Tax Changes Research Articles

Stock Market Response to Changes in the Statutory Corporate Income Tax Rate: Comparative Analysis between Developed and Developing Economies

In this study, the authors use an empirical approach to evaluate the impact of changes in the statutory corporate tax rate on stock market returns. The main objective is to investigate whether changes in income tax rates impact stock market returns and to examine the extent of this impact. According to the United Nations country classifications, the authors categorized the sample economies into two types: developed and developing1. The study further scrutinizes the differences in the outcomes when comparing developed with developing economies using a comparative study approach. Data on corporate tax rates and corresponding stock market returns are analyzed for developed economies of Japan, US and Italy, and developing economies of South Africa, Malaysia and India. The study uses panel data regression and correlation analysis of the variables of stock market returns and corporate tax rates from1990 to 2010. The statistical analysis revealed that the only significant impact was of tax cuts on stock market returns in general, and developed countries responded more strongly to tax cuts. For a 1% tax cut in rates, the stock markets could expect an increase in returns of 0.185% in the year of the tax change. Tax hikes, however, did not reveal any significant adverse effect on stock market returns. Hence, it is pertinent to note that developed and developing economies exhibit varied behaviors toward corporate tax policies and governments could make calculated decisions, considering the consequences of their tax policies on capital markets and corporate valuations.

Accounting and taxing system in conditions of the state of war: how to act and what the consequences

Introduction. The state of war caused by the full-scale Russian invasion of Ukraine is causing changes in the functioning of the economy. For more than 55 days of heroic resistance of the Ukrainian people, Ukrainian the authorities have been taking measures to support economic entities whose activities are extremely important for the launch of the economy during the war. One of the current tools to influence the activities of economic entities is taxation and proper adaptation of accounting to the introduced economic transformations. Legislative changes have softened the first blow and prevented panic in the financial sector. However, given the risks of long-term hostilities, it is important to develop a policy of economic stability in the conditions of war and to analyze the consequences of the changes introduced today and their repercussions in the future.Purpose. The purpose of this publication is to analyze the existing changes in the functioning of the accounting and taxation system during the state of war, their consequences and find ways to adapt to these conditions in the context of supporting the state economy.Research methods. The research process was conducted using a dialectical approach to the study of the current state of accounting and taxation of domestic economic entities and using methods of cognition: deduction and abstract-logical cognition - to determine the content of taxes, cost elements; abstraction and concretization - to outline areas of tax burden optimization; grouping, comparison, generalization in the process of forming research results.Results: The existing legislative reforms of the state of war of the simplified taxation system for small, medium and some large enterprises as the main fiscal elements of the impact on the activities of economic entities are analyzed. The main nuances of the application of the introduced tax changes (restrictions on application, rules of transition, post-war return) and their content are presented.The peculiarities of the activity of the enterprise in full or partial downtime are investigated and the algorithm of idle time during the state of war (registration, cost accounting, wages) is proposed. The list of the most common problems of wages in the state of war and the proposed ways to solve them is outlined. The aspects that should be taken into account by the accounting staff are considered and the mechanism of actions for assessing the risk of the impact of the sanction is presented.Perspectives. These recommendations increase the potential use of tools, in the context of supporting the state economy, to reduce the tax burden on domestic enterprises and adapt accounting to the state of war. Support for business will continue to be important as a key factor in increasing the economic stability of the state, which also contributes to effective resistance to the attacker. In the future, after the Victory of Ukraine, it will be necessary to introduce a consistent mechanism for the development of the postwar economy, one of the elements of which should be the optimization of the tax burden and compliance with international accounting.

