Tax Competition Research Articles

Aggressive Tax Planning and Performance by Kenya Revenue Authority

Taxation is a vital fiscal tool that can be utilized to augment the economic wellbeing of a nation. Taxation is not only vital for revenue generation purposes; it can also be used to control the behavior of taxpayers such as raising taxes on commodities that are deemed to be toxic to the society, if over consumed. In Kenya, from Financial Year 2010/11 to Financial Year 2020/21 has recorded a deficit budget. A deficit budget implies that the economy’s leverage is weak. The country`s debt ceiling has now become a major issue, since the increase in national debt has surpassed the stipulated threshold necessitating adjustment of debt ceiling. Aggressive tax planning is vital with regards to revenue performance by Kenya Revenue Authority. This paper reviews the conceptual, theoretical and empirical literature and raises a variety of issues that necessitates a proposed theoretical model for the purpose of understanding aggressive tax planning and performance by Kenya Revenue Authority. This study aims at assessing the effects of debt shifting, location of intellectual property rights, bilateral tax treaty and performance by Kenya Revenue Authority. This research will be anchored on Social Learning Theory and Tax Competition Theory. This research study reviewed on the previous studies undertaken on the area of interest. This study focused on the study findings and the methodology. The conclusions regarding the relationship that exist between the independent variables and dependent for this study were derived from the findings of the past studies. Recommendations in this study were made based on the previous study findings and conclusions. This study found that Multinational corporations tend to exploit all the available loopholes within the tax laws in order for them to decrease their tax liability to tax administration. Due to multinational corporations adopting aggressive tax planning, the dire repercussions include tax revenues being collected by the tax administration tend to reduce significantly. This leads to tax administration not meeting their tax revenues collection targets. This study recommends KRA to continuously review any existing loopholes in the tax laws. Sealing the respective loopholes in the tax laws tend to enhance tax revenues collection targets. Further, multinational corporations need to observe ethics in their business practices.

Effects of geopolitical risk on environmental sustainability and the moderating role of environmental policy stringency

This study investigates the impact of geopolitical risk (GPR) on consumption-based carbon (CCO2) emissions as well as the moderating role of environmental policy stringency (EPS) on the above relationship. Based on data collected from 27 countries from 1990 to 2020, the basic results from the sample of the study indicate that GPR accelerates CCO2 emissions. Quantile regression results reveal that the effect of GPR is more pronounced in countries with higher CCO2 emissions. Moreover, EPS weakens the escalating effect of GPR on CCO2 emissions. The robust test results validate the findings reported in the basic regression model. The heterogeneity test indicates that the impact of GPR on CCO2 emissions is greater in developing countries compared in developed countries. The study also proposes these policy implications based on the findings: (1) countries should ensure a stable political environment, establish a robust legal system and promote energy transition; and (2) the scope of environmental taxes should be expanded where different tax rates should be imposed in order to be useful in reducing CCO2 emissions.

China's environmental tax reform achieves the co-management of carbon and haze: The role of optimizing energy utilization

Environmental tax reform in China is an essential initiative to achieve carbon and haze co-management by shifting the Environmental Fee to Tax (EFT). Therefore, we employ a Coupling Coordination Degree (CCD) model to measure the level of carbon and haze co-management across three distinct scenarios in China. Treating the EFT policy as a quasi-natural experiment, the study explores its impact on carbon and haze co-management using data of 282 prefecture-level cities in China during 2015–2020. Furthermore, the study further analyzes the regional heterogeneity and the transmission mechanisms of optimizing energy utilization. The principal findings of this investigation are as follows. First, the co-management levels of carbon and haze in China show a discernible upward trend from 2015 to 2020. A heightened emphasis on carbon reduction is helpful in improving the co-management level of carbon and haze. Co-management levels of carbon and haze are lower within the treatment group compared to the control group, but their growth rates are higher. Second, the EFT policy in China has significantly enhanced the co-management level of carbon and haze. Third, the impact of China's EFT policy has a more pronounced effect in western China and a comparatively weaker effect in middle China, which may be attributed to variations in industrial infrastructure, supporting facilities, availability of clean energy resources, and prevailing policy inclinations across different regions of China. Finally, China's EFT policy is an instrumental factor in augmenting the co-management level of carbon and haze, primarily through pathways of upgrading energy structure and improving energy efficiency.

