Tax Framework Research Articles

English

Domestic revenue generation occupies a central domain in most countries, leading to continuous mapping of strategies towards its enhancement. Taxation is a dependable and foreseeable avenue to generate revenue for governments to fulfil their key obligations of employment creation, economic growth and infrastructural development, poverty reduction and state security. Despite these plausible arguments, tax revenues are minimal and tax bases narrow in developing countries. Contemporary tax debates point out that informal sector represents a lucrative fountain of tax revenue for governments, yet opponents of taxing the sector suggest that taxation might cripple small firms. Zimbabwe introduced presumptive tax in 2005, further enforcing to expand the tax base by including the sector into the tax basket in 2011. Researchers have focused on tax evasion and non-tax compliance when studying this sector, this paper focuses on the stakeholders perceptions on the impact of informal sector taxation on revenue generation and growth. This study adopted a sequential exploratory mixed method approach, argued to be ideal for under-researched areas such as this one. Key findings were that the current one size fit all tax framework suffocates small firms. Governments have to strike a balance between revenue mobilisation and the sector’s key economic contributions, without crippling informal firms.   Key words: Informal sector, taxation, growth, stifling, revenue mobilisation.

The Tax Complexity Index – A Survey-Based Country Measure of Tax Code and Framework Complexity

This paper introduces the Tax Complexity Index (TCI). The TCI comprehensively measures the complexity of countries’ corporate income tax systems faced by multinational corporations. It builds on surveys of highly experienced tax consultants of the largest international tax services networks. The TCI is composed of a tax code subindex covering tax regulations and a tax framework subindex covering tax processes and features. For a sample of 100 countries, we find that tax complexity varies considerably across countries, and tax code and framework complexity also vary within countries. Among others, tax complexity is strongly driven by the complexity of transfer pricing regulations in the tax code and tax audits in the tax framework. When analyzing the associations with other country characteristics, we identify different patterns. For example, we find a positive association of GDP with tax code complexity and a negative association with tax framework complexity, suggesting that highly economically developed countries tend to have more complex tax codes and less complex frameworks. Overall, the tax complexity measures can serve as valuable proxies in future research and supportive tools for a variety of firm decisions and national and international tax policy discussions.

Evolution of the tax framework of participatory products in Morocco

Le Maroc s’est enfin inscrit dans la trajectoire de la finance participative. Cependant, malgre les efforts deployes pour promouvoir cette industrie naissante, cela reste tres insuffisant pour l’encourager. Par ailleurs, la variable fiscale constitue une determinante de la decision de financement du fait qu’elle pese lourdement sur le cout des produits bancaires participatifs. Dans l’absence d’une reglementation fiscale prenant en consideration la nature de ces produits et mettant en place un cadre fiscal incitatif et encourageant et garantissant une meilleure neutralite fiscale, cette industrie risque d’etre moins competitive en comparaison avec leurs homologues conventionnels. La rarete des etudes traitant cette evolution fiscale nous a pousses a etudier et a analyser cette question, tout en nous basant sur l’evolution du cadre fiscal de ces produits au Maroc et aussi sur les differentes nouveautes fiscales apportees par la succession des lois de finances.

Shopping for Lower Sales Tax Rates

Using comprehensive high-frequency state and local sales tax data, we show that shopping behavior responds strongly to changes in sales tax rates. Even though sales taxes are not observed in posted prices and have a wide range of rates and exemptions, consumers adjust in many dimensions. They stock up on storable goods before taxes rise and increase online and cross-border shopping in both the short and long run. The difference between short- and long-run spending responses has important implications for the efficacy of using sales taxes for countercyclical policy and for the design of an optimal tax framework. Interestingly, households adjust spending similarly for both taxable and tax-exempt goods. We embed an inventory problem into a continuous-time consumption-savings model and demonstrate that this behavior is optimal in the presence of shopping trip fixed costs. The model successfully matches estimated short-run and long-run tax elasticities. We provide additional evidence in favor of this new shopping complementarity mechanism. (JEL E21, E32, G51, H21, H25, H71)

Improvement of accounting and taxation of investments in capital construction and improvement of non-current assets

