National Tax Policy Research Articles

Foreign Portfolio Investment and Shareholder Dividend Taxes

ABSTRACTWe investigate the effects of dividend taxes on foreign equity portfolio holdings. Based on the extension of an equilibrium model with risky assets to an international setting, we predict that a change in the tax rate on dividends of a country's domestic investors is positively related to changes in foreign investors' portfolio holdings in that country. The evidence from two research settings, which exploit changes in the national tax policies of different countries, supports this prediction. More generally, the model predicts that a foreign investor's equilibrium portfolio holdings in a country are negatively related to the dividend tax rate that she directly pays on assets in that country and positively related to the weighted-average dividend tax rate of worldwide investors in that country. Results from analyses using panel data provide empirical support for these predictions.

Switzerland in a Post-BEPS World

The authors, in this contribution, consider the implications of the OECD Base Erosion and Profit Shifting project, on Swiss corporate tax policy. While they generally support the BEPS project, the authors believe that its implementation should also take national tax policies differences into account.

Spielräume für eine gerechtere Steuerpolitik in den OECD-Ländern

WSI-Mitteilungen , Seite 263 - 271

El rol del sector público subnacional en la función de estabilización: evidencia desde el caso colombiano en el periodo 1990-2001

This paper analyses the impact of fiscal decentralization on the stabilization function. Although traditionally the stabilization function has been attributed to central government, regional and local authorities have a role to play in decentralized contexts. The analysis concentrates on the role that sub-national governments play in counteracting cyclical policy and on the relationship between decentralization and the fiscal position of national and sub-national governments. In particular, the stabilization and redistribution obtained by regions as a result of national tax policy and through the intergovernmental transfers system is estimated for Colombia, where deficits increased substantially both at national and local levels after the decentralization process was strengthened in 1991.

Innovating the tax compliance management process

The taxpayers' observance of tax legislation (tax compliance) is important for every tax authority. This issue is particularly relevant in the contemporary circumstances when the application of tax laws occurs within a complex and ever-changing environment. Despite the differences underlying national tax policies, tax legislations, tax administration and tax moral, the primary goal of taxation remains the same: taxes should be collected in accordance with the law in order to provide for building and preserving the taxpayers' confidence in the tax system and its effective administration. Consequently, the activities of tax authorities in tax procedure should promote a high degree of voluntary tax compliance and lead to minimizing the occurrence of various forms of non­compliance. There is a wide range of diverse factors underlying tax compliance. The understanding of these factors enables tax authorities to establish the particular reasons for non-compliance and to devise specific activities and measures which will be an incentive for taxpayers to revert to tax compliance. These goals may be accomplished through the process of tax compliance management. Tax compliance management is a structured and systematic process of monitoring the taxpayers' compliance, which also includes decisions on the essential elements for the development of tax compliance and the treatment of identified tax compliance risks. The innovations in this process are aimed at: establishing the adequate balance and framework for the evaluation of activities and measures concerning tax law and tax procedures; improving information transparency and taxpayers' education; establishing tax control; and instituting adequate legal proceedings in response to non-compliance. These activities are expected to contribute to a more successful application of tax laws in the future.

The Intricacies of Tax and Globalization

This article reviews Avi-Yonah, Sartori, and Marian’s Global Perspectives on Income Taxation Law (Oxford, 2011). It outlines the book’s key features and strengths in the quest for understanding the effect of globalization on taxation. In this process, the article also looks into available data to explore global trends in taxation over the past three and a half decades to evaluate whether and to what extent globalization leads to convergence or divergence of national tax policies. The article concludes that as Global Perspectives on Income Taxation Law illustrates, while globalization may lead to at least some observed trends in taxation—including the flattening of income tax rates and the move toward the taxation of less mobile sources, and thus more regressive, tax schemes— there is clearly far more than meets the eye. Here, Global Perspectives on Income Taxation Law provides a valuable reference for how different countries confront challenges that are common among tax systems. Keeping in mind that differences among national tax systems nonetheless exist and understanding how tax systems converge and diverge constitutes a vital first step toward crystallizing the necessary actions to better coordinate between multiple tax systems while retaining national sovereignty in tax design. Over the long run, this could also lead to better evaluation of the net benefit or cost of globalization, allowing policymakers to respond effectively to the fiscal challenges that globalization presents.  Sagit Leviner is an associate professor of law at SUNY Buffalo Law School and an overseas affiliated Faculty with Ono Academic College Faculty of Law in Israel. The author is thankful for the insightful contribution of Eric Toder to this review. Valuable comments on and discussions of earlier versions of this review were also offered by Yariv Brauner, Tsilly Dagan, David Gliksberg, Victor Fleischer, Diane Ring, Kirk Stark, Nancy Staudt and the participants of the Interdisciplinary Center Faculty of Law International Tax Symposium, Herzliya, Israel (April 3013), the Hebrew University Faculty of Law Tax Colloquium, Jerusalem, Israel (January 2013), the 6th Annual Joint Conference of Columbia University Law School and Ono Academic College, Kiryat Ono, Israel, (June 2012), and the International Society for New Institutional Economics Annual Conference, USC Gould School of Law, Los Angeles, CA (June 2012). SUNY Buffalo law student Vanessa Glushefski provided excellent research assistance.