Economic-environmental assessment of emission tax policy in developing countries: evidence from Iran

PurposeThe present study aims at quantifying the likely impacts of an environmental tax on macroeconomic variables and pollution in Iran.Design/methodology/approachThe computable general equilibrium model, which allows the prediction of the economy-wide effects of any change in policy instruments, is applied.FindingsThe main findings reveal that gross domestic product, private consumption and income in both urban and rural areas will follow a declining trend as a result of environmental tax imposition. In a scenario with the highest level of tax, the predicted percentage change to the gross domestic product and private consumption is estimated at −21.32 and −40.96, respectively. In the same scenario, pollution emissions would decrease by 12.4–22.6% for CO2, CH4 and N2O.Originality/valueThis study uses a general equilibrium model to examine the effects of the carbon tax on environmental issues and household welfare, considering the unique conditions and regulations of Iran. While the related literature examines the CO2 tax, the current study covers more pollutants, including CO2, CH4, N2O, CO, SO2 and NOx. In addition, a distinguishing feature of the current study is that it applies a modified version of the social accounting matrix (SAM) database, which includes the heavy subsidies of energy products. Another significant feature of the current study is that it examines tax policy while tax rates are exerted endogenously (compared to previous studies).

Testing the impact of environmental taxation and IFRS adoption on consumption-based carbon in European countries.

Several governance regulations have been adopted in European countries to promote environmental sustainability, such as environmental taxation and environmental disclosures in financial reports. In this context, this paper examines the linkage between environmental taxation, International Financial Reporting Standards (IFRS), and environmental sustainability in European countries from 1994 to 2018. Unlike earlier empirical studies, the present work is the first to assess the impact of environmental taxation and IFRS adoption on consumption-based carbon emissions. In order to yield valid and reliable outcomes, the modern econometric method that is vigorous to cross-sectional dependence and slope heterogeneity was employed. Likewise, the study uses the novel method of moment quantile regressions (MMQR). The MMQR outcomes illustrated that environmental taxation significantly negatively affects consumption-based emissions in European countries, indicating that environmental taxation has a positive effect on the ecological sustainability. Besides, the findings show that IFRS negatively affects consumption-based emissions, while economic growth positively affects the level of consumption-based emissions. Therefore, European governments must use fiscal and financial policies to mitigate ecological pollution. Moreover, more environmental, social, and governance (ESG) disclosure in European industries could also help promote environmental sustainability in European countries.

Public infrastructure provision in the presence of terms‐of‐trade effects and tax competition

AbstractThis paper analyses and compares the performance of resource taxes and capital taxes in financing public goods while considering the positive effects of public expenditure on firm productivity. It is motivated by Franks et al. (2017), who argue that the advantage of the resource tax consists in its potential to reap foreign resource rents. I employ an analytical general equilibrium framework of identical resource‐poor countries, where local firms use internationally mobile capital and a net imported resource in production as well as local public infrastructure. The latter is financed solely by either taxing the input of the resource or capital. The choice of the policy instrument is exogenous to policy makers and symmetric across countries. I find that expenditure on infrastructure renders the impact of fiscal policy on the terms of trade ambiguous under resource taxation and negative under capital taxation. Moreover, public expenditure weakens the outflow of factors moderating the deficit of public spending caused by tax competition. This holds for both policy scenarios. Considering both effects simultaneously, resource taxation cannot generally be identified as the policy to provide higher provision or efficiency. A numerical exercise shows cases for higher provision of either policy.

