Income Tax Code Research Articles

Greece: Greek tax treatment of foreign private foundations

Abstract The concept of foreign foundations pursuing statutory purposes other than charitable purposes does not exist in Greek civil law and is also not expressly recognized in Greek inheritance and gift tax law. On the other hand, from a Greek income tax point of view, Article 2 of the Greek Income Tax Code, applicable as of 1 January 2014, explicitly includes foundations of any type within the definition of legal entities. Moreover, in July 2017, the Greek Ministry of Finance issued Guidelines regulating the Greek tax treatment of foreign foundations of a non-charitable nature, which until then was entirely a matter of interpretation due to the lack of relevant legal provisions. This has resulted in trusts and foreign private foundations now being accorded similar tax treatment under the relevant Guidelines.

Anti-tax evasion rules and the Autonomous Taxation of companies in Portugal

States, in their tax systems, create anti-tax evasion rules to try to eliminate the possibility of taxpayers engaging in behavior that harms the state in collecting the taxes that each citizen or company owes. Anti-tax evasion rules also aim to ensure that everyone contributes to public spending according to their real ability to pay, thus respecting the principle of equal contribution based on real and effective economic and financial capacity. Aware that there are companies that carry out harmful acts and thus reduce their economic and financial capacity to try to reduce their tax burden in terms of corporate income tax, the Portuguese legislator introduced autonomous taxation in corporate income tax, in the corporate income tax code, to try to eliminate belligerent behavior on the part of companies. Using the statistical data from the Autoridade Tributária e Aduaneira, and based on statistics from the tax and customs authority, the study demonstrates the financial burden on companies that bear this type of taxation and compare it with the "Corporate Income Tax" charged annually by the State.
 Keywords: Anti-abuse rules; anti-avoidance rules; autonomous taxation; corporate tax; corporate taxation

Same-Sex Marriage Recognition and Taxes: New Evidence about the Impact of Household Taxation

Abstract The U.S. income tax code encourages marriage for some and discourages marriage for others, but same-sex couples were only recently exposed to these incentives. We estimate marriage responses by exploiting variation in the recognition of same-sex marriages for tax purposes versus earlier papers leveraging smaller changes. Using the American Community Survey, which reports cohabitation and marriage, we estimate a significant though very small marriage elasticity, with further analysis suggesting a higher (though still small) elasticity for low-earning households and in response to federal taxes specifically. Our estimates imply that the 2018 tax reform will increase marriage among high-earning cohabiting couples.

Why Is Wealth White?

Racial wealth inequality is no accident of history. Rather, it is the intended result of the southern Democrats in Congress who controlled federal tax policy throughout most of the twentieth century. Beginning in the 1930s, champions of white supremacy, such as Senator Pat Harrison (D-MI), Senator Walter George (D-GA), and Senator Harry F. Byrd, Sr. (D-VA), turned to an ostensibly race-neutral provision of the US income tax code—the preferential treatment of gains from investment—to uphold their (im)moral economy of “whites-only” wealth. After 1965, these segregationists’ successors—particularly Senator Russell B. Long (D-LA) and Senator Lloyd Bentsen (D-TX)—furtively rebuilt and shored up the structure of racial inequality with additional tax breaks (called “tax expenditures”) for investors. Our income tax system embodies—and immortalizes—a Jim Crow–era moral economy of “whites-only” wealth. Thanks to pro-investment tax expenditures, the racial wealth gap has widened over the last four decades as the very richest American households—the white 1 percent—compounded their wealth, at the expense of everyone else.

Less workplace parking with fully autonomous vehicles?

Purpose Recent studies on commuter parking in an age of fully autonomous vehicles (FAVs) suggest, that the number of parking spaces close to the workplace demanded by commuters will decline because of the capability of FAVs to return home, to seek out (free) parking elsewhere or just cruise. This would be good news because, as of today, parking is one of the largest consumers of urban land and is associated with substantial costs to society. None of the studies, however, is concerned with the special case of employer-provided parking, although workplace parking is a widespread phenomenon and, in many instances, the dominant form of commuter parking. The purpose of this paper is to analyze whether commuter parking will decline with the advent of self-driving cars when parking is provided by the employer. Design/methodology/approach This study looks at commuter parking from the perspective of both the employer and the employee because in the case of employer-provided parking, the firm’s decision to offer a parking space and the incentive of employees to accept that offer are closely interrelated because of the fringe benefit character of workplace parking. This study develops an economic equilibrium model that explicitly maps the employer–employee relationship, considering the treatment of parking provision and parking policy in the income tax code and accounting for adverse effects from commuting, parking and public transit. This study determines the market level of employer-provided parking in the absence and presence of FAVs and identifies the factors that drive the difference. This study then approximates the magnitude of each factor, relying on recent (first) empirical evidence on the impacts of FAVs. Findings This paper’s analysis suggests that as long as distortive (tax) policy favors employer-provided parking, FAVs are no guarantee to end up with less commuter parking. Originality/value This study’s findings imply that in a world of self-driving cars, policy intervention related to work commuting (e.g. fringe benefit taxation or transport pricing) might be even more warranted than today.

