European Tax Research Articles

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.

The Weakening of Taxpayer Rights in the Exchange of Information between Tax Authorities

Developments in international legislation and the growing digitalization of tax law support the development of global networks between tax authorities. We are witnessing an integration of databases that will lead to increasingly intense coordination of the fight against tax evasion at a supranational level. As in social networks and digital commerce, databases are increasingly enriched, contain increasingly precise information on the individual taxpayer and use common languages that allow for automated exchanges of information. While waiting for the creation of a global database – not conditioned by the constraints of reciprocity and abstractly usable by all authorized entities who need it – the first risks of limitation of the taxpayer’s rights are emerging. In fact, these phenomena have dark sides that are starting to emerge in use, at a national level and with respect to individual taxpayers, of interpolated databases. Moreover, a growing amount of information flows from heterogeneous and increasingly widespread sources, sometimes not protected by the requirements of professionalism, legality and public trust since data collection and entry can be delegated to economic entities, intermediaries and consultants. The absence of an authority responsible for the unitary management of global databases and for the resolution of their conflicts, the slow and timid affirmation (only in some national systems) of the taxpayer’s right of access to information concerning them, the difficult configuration of the faculty to request the correction of erroneous data and of the specular public power to remove the reported inaccuracies, weaken the system of protections gradually erected to protect the taxpayer’s position. In this way, the coordination of national systems that contemporary tax law creates is strongly unbalanced on the side of the protection of tax interests. International and European tax law should instead provide greater guarantees in favor of the taxpayers, defending their right to fair taxation.

Facing the economic tribunal: how calculative techniques impede effective finance capital taxation in Europe

ABSTRACT The rise of new financial transaction schemes enabled new forms of tax fraud in Europe in the 2010s. Despite extensive public attention to this issue, the political measures adopted to strengthen taxation control have remained remarkably lax. The article analyses the emergence and spread of US neoliberal problematisations of administrative burdens to the OECD, and how these problematisations coalesced with the development of standardized regulatory cost‒benefit techniques. Focusing on the Danish case, this constellation of problematizations and techniques is argued to have worked as an economic tribunal, effectively obstructing the control of tax dividend reclaims.

An Analysis of Anti-Tax Avoidance Approaches in Nine European Countries: An Update to the Conclusions of the First Meeting of the European Association of Tax Law Professors in 1999

In this General Report, as well as the accompanying country reports, the authors revisit a 1999 European Taxation article discussing tax avoidance, which stemmed from the first European Association of Tax Law Professors meeting. The authors explore shifts in tax avoidance perception due to the introduction of the treaty general anti-avoidance rule (GAAR) (principal purpose test), EU GAAR and specific anti-avoidance rules post-BEPS and the two OECD Pillars. Using eight 1999 cases for comparison, it provides a fresh empirical perspective on tax avoidance in Austria, Belgium, Finland, France, Germany, Spain, Sweden, the Netherlands and the United Kingdom.

Is There a Link between Tax Administration Performance and Tax Evasion?

The performance of tax administrations (TAs) is usually described as their capacity to complete activities with the minimum of resources engaged. Accordingly, tax administration performance is a multifaceted phenomenon, and measuring and benchmarking its performance against other countries or regions remains a puzzle for researchers and practitioners. This paper introduces a new approach for measuring tax administration performance using the Composite I-Distance Indicator (CIDI) based on 11 individual performance measures from 35 European tax administrations over two consecutive years (2018–2019). For the given scores of tax administrations, we conducted a correlation analysis with (a) tax evasion loss and (b) the fiscal deficit of countries in which these tax administrations operate, aiming to assess the strength of the statistical relationship between these variables. The study highlights Denmark and the Netherlands as exemplary models for tax administration, with “Revenue Collection” being identified as a crucial driver of excellence and “Operational Performance” (such as “e-filing” and “on-time filing”) forming critical aspects of TA efficiency. Also, the study finds a negative correlation between tax avoidance and tax administration performance.

Compatibility of the DAC6 Obligation to Report Cross-Border Arrangements with Fundamental Rights: A Green Light from the Advocate General?