Nexus between Innovation–Openness–Natural Resources–Environmental Quality in N-11 Countries: What Is the Role of Environmental Tax?

This research investigates the intricate relationship between financial openness, natural resources, and carbon neutrality in the N-11 countries. It provides insights into how environmental tax and innovation can drive carbon neutrality in these nations, thus advancing our understanding of the nexus among financial openness, natural resources, and carbon neutrality. The study aims to offer policymakers perspectives on formulating policies to foster sustainable economic development and environmental conservation in the N-11 nations. The discourse highlights the environmental implications of foreign direct investment (FDI) and trade openness, revealing a complex interplay between economic development, technological innovation, and environmental sustainability. While FDI can facilitate technological transfers and managerial advancements that enhance resource efficiency and promote environmentally friendly practices, its environmental impact varies based on regulatory frameworks and enforcement mechanisms. In countries with weak environmental regulations, FDI may lead to negative outcomes such as pollution hotspots, resource depletion, and ecosystem degradation. Similarly, trade openness can exacerbate environmental degradation through increased production, energy consumption, and waste generation. However, both FDI and trade openness can contribute positively to environmental sustainability when coupled with effective environmental policies, investment in green technology, and the promotion of sustainable practices. Thus, policymakers must strike a balance between economic development and environmental protection by implementing stringent environmental regulations, promoting clean technology transfer, and fostering sustainable development practices domestically and internationally. This research offers valuable insights for policymakers aiming to navigate the complexities of achieving carbon neutrality while ensuring sustainable economic growth in the N-11 countries.

The role of ICT investment, digital financial inclusion, and environmental tax in promoting sustainable energy development in the MENA region: Evidences with Dynamic Common Correlated Effects (DCE) and instrumental variable-adjusted DCE.

His research investigates the interplay among investment in Information and Communication Technology [ICT], digital financial inclusion, environmental tax policies, and their impact on the progression of sustainable energy development within the Middle East and North Africa [MENA] region. Recognizing the distinctive hurdles impeding sustainable energy advancement, effective policy formulation and implementation in MENA necessitate a comprehensive understanding of these variables. Employing a Dynamic Common Correlated Effects [DCE] model alongside an instrumental variable-adjusted DCE approach, this study explores the relationship between ICT investment, digital financial inclusion, environmental tax, and sustainable energy development. The DCE model facilitates the analysis of dynamic effects and potential correlations, while the instrumental variable-adjusted DCE model addresses issues pertaining to endogeneity. The results indicate that both ICT investment and the promotion of digital financial inclusion significantly and positively impact sustainable energy development in the MENA region. Additionally, the study underscores the importance of environmental tax implementation in fostering sustainable energy advancement, highlighting the critical role of environmental policy interventions. Based on these findings, governmental prioritization of ICT investment and initiatives for digital financial service integration is recommended to bolster sustainable energy growth in MENA. Furthermore, the adoption of efficient environmental tax measures is essential to incentivize sustainable energy practices and mitigate environmental degradation. These policy recommendations aim to create a conducive environment for sustainable energy progression in the MENA region, contributing to both economic prosperity and environmental conservation.

Environmental taxes, R&D expenditures and renewable energy consumption in EU countries: Are fiscal instruments effective in the expansion of clean energy?

In today's world, where energy demand and climate change are experienced, the transition to renewable energy comes to the fore. The main tools used in the expansion of renewable energy are taxes and expenditures. This study examines the impact of R&D expenditures, environmental taxes and economic growth on renewable energy consumption in selected EU countries from 1995 to 2019. This study used augmented mean group (AMG) and dynamic common correlated effects (DCCE), which are novel estimators. Two different long-run estimators were used to obtain robust results. According to the results of the study, Environmental taxes have a positive effect on renewable energy consumption in Germany and France, while they have a negative effect in Spain and Slovenia. R&D expenditures positively impact renewable energy in Portugal, Lithuania, and Slovakia, while negatively affecting it in Germany and Spain. EU countries, which have equal responsibilities in expanding renewable energy, need to review their tax and expenditure policies and implement them in a coordinated manner.