ASIL İŞVERENİN VERGİ TEVKİFATINDAN SORUMLULUĞU

According to article 2 of the Labour Code, the principal employer shall be jointly liable with the subcontractor for the obligations ensuing from Labour Code and from employment contracts of subcontractor's employees or from the collective agreement to which the subcontractor has been signatory. For social insurance premiums, joint liability is regulated in the Code No. 5510. However, although employer and wage are defined in tax laws, the principal employer is not defined. In addition, no obligation has been established on the principal employer regarding the receivables of the subcontractor workers. In accordance with the principle of legality, the principal employer is not the employer of the subcontractor's workers in terms of tax law. Because it is out of the question to recruit and operate by giving orders and instructions. Otherwise, there will be collusion. While the principal employer is jointly and severally liable for the wages and premiums of the subcontractor workers, it will not be able to stoppage income tax due to the lack of clear regulation. It is the sub-employer, who is the “employer”, who is responsible for withholding income tax from wages. Until this gap is filled by the legislator, the nature of the payment made by the principal employer to the subcontractor worker will not be counted as wage within the meaning of the Income Tax Code.

Homeownership and taxes: How the TCJA altered the tax code's treatment of housing

AbstractThe federal government has long promoted homeownership through various provisions in the US income tax code. The Tax Cuts and Jobs Act of 2017 (TCJA) renewed interest and debate about the treatment of housing via the tax code, particularly with respect to the mortgage interest deduction and the limitation on deductions for state and local taxes. We document the extent that the TCJA magnifies the long‐standing unequal treatment of debt and equity financing of homeownership in the tax code. Our analysis indicates that most households no longer benefit from mortgage interest and property tax deductions. We also show how the limitations on the deduction of state and local taxes alter the costs associated with homeownership across geographic areas, and we provide detailed calculations of the average and marginal tax rates at which housing‐related expenses are deducted. The former are relevant to the tenure choice decision, the latter to the quantity demanded decision. Finally, we document that the lost tax savings associated with the inability to benefit from mortgage interest and property tax expenditures are often small relative to the primary tax benefit owners still enjoy: the nontaxation of the return on equity invested in the home.

The Benefits and Costs of a Child Allowance

AbstractThis article conducts a benefit-cost analysis of a child allowance. Through a systematic literature review of the highest quality evidence on the causal effects of cash and near-cash transfers, this article produces core estimates on the benefits and costs per child and per adult of increasing household income by $1000, which can be used for any cash or near-cash program that increases household income. We then apply these estimates to three child allowance proposals, with the main proposal converting the $2000 Child Tax Credit in the federal income tax code into a fully refundable and more generous child allowance of $3600 per child ages 0–5 and $3000 per child ages 6–17, as enacted for 1 year in the American Rescue Plan. Aggregate costs and benefits are estimated via micro-simulation. Our estimates indicate that making the $2000 Child Tax Credit fully refundable and increasing benefits to $3000/$3600 would cost $97 billion per year and generate social benefits of $929 billion per year. Sensitivity analyses indicate that the results are robust to alternative assumptions and that each of the three child allowance proposals produces a very strong to an extraordinarily strong return for the U.S. population.

On employer-paid parking and parking (cash-out) policy: A formal synthesis of different perspectives

Employer-paid parking suffers from many weaknesses but is still widespread. This paper seeks to elaborate the line of reasoning accounting for the role of workplace parking and parking policy in the wage negotiation process, the income tax code, regulatory parking standards, and taking into account the adverse effects of parking at the workplace, parking elsewhere or not parking at all. We provide an assessment from two perspectives: firms provide parking spaces, a fringe benefit, if it is profitable to do so (market outcome); a social planner or policymaker endorses workplace parking if it is welfare-enhancing (social optimum). We find that policymakers as well as employers may lack sufficient incentive to reduce parking at the workplace, even in the presence of an employer parking policy program that pursues the goal of making parking opportunity cost visible to employees (parking cash-out). To foster a reduction of employer-paid parking and to exploit the potential welfare gains associated with employee-paid parking, we propose customized local cash-out programs at the firm level rather than uniform fringe benefit taxation enacted by the federal government, provided that cash-out levels account for local particularities (e.g. prevailing traffic conditions, co-existing transport policies), that bargaining power of workers over employers in terms of the incidence of cash-out is limited, and that cash-out as a wage supplement is not subject to income taxation. The (second-best) socially optimal cash-out level need not be identical to the opportunity resource cost of the employer-provided parking space.