The paper substantiates that investment in capital construction and improvement of facilities is the foundation of investment and innovation development of the country. It is proved that properly regulated terminology and regulatory framework, proper organization and high-quality methodological support for accounting and taxation of investments in capital construction and improvement of facilities will ensure reliable registration of objects of non-current assets, effective management of investment funds and identify reserves for increasing the return on invested capital. A methodological approach to accounting and taxation of investments in capital construction and improvement at the stage of forming their initial cost under IFRS, depending on the construction methods, is proposed, and the specifics of operations with investment real estate are determined, which will make it possible to account for and tax such business operations more fully, with a proper degree of detail. A system of tax incentives has been developed and justified, and a list of development drivers for the state has been defined regarding the possibility of ensuring the activation of construction processes in the national economy.

Optimal tax systems with endogenous behavioral biases

We develop an optimal tax framework that combines two recent extensions of tax analysis: a tax-systems emphasis on non-rate policy instruments, and a recognition of the role of behavioral biases. Although the implications of taxpayers’ biases for optimal tax rates have received considerable attention, a complete analysis of this aspect of optimal tax theory must account for the fact that such biases are often endogenous to the non-rate aspects of a tax system. We first generalize and extend the analysis of optimal tax systems to incorporate endogenous behavioral biases. We then develop a novel and important application of this issue, showing how misperception of the tax rate affects the optimal breadth of the tax base.

When redistribution makes personalized pricing of externalities useless

AbstractWe consider a standard optimal taxation framework in which consumers' preferences are separable in consumption and labor and identical over consumption, but are affected by consumption externalities. For every nonlinear, income‐dependent pricing of goods there is a linear pricing scheme, combined with an adjusted income tax schedule, that leaves all consumers equally well‐off and weakly increases the government's budget. The result depends on whether a linear pricing scheme exists that keeps the aggregate amount of consumption at its initial level observed under nonlinear pricing. We provide sufficient conditions for the assumption to hold. If adjusting the income tax rate is not available, personalized prices for an externality can enhance social welfare if they are redistributive, that is, favor consumers with a larger marginal social value of income.

Optimal Tax Systems with Behavioral Agents

We develop an optimal tax framework that combines two recent extensions of tax analysis: a tax-systems emphasis on non-rate policy instruments, and a recognition of the role of behavioral biases. Although the implications of taxpayers' biases for optimal tax rates have received considerable attention, a complete analysis of this aspect of optimal tax theory must account for the fact that such biases are often endogenous to the non-rate aspects of a tax system. We first generalize and extend the analysis of optimal tax systems to incorporate endogenous behavioral biases. We then develop a novel and important application of this issue, showing how misperception of the tax rate affects the optimal breadth of the tax base.

Towards a Circular Economy Taxation Framework: Expectations and Challenges of Implementation

The transition to a circular economy is a complex process requiring wide multi-level and multi-stakeholder engagement and can be facilitated by appropriate policy interventions. Taking stock of the importance of a well-balanced policy mix that includes a variety of complementing policy instruments, the circular economy action plan of the European Union (COM(2020) 98 final) includes a section about “getting the economics right” in which it encourages the application of economic instruments. This contribution presents a comprehensive taxation framework, applied across the life cycle of products. The framework includes (1) a raw material resource tax, (2) reuse/repair tax relief, and (3) a waste hierarchy tax at the end of life of products. The research is based on a mixed method approach, using different sources to analyse the different measures in the framework. More mature concepts, such as material resource taxes, are analysed by reviewing the existing literature. The analysis of tax relief on repairs is based on interviews with stakeholders in Sweden, where this economic policy instrument has been implemented since 2017. Finally, for the waste hierarchy tax, which is a novel proposition in this contribution, macroeconomic modelling is used to analyse potential impacts of future implementation. In all cases, several implementation challenges are identified, and potential solutions are discussed according to literature and empirical sources. Further research is required both at the individual instrument and at the framework level. Each of the tax proposals needs a more detailed examination for its specificities of implementation, following the results of this study.