How effective is the reduction of major pollutants in thermal power plants under the ultra-low emission policy?

In 2015, the Chinese government set ultra-low emission standards for thermal power to alleviate the pressure of increasing total pollutants from energy demand. This paper analyzes the policy effect of ultra-low emission in different regions based on panel data of 1202 thermal power enterprises, and the results of hierarchical linear model show that the total amount of air pollutants emitted by thermal power enterprises showed a decreasing trend during 2017–2021, realizing the dual control of concentration and total amount. Due to the differences in primary energy structure, industrial structure and economic development level of different regions, the total emission reduction of thermal power pollutants is affected differently. First, the proportion of the region's secondary industry in the region's GDP is negatively correlated with the decrease of the total pollutant emission of local thermal power enterprises. Second, the higher the per capita GDP of the region, the more significant the decrease in the total amount of pollutants, economic development is conducive to pollutant emission reduction. Third, the higher the proportion of thermal power in local energy, the more obvious the reduction of total pollutant emissions of thermal power enterprises, indicating that the implementation of ultra-low emission policies in these regions is more thorough. In addition, the environmental protection tax plays a positive role in the total emission reduction, and the higher the sulfur dioxide tax rate, the more significant the reduction of total pollutants of thermal power enterprises. To further reduce the total amount of pollutants in thermal power, more coordinated efforts of environmental and economic policies are needed.

The Impact of Change Orders Caused by Legislative Changes on Program Management in the UAE Construction Industry

Program management is an important strategy for organizing and managing multiple interdependent construction projects to achieve strategic goals. However, when change orders occur, they can have a serious impact on the quality, time, cost of projects and, ultimately, affect the construction program. Furthermore, when change orders are caused particularly by legislative changes, such as environmental laws, taxes, tolls, safety codes, transportation, design or building codes, their impacts are unavoidable, yet can be managed through mitigation strategies. The existing literature only reports the implications of change orders on the project level and reports legislative changes as one of the contributing factors to change orders, but does not consider the implications on a program level. This study aims to close this knowledge gap by assessing the implications of change orders caused by legislative changes on program management in the construction industry during the construction phase, and explore what the possible mitigation strategies to manage change orders caused by legislative changes are. The objectives of the study include identifying the implications of change orders on construction projects in the UAE through a literature review using peer-reviewed journals and reliable industry sources. Additionally, we investigate the implications of change orders caused by legislative changes on construction programs through interviewing subject matter experts, evaluating the importance of the reported impacts, with possible mitigation strategies, through a structured questionnaire and Relative Importance Index (RII) and, finally, proposing a set of recommendations for key industry stakeholders. A mixed methods approach is adopted in this qualitative study, and the participants include clients, contractors and consultants from the construction industry, with a defined scope covering the construction stage only. The outcomes of the study can guide program managers, decision-makers and practitioners in the construction industry to successfully deliver all projects by directing proper resources to accommodate legislative changes.

Commodity tax competition with consumption externalities

ABSTRACT This paper presents a model of cross-border shopping from a small to a large country that does not appear in standard commodity tax competition analysis. The paper focuses on consumption externalities as the key to the result and shows that the presence of positive externalities associated with consumption choices, e.g. bandwagon effects, leads to an equilibrium in which consumption flows from small countries to large countries with higher tax rates.

Do Energy Consumption and CO2 Emissions Significantly Influence Green Tax Levels in European Countries?