Evolution in the Tax Code: (Almost) the End of Homeowner Tax Savings?

The federal government has long promoted homeownership through various provisions in the U.S. income tax code. The Tax Cuts and Jobs Act of 2017 (TCJA) renewed interest and debate about the treatment of housing via the tax code, particularly with respect to the mortgage interest deduction and the limitation on deductions for state and local taxes. We document the extent that the TCJA magnifies the long-standing anti-mortgage debt bias in the tax code. Our analysis reveals that ongoing discussions about the effects of eliminating the mortgage interest deduction are largely irrelevant because most households no longer benefit from this deduction. We also demonstrate how the limitations on the deduction of state and local taxes alters the costs associated with homeownership across geographic areas, and we provide detailed calculations of the average and marginal tax rates at which housing related expenses are deducted. Finally, we calculate how the major tax benefit of owner-occupied housing — the nontaxation of net implicit rental income varies across income groups and locations.

Tax Cuts and Jobs Act of 2017: An Overview with Research Results Indicating Further IRS Clarification Needed

Since the Tax Reform Act of 1986, the Tax Cuts and Jobs Act (TCJA) of 2017 was the most comprehensive revision of the United States (US) income tax code. This article reports on analysis of and conclusions based on a survey of accounting professionals, Internal Revenue Service data and a sample of corporate reports. Some trends in data extracted from the Internal Revenue Service show that the tax burden tends to shift from corporations to individuals. At the same time, it does not appear that large US corporations are taking advantage of tax credits to promote investment. The survey results indicated tax reform itself and the inherent accounting readjustments are identified as risks in corporate decision-making. Overall, it was concluded that the IRS needs to provide further clarification of the implementation of the TCJA

Tax Progressivity in Australia: Facts, Measurements and Estimates†

We study trends in progressivity of the Australian personal income tax system after the introduction of A New Tax System (Goods and Services Tax) Act 1999. We employ two methodological approaches: one based on tax liability progression and one based on tax liability distribution. The latter shows a cycle of lesser and greater tax progressivity in Australia between 2000 and 2018. We identify two main drivers of the tax progressivity cycle: lack of automatic indexation and mismatch between the income tax code and the evolution of market income distribution. Active tax policy with frequent adjustments to income brackets, marginal rates and offset levels drive the progressivity level before 2010. Meanwhile, inactive tax policy induces lower levels of tax progressivity after 2010 as the income tax code fails to track the changes in market income distribution. Indexation to inflation can partially mitigate the decline in progressivity; however, it is not a full substitute for a proper tax indexation system with (annual) frequent adjustments. Furthermore, we separate the contributions of taxes and transfers to overall progressivity of the tax and transfer system. We find the redistributive role of transfers is more pronounced.

Tax Complexity and Technology

The federal income tax code has become increasingly complex over time with the implication that many taxpayers no longer understand the connection between their life decisions and their taxes. Some commentators have suggested that increasing computational complexity may be attributable in part to the proliferation of tax preparation software that renders such complexity manageable at filing time, but otherwise does nothing to mitigate the “black box” nature of the tax system. While such complexity and opacity undercut explicit incentives embedded in the Code, make planning more difficult, and undermine political accountability for taxes, they may also reduce the inefficient distortion or deadweight loss of the income tax, particularly with respect to higher-income taxpayers. This Article argues that technology represents a potential response to tax complexity and opacity as well as a contributing factor. It argues that tax planning software can and likely will be used to restore “functional transparency” to the Code, for good or bad, alerting taxpayers to explicit incentives, allowing taxpayers to easily determine the tax consequences of their life decisions, and providing a means for improving fiscal citizenship, but also highlighting tax burdens in such a way as to increase deadweight loss. This Article also makes the case for government provision of planning software targeted at lower-income taxpayers in order to level the planning playing field and improve the take-up of tax incentives by this population, while avoiding facilitating social welfare reducing tax planning by higher-income taxpayers.

Marginal Income Tax Rates, Economic Growth, and Primary Fiscal Deficits

Economic theory suggests that variations in marginal tax rates are more important for consumption and investment decisions than the average rates commonly studied. This article analyzes the aggregate implications of the statutory tax code, using a new times series on annual marginal tax rates, which decomposes the federal income tax code into its “level” and “progressive” (or spread) components. Robust results from a vector autoregression model show that increasing the spread of the marginal income tax rates has a positive impact on private spending growth, leading to an indirect, negative impact on the primary deficit ratio. Contrary to the political narrative, our findings suggest that the general level of these tax rates does not significantly impact growth rates or the primary deficit ratio.