Study on International References of High-End Equipment Manufacture Industry

Strategic emerging industry development has important relations with national economic security and strategic changing. One of the most important national economic developments is training and developing strategic emerging industry. Tax revenue is very important to developing emerging industry, which cant be replaced by other measures. But, the emerging industry is obstructed by the national current tax policies. And some tax policies which used to encourage emerging industry also have shortages. In this paper, we have summarized developed countries tax policies which used to encourage strategic new-type industry efficiently. On the basis of analysis, we have concluded some proposals about constructing our countrys strategic new-type industry tax policies. And all the proposals are focused on such aspects as homegrown innovation, training market and absorbing talented people.

Reconsidering International Tax Neutrality

For decades, U.S. international tax policy has shifted back and forth between territorial-source-exemption taxation and worldwide-residence-credit taxation. The former is generally associated with capital import neutrality (CIN) and the latter with capital export neutrality (CEN). One reason why national tax policy has shifted back and forth between those benchmarks is because it is widely accepted that a tax system cannot simultaneously satisfy both CEN and CIN unless tax rates on capital are harmonized across jurisdictions. In this essay, I argue that the international tax literature contains two different and conflicting definitions for CIN. Under one definition, which goes back at least to Peggy Musgrave’s early writings and which has been adopted by politicians, lawyers and lay readers, CIN is understood to refer to a tax system that was competitively neutral. That idea can be conceptualized as a tax system that does not distort the ownership of capital (ownership neutrality). In the economics literature, ownership neutrality is closely associated with the recent work of Mihir Desai and James Hines, who coined the phrase capital ownership neutrality (CON) to describe a tax system that does not distort the ownership of assets. Under the other definition, which goes back to Thomas Horst and which has been broadly adopted by professional economists, CIN is understood to refer to a tax system that does not distort the consumption - savings choice (savings neutrality). In this essay, I show that the widely accepted and often repeated proof that a tax system cannot simultaneously satisfy both CEN and CIN is based on the assumption that CIN refers to saving neutrality. In contrast, when CIN is interpreted as ownership neutrality, the global adoption of a worldwide tax system simultaneously satisfies both CEN and CIN. However, global adoption of a territorial tax system still cannot simultaneously achieve both CEN and CIN because a territorial tax system violates CEN. Not surprisingly, the use of the term CIN to denote two different types of neutrality - ownership neutrality and savings neutrality - has produced much confusion for those trying to understand, influence and set international tax policy. Accordingly, I recommend that commentators either stop talking about CEN and CIN and talk instead about locational, ownership, and savings neutrality or if they continue to talk about CIN that they clearly specify whether they mean CIN as ownership neutrality or as saving neutrality.

The Intricacies of Tax & Globalization

This article reviews Avi-Yonah, Sartori, and Marian’s Global Perspectives on Income Taxation Law (Oxford, 2011). It outlines the book’s key features and strengths in the quest for understanding the effect of globalization on taxation. In this process, the article also looks into available data to explore global trends in taxation over the past three and a half decades to evaluate whether and to what extent globalization leads to convergence or divergence of national tax policies. The article concludes that as Global Perspectives on Income Taxation Law illustrates, while globalization may lead to at least some observed trends in taxation—including the flattening of income tax rates and the move toward the taxation of less mobile sources, and thus more regressive, tax schemes—there is clearly far more than meets the eye. Here, Global Perspectives on Income Taxation Law provides a valuable reference for how different countries confront challenges that are common among tax systems. Keeping in mind that differences among national tax systems nonetheless exist and understanding how tax systems converge and diverge constitutes a vital first step toward crystallizing the necessary actions to better coordinate between multiple tax systems while retaining national sovereignty in tax design. Over the long run, this could also lead to better evaluation of the net benefit or cost of globalization, allowing policymakers to respond effectively to the fiscal challenges that globalization presents.