In this article, we analyze the correlation between GDP/capita variation, primary and renewable energy consumption and greenhouse gas emissions on the one hand, and green taxes on the other. Green taxes are the main instruments used to limit activities that have a negative impact on the environment. These consist of taxes paid by producers and/or consumers for any activity that generates pollution. The results of dynamic regressions, validated by the applied robustness tests, indicate a significant and positive correlation between primary energy consumption and total environmental taxes, respectively energy taxes. At the same time, this shows that variation in GDP/capita significantly and positively influences transport taxes and pollution taxes. In contrast, net greenhouse gas emissions and the supply, transformation and consumption of renewable sources and waste do not significantly influence the total green taxes and their components. This finding is useful to both academic research and government policies for the realistic substantiation of the levels of green tax revenues and for establishing appropriate measures meant to reduce CO2 emissions.

Environmental taxes, technological innovation and firm performance: Evidence from China's manufacturing firms

Based on panel data from 2011 to 2019 for heavily polluting listed firms in the manufacturing industry, this paper examines the impact of environmental taxes on technological innovation and firm performance using the propensity score matching (PSM) and differences-in-differences (DID) methods. The empirical results show the following: (i) Firm performance and innovation quantity are positively affected by environmental taxes. The average effects of environmental taxes on firm performance and innovation quantity are 1.28 and 0.219, respectively. However, environmental taxes have no significant impact on innovation quality. (ii) A mechanism analysis reveals that innovation quantity plays a significant partial mediating role in the positive effect of environmental taxes on firm performance. (iii) Heterogeneity analysis shows that different environmental tax rates lead to a variation in innovation quantity and firm performance across regions. The positive effect of environmental taxes on innovation quantity is only confirmed in high-tax and low-tax areas. Meanwhile, high environmental taxes are related to better firm performance. Based on the research, policy recommendations are put forward to optimise environmental taxes, such as improving the environmental tax system and coordinating environmental tax and innovation policies.

The role of environmental tax on the environmental quality in EU counties: evidence from panel vector autoregression approach

This study intends to analyze the influence of environmental taxes on pollution in EU-27 nations. Furthermore, energy from renewable sources consumption and urbanization are employed to clarify CO2 emissions in this study that tests the EKC hypothesis. According to the findings, an increase in environmental taxes reduces CO2 emissions by 0.14%. Also, the data supported the validity of the EKC concept. The findings of the causality test demonstrated that there is a bidirectional causal link between CO2 emissions and environmental taxes. These results reflect that environmental tax revenues contribute to sustainability as an effective policy tool in EU countries. Policies regarding environmental tax enforcement come to the fore in terms of both keeping the balance in economic activities and serving sustainability.

Nghiên cứu ảnh hưởng của ESG đến hành vi tránh thuế của doanh nghiệp

This article examines the impact of environmental, social and governance (ESG) activities on tax avoidance behavior of non-financial enterprises listed in four emerging markets including Brazil, Russia, China and India (BRIC countries) over the 2010-2020 period. Using a quantitative method for panel data including 2,372 observations, empirical results show that businesses that perform well on environmental (E) and social (S) activities are less likely to engage in tax avoidance. Meanwhile, the impact of corporate governance (G) is not statistically significant. The research results ensure robustness when controlling the endogeneity issue using the sysGMM regression technique. The empirical evidence on the negative relationship between the implementation of environmental and social responsibility and tax avoidance has important implications for policymakers in promulgating policies to promote environmentally and socially responsible initiatives in order to mitigate corporate tax avoidance.

The Internet of Things as A Tool to Improve Environmental Taxation within the EU: A Case Study on the Design of Annual Road and Motor Vehicle Taxes

The Internet of Things as A Tool to Improve Environmental Taxation within the EU: A Case Study on the Design of Annual Road and Motor Vehicle Taxes

Study on the regulatory alienation effect of China's Environmental Protection Tax Law during the strict epidemic control period: based on a sample test of 1000 tax personnel