Impact of Indirect Tax Reforms in India

In this paper, we have analyzed what is the impact of Indirect tax reforms in India, as we all know how indirect taxes played progressively vital role in the Indian economy. Excise duty was first introduced in India in 1944. The change in the Indirect taxes was anticipated after independence. As Goods and Services tax (GST) is India’s most significant tax reform, which went into effect on July 1st, 2017. It was eventually superseded by all the indirect taxes levied by Federal and State Governments on Goods and Services. Indirect taxes are imposed on goods and services due to which consumer ended up paying more for the products. The time limit for paying tax was extended during the Covid-19 pandemic. There were several GST compliance relief measures announced by union finance minister during worldwide pandemic. Through our research we come to know about that the introduction of GST boost economy growth and give rise to GDP growth by 1.0% to 3.0%.

Italy’s demographic trap: Voting for childcare subsidies and fertility outcomes

In this paper we study how population aging impacts the age distribution of the voting electorate and voters’ choices over childcare subsidies. We build a computable general equilibrium framework populated by heterogeneous agents who, over the course of their life-cycle, make endogenous and age-dependent fertility choices. The model is calibrated to match economic and population outcomes of the Italian economy. Child support favors young and fertile cohorts but can also impact all population subgroups through changes in prices, income taxation and population growth. A probabilistic voting model is used to measure voting outcomes over a range of childcare subsidy levels and tax policies. Our findings show that childcare subsidies have a positive impact on the total fertility rate and are welfare improving when financed with both capital and labor income taxation and in combination with lower pension contribution rates. A 10 percent increase in the level of subsidies can increase the population growth rate by an average of 0.47–0.70 percentage points. We find that voting choices of different population subgroups, while depending on the tax used to finance new expenditure, lead to lower levels of childcare subsidies, lower fertility rates and to a demographic ‘trap’.

The Effect of Policy on Changes in Final Income Tax Rates on MSME Taxpayer Compliance in Binjai City

Taxes are one of the sources of state revenue, the government sets taxpayers to the public, especially MSME taxes, looking for sectors that have the potential to increase tax revenue. . This study aims to analyze the effect of changes in the PPH tax rate on MSME taxpayer compliance. This study uses qualitative research methods, with an empirical juridical approach. This study shows the existence of a policy regarding the MSME income tax rate of 1% through Government Regulation no. 46 of 2013. However, the enactment of this regulation experienced pros and cons among the public. As a result, in 2018 the government changed the tax rate by 0.5% through Government Regulation no. 23 of 2018. This policy on reducing income tax rates for MSMEs has an impact on MSME compliance levels as taxpayers. Research conducted at the Binjai Pratama Tax Service Office shows an increase in the compliance of MSME actors in carrying out their tax obligations, so it can be interpreted that the implementation of PP 46 of 2013 provides a significant increase in the efficiency of fulfilling tax obligations for taxpayers at KPP Pratama Binjai.

Targeting in tax behavior: Evidence from Rwandan firms

This paper describes tax behavior among firms in a low-income country that diverges from traditional models of compliance. Using the universe of administrative filings in Rwanda, I find that many firms consistently pay identical amounts in income tax year after year. Evidence from a survey of filers, matched to administrative filings, suggests that constraints on documenting and verifying earnings motivates a heuristic of targeting past payment amounts. To illustrate the policy relevance of this behavior, I exploit an income tax reform to show that targeting can reconcile perverse responses to tax changes: when taxes are cut, firms relying on this heuristic on average persist in paying as much as they did before.

Market positioning in food industry in response to public health policies

Public health agencies have designed and implemented interventions to control the global obesity epidemic using healthfulness messaging and policy changes such as taxation. These changes in the policy environment and marketplace dynamics have shifted consumer trends and have challenged food producers in the industry. The following questions are considered in the food industry in such a context: (i) Should firms offer similar or very different quality offerings? (ii) How should a firm's positioning strategies change as consumers' perceptions of healthful messaging and taxation change? and (iii) How do these factors impact firm profits and social welfare (SW)? Using an analytical model of duopolistic competition, we highlight that both firm profits as well as SW could increase when the importance of healthfulness messaging to consumers increases. Furthermore, we show that increased taxation could reduce the quality gap between alternatives in the market, forcing firms to lower prices. In contrast, when healthfulness messaging becomes more important to consumers, the quality gap between both firms increases. Our results provide important implications for public policy as well as firm profits as a consequence of the strategic decisions of firms in a health policy context.