Tax Reforms and Debt in Greece after the Financial and Economic Crisis: Insights and Challenges for Tax Policymaking in Times of Emergency

In the area of tax and taxation the European Union, EU Member State Greece has consistently faced non-compliance by its citizens. Greece has, therefore, in the last years, under supervision of the European Union and the International Monetary Fund (IMF), taken steps to reform its tax administration and confront tax evasion. These reforms have taken place in combined EU and IMF programmes to manage Greece’s recovery from its financial and economic crisis, with substantial financial assistance from the European Stability Mechanism. Numerous tax reforms have occurred, including the adoption of the Income Tax and Tax Procedure Codes and a major reform of VAT legislation. Nonetheless, Greece’s shadow economy has been and remains a factor of concern for tax compliance. Furthermore, economic hardship and the financial crisis have hindered Greek taxpayers’ ability to pay their tax due and propelled government debt. A substantial part of the Greek population has lived and still lives in poverty, while the Greek government continuous to deal with the task of paying the debt owed to its bailout creditors. The current worldwide COVID-19 (corona virus) crisis will certainly also impact the Greek government’s ability to continue with tax reforms and debt sustainability.

The Accrual Accounting Principle and its Implications for Portuguese Tax Courts Decisions

Abstract To the best of our knowledge, this is the first paper focusing on the interpretations issued by different Portuguese courts concerning the application of the accrual principle established in the Corporate Income Tax Code. This paper uses a database of the Portuguese tax courts’ decisions and employs a case law-based research methodology to address the following question: under which circumstances the principle of justice may affect the strict application of the accrual principle? After collecting twenty-four legal decisions related to the application of the accrual principle outlined in tax law, this paper summarises eleven, grouping them according to the different issues under dispute. This analysis also includes the confrontation of the assumptions used by the tax authority and the claims of the taxpayers, identifying and discussing the legal arguments to override the strict application of the accrual principle. The main conclusion is that Portuguese courts may summon the principle of justice in taxation when taxpayers violate the accrual principle, in order to prevent unfair corrections to taxable income performed in tax audits. This paper found that the tax authority typically demands a rigid use of the accrual principle while the taxpayers often argue for a more flexible application. This last perspective has been adopted by the tax courts in certain circumstances, in particular when taxable income transfer was not motivated by tax avoidance.

Tax Loss Utilization through Company Reorganizations

In this article, the author outlines the rules of the Greek Income Tax Code on company restructurings and transfers of losses, including the impact of the applicable anti-abuse rules, in light of recent guidance issued by the Greek tax authorities.

Did Tax Cuts and Jobs Act Create Jobs and Stimulate Growth? Early Evidence Using State-Level Variation in Tax Changes

The Tax Cuts and Jobs Act (TCJA) of 2017 is the most extensive overhaul of the U.S. income tax code since the Tax Reform Act of 1986. Existing estimates of TCJA’s economic impact are based on economic projections using pre-TCJA estimates of tax effects. Following recent pioneering work of Zidar (2019), I exploit plausibly exogenous state-level variation in tax changes and find that an income tax cut equaling 1 percent of GDP led to a 1 percentage point higher nominal GDP growth and about 0.3 percentage point faster job growth in 2018.

Did Tax Cuts and Jobs Act Create Jobs and Stimulate Growth? Early Evidence Using State-Level Variation in Tax Changes

The Tax Cuts and Jobs Act (TCJA) of 2017 is the most extensive overhaul of the U.S. income tax code since the Tax Reform Act of 1986. Existing estimates of TCJA’s economic impact are based on economic projections using pre-TCJA estimates of tax effects. Following recent pioneering work of Zidar (2019), I exploit plausibly exogenous state-level variation in tax changes and find that an income tax cut equaling 1 percent of GDP led to a 1 percentage point higher nominal GDP growth and about 0.3 percentage point faster job growth in 2018.

German income taxation and the timing of marriage

ABSTRACTI investigate how the German income tax code affects the timing of marriages. The German income tax code allows married couples to benefit from full income splitting relative to unmarried couples. If their individual incomes differ, legally married couples may benefit from jointly filing their income taxes and thus fully splitting their incomes because of increasing marginal tax rates. The gain from joint taxation for married couples arises every year including the year in which they marry, independent of the month of the marriage. I use data from the German Socio-Economic Panel to test whether couples with larger gains from joint taxation are more likely to marry late in one year instead of early in the subsequent year. The results provide support for the hypothesis that pecuniary gains from joint taxation incentivize couples to prepone their marriages to the last quarter of a year, especially to December.