The enactment of the Environmental Protection Tax Law was a major event in the process of China's economic and social development. This law has achieved certain results in the first two years since enactment, but there have also been many problems. During the three-year strict pandemic control period, the normal process of Environmental Protection Tax Law implementation was impacted, causing alienation and reducing the quality of implementation. This study empirically reveals the alienation mechanism in the implementation of the Environmental Protection Tax Law by taking 1000 Chinese tax professionals, and randomly divides the sample equally into two parts, utilizing 500 samples for the initial test and another 500 samples for the robustness test. This research shows that pollutant emission monitoring (correlation coefficient is 0.07), preferential tax policies (correlation coefficient is 0.03) and the quality of tax personnel (correlation coefficient is 0.06) are not conducive to realizing the crowding-out effect of the Environmental Protection Tax Law, while preferential tax policies (correlation coefficient is 0.05), information-sharing platforms (correlation coefficient is 0.06) and the quality of tax personnel (correlation coefficient is 0.05) hinder the incentive effect, and the remaining elements passed the correlation coefficient test within certain confidence intervals. Therefore, the implementation of China's Environmental Protection Tax Law should be improved in the following ways: the accuracy of the environmental protection departments' supervision of pollutant emissions as well as the scientificity and rationality of preferential tax policies should be improved, the construction of environmental protection tax information-sharing platforms should be strengthened, and compound tax collection and management talent should be created.

Digital Technologies, Environmental Governance and Environmental Performance: Empirical Evidence from China

This research conducts an empirical analysis of the relationship between digital technologies, environmental governance (assessed through environmental taxes), and China's environmental performance from 1995 to 2020. Additionally, within the framework of the STIRPAT model, the impacts of GDP and urbanization on ecological footprints are examined. This study is distinguished by its innovative approach to evaluating environmental performance via ecological footprints and the application of the Autoregressive Distributed Lag (ARDL) model along with Dynamic Ordinary Least Squares (DOLS), Canonical Cointegration Regression (CCR), and Fully Modified Ordinary Least Squares (FMOLS) as long-run estimators, methodologies not previously applied to this context in China. The findings indicate that digital technologies and environmental taxes contribute to a reduction in ecological footprints, while GDP and urbanization have an adverse effect, increasing ecological footprints. Post-estimation diagnostics confirm the absence of serial correlation and heteroskedasticity, and affirm the normal distribution of the disturbance terms. For a robustness check, the study further employs DOLS, FMOLS, and CCR methods, which corroborate the initial results regarding the beneficial impact of digital technologies and environmental governance on ecological footprints. Based on these findings, the study advises the Chinese government and policymakers to enact more effective environmental tax policies and leverage digital technologies to enhance environmental sustainability in China.

Tax havens reexamined: The impact of global digital tax reforms on international taxation

This review delves into the evolving landscape of tax havens in the wake of comprehensive digital tax reforms. This study scrutinizes the implications of global efforts to address tax evasion and profit shifting, particularly in the context of the digital economy. With the proliferation of digital services and cross-border transactions, traditional tax frameworks have struggled to capture the economic activities of multinational corporations operating in cyberspace. Consequently, tax havens have emerged as facilitators of aggressive tax planning strategies, exacerbating global tax inequalities and eroding fiscal sovereignty. Against this backdrop, the study analyzes the efficacy and repercussions of recent digital tax reforms spearheaded by international organizations and individual nations. It examines the implementation challenges, compliance burdens, and potential loopholes associated with these reforms. Moreover, the research evaluates the impact of digital tax measures on the behavior of multinational enterprises, exploring their responses in terms of tax planning strategies and business models. Furthermore, the study investigates the broader implications of digital tax reforms on international taxation dynamics, including their influence on tax competition, investment flows, and economic development. Special attention is paid to the implications for developing countries, which often bear the brunt of revenue losses resulting from profit shifting to tax havens. By synthesizing empirical evidence, policy analysis, and theoretical insights, this study offers a comprehensive reevaluation of tax havens in the digital age. It sheds light on the complex interplay between technological advancements, regulatory frameworks, and global economic dynamics shaping contemporary tax landscapes.