Do countries compensate firms for international wage differentials?

We address the role of labor cost differentials for national tax policies. Modeling a tax competition race between two countries competing for a population of mobile firms, we show that in equilibrium, the high-wage country charges a lower tax than the low-wage country. Moreover, under tax competition the high-wage country attracts more firms than in a setting without taxation. Exploiting exogenous variation in labor cost differentials induced by the breakdown of communism in eastern Europe, we find that tax policies are in line with the model prediction. Our most conservative estimates suggest that a one dollar increase in the compensation cost differential (in prices as of 2000) triggers a cut of the statutory corporate income tax rate by about one percentage point.

Tax reform and coordination in a currency union

Nous proposons un modèle DSGE à deux pays pour analyser l’impact à court et à long terme d’une modification de la TVA et des cotisations sociales dans un pays de l’union monétaire. Le modèle prend en compte le fait que les entreprises diffèrent dans leur comportement prix après une hausse de la TVA. En raison de la politique monétaire commune, les politiques fiscales nationales ont des externalités sur le reste de l’union monétaire. En particulier, les effets d’une dévaluation fiscale sont différents de ceux d’une dévaluation nominale. Classification JEL : F56 ; C12.

Fiscal Harmonization and Economic Integration in the European Union

Since the foundation of the European Economic Community there is an incessant debate about the necessity of an overall tax and fiscal cooperation and harmonization in Europe, which recently has been intensified mainly because of EMU. By reviewing the literature, this article argues that closer cooperation in tax issues, for both indirect and direct taxation, needs to accompany the current state of integration in the EU. Advances have taken place in indirect taxes, value added tax (VAT) and excises. With respect to VAT, the major agreements were achieved with the Sixth VAT Directive (1977) and the agreements on rates after the elimination of the frontier controls (1992). In the case of excise duties, the progress have been less significant and there can be noted only the agreements of minimum rates for alcohol, tobacco and energy (fuels). In direct taxation, it is necessary to point out that the powers are national and the EU is limited to guaranteeing the performance of the single market. Community legislation is centered on company taxation and the taxation of savings income. Taxes and social security contributions strongly influence patterns of saving, consumption, investment and employment, and thus shape the operation of markets for goods, services, capital and labor. The reforms launched by the Cardiff European Council of June 1998 are designed to ensure that the differences between systems that have become even more apparent since the introduction of the euro do not hamper trade, result in fragmentation of the single market or prevent the efficient allocation of resources. Tax fraud is another problem of increasing concern in the Community. European Parliament and Council Decision 888/98/EC instituted a program (Fiscalis) to improve the operation of indirect taxation systems in the single market and to secure wide-ranging and effective cooperation between Member States and with the Commission, and to improve administrative practice. International VAT fraud, particularly on sales and deliveries within the EU, has led to serious losses of revenue. Only through closer coordination of national tax policies a balance can be struck between the diversity of Member States’ tax and social contribution systems and the right to the freedom of establishment and movement throughout the EU. In a monetary union, with one currency and common policies, a larger harmonization and coordination of the fiscal policies are forced.DOI: http://dx.doi.org/10.5755/j01.ee.24.1.3503

Coordination fiscale dans l'Union Économique et Monétaire Ouest Africaine

<titre>R&#233;sum&#233;</titre>L&#8217;Union &#201;conomique et Mon&#233;taire Ouest Africaine (UEMOA) est l&#8217;une des r&#233;gions du monde o&#249; la coordination fiscale entre &#201;tats souverains est la plus avanc&#233;e, de jure du moins. Depuis la fin des ann&#233;es 1990, plusieurs directives communautaires ont encadr&#233; la fiscalit&#233; directe et indirecte des &#201;tats membres. Cette coordination vise notamment &#224; cr&#233;er un cadre fiscal propice &#224; l&#8217;int&#233;gration &#233;conomique r&#233;gionale, &#224; assurer la transition fiscale en substituant les recettes de la fiscalit&#233; int&#233;rieure &#224; celles douani&#232;res compromises par la lib&#233;ralisation des &#233;changes internationaux et &#224; mobiliser les recettes fiscales. L&#8217;objet principal de cet article est de pr&#233;senter l&#8217;&#233;tat actuel de cette coordination fiscale. Nous examinons les directives et r&#232;glements pertinents, la coordination de jure, et leur &#233;tat d&#8217;application dans les pays membres, la coordination de facto. Une br&#232;ve appr&#233;ciation des recettes fiscales compl&#232;te cette analyse qui se conclut par quelques observations sur les enjeux principaux de la coordination fiscale dans la r&#233;gion et les le&#231;ons apprises.Classification JEL&#160;: O1, H2, H7