ПЕРЕВАГИ УКРАЇНИ НА СВІТОВОМУ РИНКУ ІТ-ТЕХНОЛОГІЙ

The strategic importance of forming a national innovation system has been confirmed in the theories of Kondratiev, Schumpeter and Freeman. Rapid technological development orients economic entities to strengthen their competitive advantages in the global IT market. The opportunities created by IT technologies during the pandemic phase of global economic development are extremely important for countries with economies in transition and developing countries. The article is devoted to determining the advantages of Ukraine in the global IT market based on rapid analysis of the national IT sector. The specialized incentives of Ukrainian state government institutions in the framework of tax, immigration, investment policies, reforms of the institutional sphere and higher education have been identified, which in the medium term allow expecting increased investment attractiveness of the national IT sector. The growing orientation of the IT sector of Ukraine to exports, in particular, the focus on the regions of North America and the European Union has been identified. On the one hand, the dynamic development of business process outsourcing services in the country, and the shortage of digital skills in Sweden and Denmark on the other, open new prospects for Ukraine in the Scandinavian markets. It has been identified that today the relatively low labor costs of the IT sector, growth of human resources based on the upward dynamics of the number of graduates, high quality technological education, significant level of integrated skills are the main competitive advantages of Ukraine in the world IT market. It has been stated that the human resources potential of the IT sector of Ukraine on the basis of geographical distribution is concentrated in Kyiv, Lviv and Kharkiv. It has been hypothesized that the location of R&D offices in Ukraine by world technology leaders and the growth of precedents of successful Ukrainian startups (such as Grammarly, People.ai, Readdle, Attendify, MacPaw) will increase the concentration of scientific and technological potential. It has been concluded that in these conditions international projects with the participation of Ukrainian IT specialists become relevant.

Specifics of Cryptocurrencies from an Accounting, Tax and Financial View in a Globalized Environment

Research background: With the advancing entrance of digital technologies into all areas of private and business life in the past 10 years a new digital asset referred to as virtual currency or cryptocurrency had been invented. This virtual currency is not yet regulated in most countries and there is a need to establish a legal framework for accounting, taxation and recording of financial transactions so the treatment of transactions with these digital assets is the same across the globalized environment, as different approaches may affect the decision-making of the management and investors or can alter the tax base for income tax purposes. Purpose of the article: The aim of this paper is to compare and discuss the different possible approaches of recording and reporting of the virtual currencies for accounting and tax purposes and to compare the approaches among the Czech Republic, the Slovak Republic and Germany to point out the need for a harmonized solution in a global environment, as dealing with cryptocurrencies is not included in the accounting and tax legal framework in many other countries. Methods: Methods of description, analysis, comparison and synthesis are used to achieve the set aim of the paper. Different approaches to the topic are demonstrated and compared in illustrative Tables. Findings & Value added: The paper highlights the need for a uniform approach for the accounting and tax treatment of virtual currency by comparing the level of legal definitions and different approaches. The most elaborate legal implementation of this topic is in the Slovak Republic where the treatment of virtual currencies is included in the Accounting Act and the Income Tax Act. The Czech Republic approaches cryptocurrencies only on the basis of recommendations from the Ministry of Finance, which is not legally binding to obey. Germany has included cryptocurrencies in the Banking Act, the accounting definition is missing and the tax solution is in the Income Tax Act.

Formation of the incentive role of the environmental tax in Ukraine

Purpose. Developing trends for increasing the effectiveness of environmental tax as an institutional means of environmental protection and optimization of the tax burden. Methodology. A set of scientific methods and approaches was used in the research, which provided an opportunity to form a conceptually integrated scientific work. For this purpose, the following was used: content analysis method to study the regulatory framework of the environmental tax; abstract-logical approach to analyze the differences between the revenues of the environmental tax to the budget and the amount of funds planned and funds spent on environmental protection; integrated system approach to compare environmental taxation in the European Union and Ukraine; method of logical generalization to make proposals on how to increase the efficiency of the environmental tax, optimize the tax burden and align with Ukraines international obligations. Findings. A comparative analysis of environmental taxation in the European Union and Ukraine is conducted. The existing differences by types of environmental tax, the share of these types in the total amount of environmental tax and the purpose of environmental taxation in European countries and Ukraine are indicated. The dynamics of ecological tax revenues to the State budget and budget expenditures for environmental protection is studied. Trends in the dynamics of taxation, in particular, in creating a gap between revenues and expenditures are established. There is a tendency to form a significant gap in the amounts of environmental tax paid by enterprises. It is stated that only ten enterprises pay more than half of the countrys environmental tax. Originality. The necessity of formation of the role of ecological taxes stimulating preservation of the environment is pointed out and particular directions of formation of such incentives are offered. Proposals for environmental tax policy have been developed. It is stated that the increase in the environmental tax should be consistent with the overall tax burden per capita. Increasing the environmental tax also requires a preliminary detailed analysis of how the impact of its increase will affect each large enterprise and industry and determination of approaches to increasing the environmental tax differentiated according to transparent principles. Practical value. Recommendations are provided on how to increase the efficiency of the environmental tax as an institutional means of environmental protection, specific steps are proposed to optimize the tax burden and promote the norms approved by the Paris Climate Agreement and the Association Agreement with the EU.