On 29 February 2024, Advocate General Emiliou of the Court of Justice of the European Union gave his Opinion in Belgian Association of Tax Lawyers and Others v. Premier ministre/Eerste Minister (Case C-623/22) on the compatibility of DAC6 with the principles of equality and non-discrimination, legality in criminal matters, legal certainty and the right to respect for private life. This contribution summarizes and criticizes the main elements of the Opinion, which will have major ramifications for the European tax transparency and tax cooperation regime if upheld by the Court of Justice of the European Union in its forthcoming DAC6 decision.

Guest Editorial: The Future of Taxation in Europe

Guest Editorial: The Future of Taxation in Europe

Carbon taxation in Europe

The subject of the study is the carbon tax legislations of European countries.The purpose of the article is to identify the general consistent patterns of carbon taxation in a number of European countries: the United Kingdom, the Netherlands, Norway, France, Sweden and Switzerland.The methodology of the research includes the analysis of the provisions of the carbon taxing legislation of these countries.The main results, scope of application. The analysis shows that the structure of the carbon tax in European countries has differences, but the predominant form of taxation is an excise tax on fuel. In Sweden and Switzerland the excise rate is in direct proportion to the carbon content of the fuel, however in the UK, Norway and France excise rates are set more voluntary. Each country countries grant exemptions for specific fuel uses and industries that they deem essential to protect from the exceeding tax burden. In the Netherlands, Norway and France, carbon/energy taxation is applied in addition to the emissions trading system. In all these countries, this is motivated by the evaluation of the latter as insufficient to attain the objectives of diminishing CO2 emissions. Based on the experience of these countries, there is no prevalent model for the arrangement of carbon / energy taxation. For instance, France imposes an energy tax as an excise tax, that is, a consumption tax. The UK levies excise taxes on the consumption of natural gas, LNG, coal and electricity, correlated to the amount of energy contained in these fuel products. Norway applies both an excise and an indirect output tax in the oil sector. In the Netherlands, a carbon tax is levied on actual CO2 emissions (as far as they are accounted for under the EU ETS), but this tax only applies to ETS participants and only if the ETS prices are below the established level. Despite the high tax rates (up to 120 euros per ton of CO2 in Sweden and Switzerland), the significance of the carbon tax for the economies of the considered countries is low due to both low energy consumption and the high proportion of carbon-neutral energy sources such as hydroelectric, nuclear and biofuel.Conclusions. An analysis of the provisions of the carbon taxing legislations of various European countries revealed that these countries adopt such carbon tax schemes that optimize their administrative feasibility, public acceptability, and economic impact mitigation for vital sectors. At the same time, in the majority of countries, the carbon tax is implemented as an excise tax on fuel.

ОБЛІКОВО-АНАЛІТИЧНІ АСПЕКТИ ФІСКАЛЬНИХ МЕХАНІЗМІВ ЄВРОІНТЕГРАЦІЇ НАЦІОНАЛЬНИХ ЕКОНОМІК

The article examines the specifics and peculiarities of the functioning of various types of taxes in the European taxation system of the European Union and OECD countries and substantiates the practice of their application in Ukraine. It is well known that the economic development of the country directly depends on the formed tax policy in the state. Under the conditions of dynamic changes in economic relations and a competitive market environment, tax legislation also changes, which varies a lot in different countries, depending on their geographical location, organization and conditions of conducting business activities. Based on the generalizations of various scientific works and current practice, various ways of taxation in European countries have been researched and analyzed and their comparative advantages have been assessed, taking into account factors of competitiveness (maintaining low marginal tax rates, which will contribute to the inflow of investments into the country – economic growth – obtaining the maximum profits, and this will lead to the payment of appropriate taxes and the filling of the country's budget) and neutrality.The ranking of the system of indicators of the European tax policy of the countries of the European Union and OECD countries (such as Switzerland, Turkey, Norway, Great Britain, Iceland) is summarized and determined. To understand why each country has such positions in the European taxation system, each tax and its impact on the country's economy is analyzed.The need for further development and improvement of the taxation system in the context of the restructuring of the Ukrainian economy, when major transformations are taking place in the country in the socio-economic and political spheres, as well as the desire of our country to integrate into the European Community is substantiated.At the end of the article, conclusions are made about the need to use the experience of the European Union and OECD countries in tax administration, which will create prerequisites for the proper reform of the tax system in the realities of Ukraine. The state can introduce certain reductions in tax rates for certain groups of goods, following the example of EU countries. Such measures will stimulate Ukrainian enterprises to focus more attention on the quality and usefulness of the offered products.

