the Lorenz dominance criterion. Additionally, we study the tax liability elasticity of each of the reforms proposed. Finally, by means of a microsimulation model and a considerably large data set of taxpayers drawn from 2004 Spanish Income Tax Return population, 1) we compare different yield-equivalent tax cuts applied to the Spanish dual income tax and 2) we investigate how much income redistribution the dual tax reform (Act ‘35/2006’) introduced with respect to the previous tax.