Health Equity and Its Economic Determinants (HEED): protocol for a pan-European microsimulation model for health impacts of income and social security policies

IntroductionGovernment policies on taxation and social security are important determinants of population health outcomes and health inequalities. However, there is a shortage of evidence to inform policymakers of the health...

SME Advisors: An intermediary website between MSME and Experts

Abstract: MSMEs are an essential component of the Indian economy and have significantly aided in the socioeconomic development of the nation. It not only opens up work opportunities but also aids in the advancement of rural and underdeveloped sections of the nation. The number of start-ups surged during Covid-19, and as we all know, start-ups require all financial support they can get. Smaller enterprises and firms in the Indian economy have long had trouble getting finance. Over time, it has been discovered that there are a number of regulatory challenges, such as problems with tax compliance and changes to labor legislation that have ended up costing the MSME sector significantly. Despite constantly creating new goals and preparing to expand their current operations, many business leaders still lack the financial knowledge required to lead their organizations in the right way. Despite these obstacles, if a business is persistent, it is still feasible for it to succeed, and if they have the correct support from the right people, these issues could be quickly overcome. The answer we developed is SMEAdvisors, a website that strives to build a platform that links experts in many fields with entrepreneurs while also giving professionals opportunities to use their expertise. The website helps MSMEs get in touch with qualified experts, focuses on the business life cycle and all potential difficulties, and assists in finding solutions and taking the necessary steps.

The effects of corporate taxes on small firms

We study the impact of corporate taxes on firm-level investments and business activity by exploiting a 6 percentage-point reduction in the corporate tax rate in 2012–2014 in Finland. We use detailed administrative data and a difference-in-differences method comparing small corporations (tax rate cuts) to similar partnerships (no change in taxes). We find no significant average investment responses but do observe an average increase in annual sales (1.6%) and variable costs (2%) when comparing years before (2008–2011) and after (2014–2016) the tax rate cuts. These effects are driven by more cash-constrained firms and firms where the main owner actively works in the firm.

Variability in total cost of vehicle ownership across vehicle and user profiles

Widespread adoption of electric vehicles (EVs) is a common and critical component of international strategies to mitigate environmental pollution, climate change and oil dependency. The ability of consumers to assess the total cost of ownership (TCO) of EVs relative to internal combustion engine vehicles (ICEVs) remains an important factor for EV uptake. The TCO of vehicles is not universal across different car segments and user profiles. We analyse and compare the TCO of ICEVs and EVs from 17 car segments across short- and long-term ownership periods, and further advance existing TCO approaches by integrating detailed activity-based driving profiles, taxation, grant structures and pricing. Results show that EV options in the most popular Irish car segments have existing battery EV options with a TCO averaging respectively 26% and 42% less than their equivalent petrol and diesel ICEV options over a 4-year ownership term when the current grant is included. This integrated method for granular TCO evaluation offers important insights for this market and affords scope to investigate how changes in travel patterns, car-segment pricing, taxation, grant policy, fuel costs, and carbon pricing and other transport policies can all affect TCO values over time across a broad range of market offerings.

Taxes and declared profits: Evidence from gold mines in Africa

In this paper, we analyze the effects of tax changes on the declared profits of extractive firms. We consider a country that levies a profit tax and a royalty on the profits of extractive firms to maximize its tax revenues. Mining companies located in the country engage in overstating extractive costs to reduce their taxable income. We show that the higher taxes, the lower the declared profit. Then, we estimate the effect of the change of profit taxes and royalties on the extracting firms’ profit in African countries during the period spanning from 2007 to 2018. We employ the Mining Intelligence database to constitute an individual data panel of gold mines located in Sub-Saharan countries. Our empirical findings also suggest an inverse relationship between the tax rate change of the tax instruments and the declared profit of the firms. This link indicates that firms decide on how much profit to declare depending on the tax levels.