Windfall Profit Taxation in Europe (and Beyond)

In 2022, the European Commission introduced, for the first time in its history, a windfall profit tax to be applied on “excessive” profits realized by qualified businesses operating in the “Oil and Gas” sector. Immediately after its implementation, questions arose as to its sustainability and its consistency with constitutional principles of the different member states regulating the domestic power to tax. To assess the consistency with the aforesaid rules, the article samples two countries, inside and outside the EU (Italy and Australia, respectively), and the historical precedents of the matter. Italy has been chosen due to the particularly stringent set of principles regulating the power of the legislature to tax, and Australia has been chosen because of the long-standing experience with superprofit taxes. In most of the scenarios analyzed, one common feature emerged: the complexity in defining the “Extra” nature of the profits and, consequently, the uncertainties in the calculation of the taxable base. In the case of Italy, for instance, the legislator had to intervene in several different moments to fine-tune the taxable base and restore certainty to the tax system. As a conclusion, while the taxation of extra profits should not per se be disregarded, its implementation demands a more robust and precise legal framework together with the understanding that the introduction of such a levy would be a one-way journey for the tax systems: windfall profits taxes would be here to stay.

Literature Review: C. Pollak, Platforms in EU VAT Law. A Legal Analysis of the Supply of Goods, EUCOTAX Series on European Taxation, Vol. 70, Wolters Kluwer, 2022

Literature Review: C. Pollak, Platforms in EU VAT Law. A Legal Analysis of the Supply of Goods, EUCOTAX Series on European Taxation, Vol. 70, Wolters Kluwer, 2022

Evaluación del plan de armonización fiscal en la Unión Europea

Study of Political Economy, Public Finance and European Economic Integration on the tax harmonizationplan of the European Union. It is based on the theoretical and methodological frameworks of the EconomicAnalysis of Law, in order to analyze the European tax harmonization process. In addition to analyzing ques-tions of incentives, efficiency and institutional quality, special attention is paid to the problems of attributionof powers in the European system and the different existing levels of tax pressure and effort in the MemberStates. This study will also analyze the European Commission’s latest proposal on taxation, which aims toachieve tax uniformity, combat tax abuse and put an end to unfair competition practices within the Europeaneconomic-legislative framework. These initiatives are particularly important in the current socio-economiccontext, when new ways of financing the post-Covid recovery fund, curbing the inflation that has beenlatent in recent months and dealing with the negative externalities that the conflict between Russia andUkraine may produce are being studied. All this is completed with a proposal for the feasibility of fiscalfederalism.

Stages of development and convergence of bookkeeping and tax accounting in Turkey

Subject. This article examines the organization of bookkeeping and tax accounting in Turkey at the present stage and analyzes the stages of development of national institutions for these types of accounting. Objectives. The article aims to determine Turkey's position in the world according to a number of macroeconomic indicators and establish a development trend, identify the peculiarities of the taxation system in Turkey, systematize the various stages of taxation, conduct a retrospective analysis of the development of national accounting to date, and determine the differences between audit and the unique institution of sworn tax consultants based on the current regulatory framework of the Republic of Turkey. Methods. For the study, I used a post-hoc analysis, and general scientific and particular cognition methods. Results. The article describes the peculiarities of the Turkish tax system, highlights significant milestones in the development of taxation up to the present time, analyzes the development of accounting methods and the current state. The article also defines a stable trend of orientation towards European models, which does not exclude the presence of certain elements of the Islamic model mainly in the banking sector of the economy. Conclusions and Relevance. Turkey's tax system is highly sensitive to advanced European tax methods, which is still combined with the predominance of an Islamic world view based on Sharia law. Currently, the Turkish tax system is focused on European norms, primarily German ones, and the tax burden is defined as low according to the presented world ranking. The developed conclusions and proposals can be applied both in scientific and practical activities in the field of economics and financial law, as well as by educational institutions of higher education.