ПОДАТКОВЕ НАВАНТАЖЕННЯ СУБ’ЄКТІВ ГОСПОДАРЮВАННЯ ЯК ОБ’ЄКТ ДЕРЖАВНОГО РЕГУЛЮВАННЯ

The article is devoted to the study of the tax burden in Ukraine. The article reveals the importance of the tax burden indicator and assesses its impact on the activities of economic entities, opportunities for growth of production and investment potential, as well as on the development of the economy as a whole. The influence of the level of tax burden on the indicators of macro-and microeconomic development is estimated. The role of tax revenues in the formation of state budget resources is determined. The levels of tax burden are characterized, the share of basic taxes in budget revenues is analyzed. The dynamics and structure of tax payments in the revenues of the Consolidated Budget of Ukraine are estimated. The analysis of the tax system was carried out in the following direction: assessment of the level of tax burden and its impact on the dynamics of business activity, production development, investment attractiveness. The study examined and analyzed the level of integrity of tax payments, identifiedreasons for income concealment and the high level of the shadow economy, assessed the level of tax debt, examined the causes of inconsistencies between the state and taxpayers, analyzed the legal framework for taxation and identified problems and shortcomings must be eliminated. Based on the study, the existing problems and the main directions of improving the taxation system in Ukraine were identified. The article analyzes the main factors that affect the efficiency of the tax system. The main advantagesof reducing the tax burden on business entities are given, the expected results from increasing the incentive orientation of the tax system are determined. Measures to rationalize the taxation system are proposed. The main tasks of the next stage of tax reform in Ukraine have been developed.

О СОДЕРЖАНИИ ВЗАИМОДЕЙСТВИЯ ТЕРРИТОРИАЛЬНЫХ ОРГАНОВ РОСРЕЕСТРА И ФЕДЕРАЛЬНОЙ НАЛОГОВОЙ СЛУЖБЫ В ЦЕЛЯХ СОВЕРШЕНСТВОВАНИЯ НАЛОГОВО-БЮДЖЕТНОЙ ПОЛИТИКИ ГОСУДАРСТВА

The article discusses the urgent problem of improving the information interaction between Rosreestr and the Federal Tax Service of the country, the optimization of the solution of which will allow not only to collect all planned taxes and tax payments in full and on time, but also to take into account within the framework of tax policy a fundamental aspect – the need for a consistent transition of regions to a "green" economy and sustainable development. Plans for such a transition have been developed and their subsequent adjustment is reflected in the Presidential Development Program of the country for the period until 2024, and in certain areas – until 2035. The complexity of their implemen-tation is mainly determined by economic reasons, reluctance, and in some cases, the premature im-plementation of environmentally expensive projects. The article proposed and analyzed options for taxation of real estate, allowing in the future to significantly increase, with a simultaneous differentia-tion of the tax burden, tax revenues to the budgets of different levels. Particular attention is paid to the theoretical and methodological foundations of the interaction of scientific technological knowledge and the practice determined by it, which are available in modern land management, cadastre and land monitoring represented by Rosreestr, with the main economic regulators of the NBP, represented by its partner, the Federal Tax Service, which has not only practical but also theoretical significance, empha-sized, in particular, by the rich content and multipurpose practice of world land management. The re-sults of this study were conclusions regarding a certain generality of the results of the activities of Rosreestr and the Federal Tax Service on modeling real geospace; increasing the possibilities of mod-ern knowledge in the field of land management and cadastre in solving problems of improving the in-formation support of property taxation.