Бедность, неравенство, национальное богатство: эмпирический анализ и следствия для политики

The article is devoted to the study of poverty and inequality in the economic growth of the most developed countries, with a general focus on the formation of social policy consistent with the growth policy. The purpose of the study is to conduct a macroeconomic analysis of poverty, inequality and wealth in the G7 countries, China and Russia, with the ensuing substantiation of a social development strategy for the Russian economy. The methodology is made up of empirical analysis, as well as regression modeling, which make it possible to identify in a comparative way the connectivity of the dynamics of relevant indicators of social development — the level of national poverty and wealth, the Gini coefficient and general inequality, growth rate, human development index. The result of the study is a precisely confirmed empirical relationship between the level of poverty and inequality for the countries considered, that is, a high value of one parameter corresponds to a high value of another. Consequently, poverty reduction may imply a reduction in inequality, and not only relative, but also absolute. In addition, it was found that for developed countries, high levels of poverty and inequality mean low values of the human development index. Social policy aimed at human development requires that its instruments be harmonized, including the necessary alignment with the current macroeconomic policies to stimulate growth. The magnitude of national wealth does not guarantee high growth rates, as well as low levels of inequality and poverty. A high level of inequality can accompany economic growth, having a positive effect on the growth rate, as for the Russian economy. In this regard, the current policy needs a reasonable selection of measures to stimulate growth and, at the same time, measures to reduce inequality, which can and should not be limited only to tax changes that require special confirmation of influence, but to institutional changes that regulate the creation and appropriation of income.

Features of legal regulation of the financial system in the modern world

The article is devoted to the study of complex system analysis of the current state of the financial system and its elements. The current national financial legislation, by-laws and experience of forming the financial system in the European Union are considered. It is noted that the development and implementation of financial policy, the organization of sustainable and stable money circulation in the country is one of the important activities of the state. That is why the issue of the financial system has always, one way or another, been reflected in the constitutions, ie it was and remains one of the objects of legal regulation. As the world economy developed, the relevance and comprehensiveness of its legal regulation gradually increased, growing both in depth and breadth: on the one hand, the number of financial institutions and relations governed by the constitution and other sources of constitutional law increases, and on the other such regulation. In order to understand the points of contact between law and the financial system, the reasons, content and aspects of its legal regulation, it is necessary to try to formulate a general concept of finance and the financial system of the state and its structure. Only on the basis of the analysis of the essence and correlation of the named phenomena it is possible to determine the place and significance of finance in law. There is currently an urgent need for major legal changes regulation of financial and economic relations. Modern financial transformations have covered a wide range of public relations, as evidenced by changes in tax, budget, currency, insurance legislation, banking and credit reforms. However, the reality shows that the improvement of all management systems is taking place in a crisis caused by Russia’s military intervention in Ukraine’s internal affairs, in connection with which the need to use the experience of the European Union is particularly acute. This applies not only to fiscal policy, but also, in particular, issues of taxation, banking, building an effective financial management system, creating an effective structure of financial authorities.

REGIONS OF RUSSIA AS CENTERS OF GRAVITORY FOR SMALL AND MEDIUM-SITEZ BUSINESSES (ORGANIZATIONS) CENDEZ SPECIAL TAX REGIONS

The paper deals with the problem of choosing a special tax regime by small businesses (enterprises) in order to reduce the fiscal burden on business. The purpose of the article is to identify the regions of Russia with «attractive» tax conditions for the creation of small businesses in the conditions of special tax regimes, taking into account tax changes in the practice of property taxation. The regions of Russia with the largest share of the employed able-bodied population in small business for 2018-2020 have been identified. The features of the taxation of property of organizations depending on its location and type of real estate are established; vehicles depending on the region of their registration, capacity and date of issue. Changes in the tax legislation of property taxation of organizations in the conditions of special tax regimes are considered. Conclusions are drawn about the expediency of taxpayers choosing the cities of Moscow, St. Petersburg, Kaliningrad, Novosibirsk, Sverdlovsk, Voronezh and Tyumen regions for starting a business and choosing a special tax regime. The results obtained are of interest to Russian organizations using special tax regimes.