The Commissioner vs the states: responsiveness and responsibility in European tax governance

ABSTRACT The European Union is the only international organisation that has a parliament where taxation is debated and legislated on. Along with foreign affairs and defense, however, taxation is also one of the few policy areas that is subject to unanimity voting among member-states. This creates a responsiveness-responsibility dilemma that the European Commission has tried to navigate by constructing responsiveness to public demands for tax justice as a political imperative. In this article, I apply the concept of ‘political work' to analyse EU tax policy between 2014 and 2019 and show the ways in which the politics of responsiveness partly eroded the institutional constraints of responsibility vis-à-vis member states. As I document, the Commission’s political work was initially successful but then lost momentum, as a handful of governments managed to veto efforts in the Council and push the issue to the OECD, where it was stalled by the United States until the election of Joe Biden.

TAX HEAVENS: THEORETICAL GUIDELINES

The main purpose of this paper is to study the concept and aspects of tax havens and the attempt of companies with significant revenues to avoid taxation, their causes, trends and effects in the European Union (EU) resulting from tax avoidance or tax evasion behavior. These phenomena were triggered by several factors. The purpose of this study is to identify the major determinants of tax havens in the current economic context. In recent years, the international and European tax policy debate has focused on tax avoidance strategies. Attempts and cases of tax evasion have become more frequent. The development of tax havens has been favored by some macroeconomic factors, but also by the tax non-compliance behavior of companies and individuals looking for different ways to avoid taxation. We examine the theoretical implications of tax haven operations on the actual tax burdens of companies based in Europe. One of the factors that has a major contribution to the development of the orientation trend of multinational and national companies with significant revenues made on the territory of the EU is the degree of taxation. Although this level of taxation differs from one country to another, it is a significant one and is the main pillar on which tax havens are based. This expansion of the phenomenon of avoiding taxation by transferring income to tax havens generates negative effects in the European economy, which leave their imprint on the economy more and more. Since the phenomenon of tax avoidance by directing companies to tax havens cannot be eradicated, it is very important to find measures to limit it. In this context, at the level of the European Union, concerns have arisen for the development of a conceptual, institutional and legislative framework to mitigate these phenomena as much as possible. This phenomenon occurs both within the European Union and globally. The European Union together with the Member States must work more and collaborate internationally to limit the orientation of companies towards tax avoidance by transferring profits to tax havens. In the general context of the globalization of the world economy, the governments of countries that want to increase their tax revenues hit a significant obstacle called “tax havens”. The main finding of this approach is that the EU together with other OECD member states are making diplomatic and legislative efforts to limit as much as possible the tendency to avoid taxation.

The tax policy of Ukraine within the framework of European integration processes

During the decades of integration of the domestic tax policy within the framework of integration processes, it was possible to achieve many positive results, however, the long struggle in the field of detinization of the economy, the reform of pension and insurance, land legislation, the conflict of interests in creating a favorable investment climate and protecting the interests of domestic enterprises every time indicates new vectors of further development tax policy of the state. The purpose of the paper is the analysis of the current tax policy of Ukraine within the framework of European integration processes, taking into account the influence of the state of war on the tax policy of Ukraine. The results. The tax policy of Ukraine within the framework of European integration processes is aimed at harmonizing the tax systems of EU member countries, which requires the development of mechanism for coordinating their changes, maintaining a balance of protecting national interests and implementing European taxation practices. An important aspect in this is bringing the level of taxation closer to EU requirements, in particular the expansion of the domestic property taxation base and the transformation of the indirect taxation system of Ukraine. Revision of the system and mechanism of tax benefits requires special attention, in particular, prevention of their illegal receipt and control of the effectiveness of implementation for the purpose of the domestic economy. The influence of martial law on tax policy led to a quick response to the introduction of a number of important regulatory innovations designed to reduce the fiscal burden on business and stimulate the development of small entrepreneurship. Prospects. Given the significance of the implementation of the Association Agreement with the UE, the creation of the stable regulatory and legal field is an urgent direction for the further development of Ukraine’s tax policy within the framework of European integration processes.

Play and Pay: The Ill-Starred Project of the Municipal Tax on Musical Instruments in Prague, 1910–1913

Utilising archival documents and the press, this article scrutinises aspects of the connections between local government, taxation and domestic music in Prague, 1910–1913; of all the European tax initiatives on musical instruments, the Prague one was the most ambitious and comprehensive. The administration aimed at raising considerable revenues and lessening the disturbance from music by taxing pianos, harmoniums, gramophones and orchestrions in inns and private homes. The initiative included an inventory of musical instruments, after which the officials began drafting the tax law. The press published on the inventory and planned tax measures, and several interest groups from the music and restaurant business submitted appeals to the city’s representative bodies. Some interest groups cooperated and cleverly exploited public opinion, forcing the city fathers to remove the tax from the agenda of the public sitting of the City Assembly. The initiative was doomed in several respects, including its unrealistic schedule, excessive complexity and lack of clarity.