Fiscal goals of regulating the activities of the institute of controlled foreign companies in the digital economy

At the OECD level, within the framework of taxation, relevant documents that directly concern the procedure for enhancing interaction and cooperation among its member states are being developed. The most important ones include the development of recommendations in the field of taxation of controlled foreign companies, including the study of current aspects in the event of a conflict between the provisions on controlled foreign companies and the concluded double taxation treaties. Meanwhile, in the study of the formation of the institute of controlled companies with regard to the manner of their formation and use of modern forms and methods of administrative control and tax liability, it is important to study actions in the sphere of international tax law. However, the emerging problems in this sphere are relevant, since, at the level of national legislation of each state, there are both objective and subjective factors that directly affect the formation of law enforcement practice on controlled foreign companies, with regard to a lack of scientific information in the context of national law. Therefore, in terms of improvement of the tax legislation of countries with developing economies that are reforming the institution of controlled foreign companies and supplementing them with new provisions which cover the basic aspects of the formation of taxation of controlled foreign companies in the digital economy, it is important to mention the urgent measures aimed at improving them, including ways of implementation and modernization of the rules and procedure for determining the profits of controlled foreign companies in terms of clarifying the list of passive taxes, as well as the composition of costs of such companies.

Taxation of personal income in the context of issues of social fairness

The subject. The leading position of the personal income tax in most countries is due to a number of circumstances. First, it is a personal tax, the object of which is the income actually received by the payer, and not the estimated average income that could be received in specific economic conditions. Second, income tax allows to maximize the implementation of the basic principles of taxation - universality and uniformity. In recent decades, national regimes of personal income taxation regimes have been actively developed both in foreign countries and in Russia. Purpose of the study. The article shows the results of analysis of the framework of personal income taxation in the Russian Federation in the context of the principle of the social fairness. Dealing with selected provisions of the national legislation of European countries and Russia the article shows that elements of progressive taxation can be applied only in particular aspects. The proposals of taxation of rich taxpayers are also brought into light. Methodology. The research was carried out with the application of the formally legal interpretation of legal acts as well as the comparative analysis of Russian and European legal literature. Structural and systemic methods are also the basis of the research, The main results. After studying the European experience of personal income taxation the authors come to the conclusion that some of the ideas described can be transferred to the Russian tax legislation, but this should be done with caution. It is not necessary to introduce a progressive tax system in its pure form in the Russian Federation, but it is worth considering options for switching to a dualistic system. The authors believe that the elements of borrowing foreign experience should be aimed rather at a fair distribution of benefits, for example, through rules that fix tax benefits. Conclusions. The following proposals can be formulated to improve the legal regulation of personal income taxation in the Russian Federation: the distinction between taxation of taxpayers with ultra-high incomes and those with minimal incomes should be based not on the income criterion, but on the expenditure criterion; to establish a non-taxable minimum in the amount of the minimum wage, which will ensure tax fairness for taxpayers with lower-average incomes; to review the criteria of taxation of luxury vehicles, raising the border separating the mass and premium segments of the Russian car market by at least two times - up to 6 million rubles. The best solution would be to abolish the vehicle tax and impose an increased excise tax on fuel and lubricants for personal transport.

Taxing Artificial Intelligence and Robots: Critical Assessment of Potential Policy Solutions and Recommendation for Alternative Approaches