The Austrian Private Foundation in times of crisis

The present economic crisis and, in particular, the uncertainties within the Eurozone provide an opportunity to review the use of the Austrian Private Foundation, its exposure to national tax policies in view of its accumulated wealth and tax privileges, inherent risks emanating from structural and management shortcomings, threats from founders, creditors, spouses and heirs, as well as the opportunity provided by the foundation for wealth planning, asset protection, and additional tax benefits applicable from 2012 onwards.

Tax reform and coordination in a currency union

We propose a two-country DSGE model to analyze short-term and long-term impact of a modification of consumption and labor tax rate in one country in a currency union. The model embodies the fact that firms differ in their pricing behavior after a VAT tax increase. Due to the common monetary policy, national tax policies have large spill-overs on the rest of the currency union. Furthermore, a fiscal devaluation is different from a nominal devaluation due to the common monetary policy.

Cross-border tax effects on affiliate investment—Evidence from European multinationals

Recent studies suggest that multinational firm activities at home and abroad are positively correlated which may be due to the use of common inputs (like marketing, patents, etc.). Then, a cost shock at one location may lead to reduced activity in all other locations within the firm. In this paper, we theoretically and empirically analyze national corporate tax policy in such a setting. Our main hypothesis is that corporate taxation at the parent location not only reduces the parent's capital stock but also lowers capital stocks at affiliates abroad. Using micro data on European multinational firms, we confirm the hypothesis showing that a 10 percentage point increase in corporate tax rates is associated with a 5.6% decrease in the affiliate's capital stock. From a welfare point of view, this cross-border tax effect on the capital stock gives rise to a negative fiscal externality of corporate taxation which is empirically shown to compensate a substantial fraction of the well-known positive externality due to profit shifting.

External Factors in Tax Policy: International Obligations

The authors, in this article, review the effect of international obligations on national tax policy, with specific reference to World Trade Organization rules, free trade agreements, investment protection agreements and tax treaties.

Tax Competition and Inequality: The Case for Global Tax Governance

Abstract This article presents the normative case for global tax governance. Contrary to an influential part of the literature, national tax policy choices cause significant externalities for other nation-states. Focusing on business taxation, the article shows that tax competition undermines the integrity and distributive principles of domestic tax systems and aggravates the inequality between developed and developing countries. Further, it demonstrates that the effects of international tax competition are unjust irrespective of whether a globalist or less demanding internationalist perspective on justice is adopted. The minimum requirement of justice is to devise global rules that ensure that national tax systems remain capable of implementing distributive justice as they see fit. Finally, the article presents and discusses a concrete proposal for the global governance of business tax competition, namely, unitary taxation with formula apportionment.

Viewing Tax Policy Through Party-Colored Glasses: What German Politicians Believe

AbstractThe process of globalization has an important impact on national tax policies. Most of the literature does not focus directly on the political decision-making process and assumes that the desired tax policy is responding to objective underlying tradeoffs. Based on an original survey of members of the German national parliament (Bundestag) in 2006/07, we document a strong ideological bias among policy-makers with respect to the perceived mobility of international tax bases (real capital and paper profits). Ideology also influences, directly and indirectly, the perceived national autonomy in tax setting and preferences for a European Union minimum tax for companies. There seems little consensus as to what the efficiency costs of capital taxation in open economies are, even though our survey falls in a period of extensive debate about, and actual adoption of, a company tax reform bill in Germany.

Coordinating Tax Strategies at the EU Level as a Solution to the Economic and Financial Crisis

The global economic and financial crisis that started in 2008 is strictly connected with national and European tax policies, concerning both the existence of specific elements of the tax systems that have contributed to the crisis and the role played by tax policies implemented by states in countering the crisis itself. This article provides an analysis of national and European tax policy strategies introduced during the crisis and points out the necessity of a tax coordination at the European Union (EU) level in order to increase fiscal integration among Member States while respecting national sovereignty and thus giving Member States the opportunity to adopt tax measures according to their needs and specificities.