What drives the performance of tax administrations? Evidence from selected european countries

An effective, efficient, fair, and trusted tax administration is a top priority for every country in the world; however, tax administration faces many issues, such as corruption, tax avoidance, or lack of flexibility. Some countries perform better in this process, and this paper aims to identify the main drivers of tax administration performance. We analyzed 35 European tax administrations by 12 performance dimensions in 2 consecutive years (2018–2019) and created a comprehensive performance measurement indicator using a data-driven neutral-aggregation approach. The findings indicate that (a) digitalization of tax administrations is the most influential driver of the overall tax administration performance, (b) Nordic countries and Switzerland can serve as role models for tax administration performance, and (c) the country-level results can serve as a proxy for the degree of the shadow economy. These findings guide European policymakers regarding the appropriate policy measures required to improve the performance of tax administration.

Distortional effects of separate accounting and formula apportionment on factor allocation

We examine distortions caused by tax base allocation systems–separate accounting (SA) or formula apportionment (FA)–with respect to the allocation of assets and workforce within multinational entities (MNEs). The effects of both systems are intensively debated by EU Member States as they are striving to implement a European tax system. Its introduction would lead to a switch from SA to FA. Moreover, Pillar One of the recent global tax reform includes a mix of both tax base allocation systems. We find that, against the claims of the EU, FA does not necessarily create lower distortions of the factor allocation. Decisive for that assessment is the level of profit shifting under SA. Our results indicate that, in tendency, the factor allocation is more severely distorted by FA when the profit shifting possibilities were rather low under SA. In contrast to former studies, we highlight the importance of analyzing the status quo under the recently applied system (SA) in order to be able to assess the consequences of a switch from SA to FA. Our results are interesting for policy-makers as they help anticipating reactions of MNEs to a change in the applied tax base allocation system and for companies as a basis for future tax planning.

Налоговые инструменты стимулирования инноваций в странах ЕС

Solow–Swann’s neoclassical theory of economic growth shows that without technological progress, capital accumulation can only lead to a short-term increase in the growth rate of output per capita. The challenges of sustainable innovative development in many countries are coming to the fore today. The creation, dissemination and use of innovations occur in companies, universities, scientific organizations (micro-level), between economic entities within the framework of regional (meso-level) and national (macro-level) innovation systems, as well as at the international level. Innovation support is carried out at the meso-level, focuses on companies and organizations, and is evaluated at the level of the country as a whole. State support for innovation is necessary for the following reasons: 1) the ease of information transfer puts manufacturing companies in a less favorable position compared to consumer companies; 2) the difficulty of obtaining a loan for R&D with the risk of information leakage and lack of confidence in the final results; 3) the socio-economic system of the country receives more benefits from innovation than all companies in the aggregate. The article discusses such types of support as government subsidies and grants, tax incentives, measures for the development of human capital in an innovative environment, competition and intellectual property protection policy. In the international practice of stimulating innovation, tax incentives are used, 1) allowing to reduce R&D costs, 2) based on non-reduction of R&D expenditures and 3) preferential tax regimes derived from innovation activities. It is shown that the methodological approaches used to assess the effectiveness of tax measures are the B-index (calculated and published by the OECD by country), the analysis of the validity of tax instruments and the use of the European Tax Analyzer model – computer modeling. The analysis of innovative development showed that the European Union in terms of the number of patents, residents and non-residents, the share of researchers in the total population and the share of R&D expenditures in GDP for 2000–2022 is often inferior to China, the USA, Japan and Korea, but generally has a positive development trend. The most popular tools in the European Union countries are tax deductions, “super deductions”, R&D grants and other incentives. There is no direct correlation between the number of benefits and the level of innovation development. At the same time, it is noticeable that countries using a large number of support tools are becoming attractive to innovative companies and entrepreneurs. The article analyzes the measures of state support for R&D during the COVID‑19 pandemic. Of these, the most relevant are grants and subsidies, and tax benefits. The analysis of tax instruments for stimulating innovation carried out in the article may be useful in the implementation of appropriate policies in other countries.