In recent years, investments in technology have resulted in an exponential growth of AI/robots. It is argued that some of these innovations are able to outperform and replace humans in various types of jobs. Accordingly, concerns regarding government revenues have been raised, as AI/robots could trigger widespread unemployment with the result that less tax revenue will accrue to the government. This contribution, as a start, analyses whether or not this is truly a concern. In order to do so, the authors map the Industrial Revolution(s) that humankind has witnessed and then conduct a literature review of economic and demographic studies relevant to the debate. The economic studies indicate two different directions, that is, some argue that AI/robots (Industry 4.0) will increase human jobs whereas others argue that jobs could disappear. At the same time, the demographic perspective indicates that a purely economic employment-focused view of AI/robots is bound to lead to inconclusive results. Assuming that this is a probable concern, the authors summarize selected measures taken by governments as well as the various options that have been considered in academic literature to introduce taxes on AI/robots. Subsequently, the authors analyse the various “taxing” options from the perspective of commonly accepted tax policy principles applicable to electronic commerce (Ottawa Taxation Framework conditions). This analysis indicates that several proposals (e.g. proposals that treat AI/robots as independently taxable subjects or proposals that attribute income to owners of AI/robots) breach the principles of (i) neutrality; (ii) simplicity and certainty; (iii) efficiency; (iv) effectiveness and fairness; and (v) flexibility. Thus, such measures should not be pursued. The authors also conclude that, at this stage, targeted taxes on AI/robots should not be introduced, as this would also be contrary to the measures taken by governments globally to promote research and development (R&D) (input or output incentives). The present contribution therefore suggests that governments need to be proactive rather than reactive in this area. This could be achieved by monitoring the impact of AI/robots on a regular basis, and if the trend indicates that jobs are disappearing or revenues are declining, then the article suggests that states raise funds from an earmarked education tax. The funds raised from this tax, among other objectives, should be used to finance and foster professional educational programmes to reskill workers, besides assisting and guiding them to transition into new roles. However, a national measure may not be sufficient to tackle the issue (issues) at stake, especially in light of the demographic perspective discussed in the contribution. Thus, considering some jurisdictions may not be in a position to implement or fully benefit from an education tax, the authors also discuss the possibility of implementing a global fiscal redistribution mechanism (multilateral solution) from developed (surrender jurisdictions) to developing countries (recipient jurisdictions). The latter, depending on its scope, could be in the form of a global education tax or more broadly a planetary tax.

Sustainability of a shared economy

Shared economy is a current concept associated with the sharing of human, physical and intellectual resources. The penetration of a shared economy into different sectors of human activity is often referred to as a prerequisite for further sustainable development. Thus, a shared economy is one of the basic pillars of sustainable development, as it helps the market to function better, raises awareness of prices and the quality of services, but also enables anyone to have better market access. It is necessary to monitor, research, analyze and focus on identifying positive as well as negative impacts. The speed of technological development has significantly exceeded the legislative, regulatory and tax frameworks, which is often the cause of tensions between old and new business models. In general, a balance between a degree of regulation and freedom is a desirable state of affairs, providing a clear framework and rules for a shared economy while allowing for its further development and change. However, there is no consensus among experts on how to achieve this balance. The tightening of the regulation of individual shared services or, on the contrary, the deregulation of traditional industries is most often mentioned. At the same time, there are critical voices pointing to the fact that a shared economy is the result of technological progress that cannot be suppressed or reversed by any regulation, so it should have its own special laws. Given the popularity and constant development of digital technologies along with consumer habits, it is very real that a shared economy will sooner or later affect almost all areas of business. In order to make the best use of its potential, it will be necessary to find a way to adapt to its development and influence it as needed. The paper deals with the above areas with a possible prediction and proposal for future development. Keywords: Shared Economy; Circular Economics; Sustainability; Consumption; Externality

In-Depth Analysis of the Concept of Control over Risk

With the 2017 revision of the OECD Transfer Pricing Guidelines, the OECD employs the “concept of control over risk” as the turning point in determining whether or not an associated party contractually assuming risks is entitled to receive the higher returns associated with such risks. This article provides a historical context for the concept of control over risk and critically evaluates it over risk from a tax policy, general arm’s length as well as international corporate tax framework perspective.

India’s Inequality Trap: The Role Played by Taxation Policies and Automation

Abstract Recent increases in automation and unemployment have aggravated income inequality in India. Thus, it is imperative for policy-makers to cut down on inequality and unemployment while promoting planned automation. This paper proposes a joint solution to reform India’s taxation framework to fight income inequality while promoting planned automation. The paper finds that the current tax policies are severely increasing income inequality in India, and this, in turn, has lead to alarming consumption and economic slowdown in key industries. Unable to encourage the demand side, industries have responded by cutting down labour costs. This has created an inequality trap. To bring India out of this trap, it is imperative that India moves ahead with taxing concentrated capital and invests in re-skilling. Further, India also must give effect to Baumol’s cost disease insight and create new job opportunities for the rural youth, which is at the highest risk of unemployment.