Corporate Tax Changes

This note outlines recent Bulgarian amendments, including: refinements to the transposition of the EU Anti-Tax Avoidance (2016/1164), as well as the amending Council Directive (2017/952) into national legislation; provisions to address the tax treatment of sale and leaseback agreements classified as operating leases under the International Accounting Standards (IAS); a reduction in the tax rate applicable to the one-off tax on benefits in kind; and amendments related to the tax treatment of food vouchers.

Shareholders’ tax incentives and changes in the organizational form of foreign operations

This study examines whether the tax incentives of home-country shareholders influence the organizational form changes of foreign operations. While a corporation and a limited company (LC) in South Korea are treated the same for Korean tax purposes, an LC can be treated as a pass-through entity for U.S. tax purposes. This tax treatment of LCs can create incentives for U.S. owners to convert their Korean corporations to LCs. We find that private corporations owned by U.S. shareholders are more likely to convert to LCs than those owned by non-U.S. shareholders. We also find that the tax costs and benefits of conversion affect the likelihood of LC conversion for U.S.-owned firms. Overall, our results suggest that multinational corporations use organizational form changes as a tool for international tax strategies.

Work Hours & Income Tax Cuts

We investigate how income tax reductions affect work hours. Our empirical strategy relies on the fact that, in states where taxpayers can deduct federal tax payments from state taxable income, federal tax changes are dampened. We study 2003 tax reforms (JGTRRA) that dramatically reduced federal tax rates on dividends and capital gains, and moderately reduced rates on ordinary income. Difference-in-Difference analysis indicates that work hours decreased most among high income and wealthy taxpayers who were most directly affected by the tax reductions. The decrease in hours was larger for residents of states in which the effective tax reductions were larger. Conversely, we find possible evidence that larger ordinary income tax rate reductions in the 1980s, accompanied by effective tax increases on capital gains, had the opposite effect and induced an increase in work hours. These results suggest that the effect of tax reductions may depend on the type of income targeted.

Инвестиционная привлекательность проектов по разработке нефтяных месторождений в условиях налогового маневра. Оценка на примере Западно-Сибирского экономического района

The West Siberian economic region remains a territory with high potential of liquid hydrocarbons production, which serve as a reserve for long-term development not only for this region, but for Russia as a whole. Experts claim that Western Siberia provides 70% of Russia’s oil production and accounts for 61% of the mineral extraction tax revenues. According to forecasts of the Ministry of Energy, if oil production is not stimulated, then by 2035 the volume of oil production will significantly reduce and budget revenue will decrease by 4.1 trillion rubles. At present, in order to increase the investment attractiveness of the industry, changes in tax and customs legislation are being introduced. However, the effects of the reforms are not obvious. Employing scenario analysis, the case method and financial modeling on the basis of publicly available information, we assess the impact of changes in tax and customs legislation on the investment attractiveness of oil field development projects. The main hypothesis of the study about the positive impact of the tax maneuver on the attractiveness of projects was partially confirmed. However, in all considered scenarios the internal rate of return does not exceed 13%. This is significantly lower than the global average rate of return for oil and gas industry. This points to the need for further adjustments to the tax and customs legislation to ensure sustainable growth and development of the oil and gas industry. The model created to assess the impact of alternative tax regimes on the investment attractiveness of hydrocarbon exploration and development projects can also be used to identify potential benefits and tax consequences for both the investor and the state.

Имущественное налогообложение: трансформационные изменения в эпоху цифровизации и влияние пандемии COVID-19

The timeliness of this research is determined by the large-scale changes taking place in the world economy under the influence of digitalization, which accelerated during the COVID-19 pandemic. These processes affect the direction of transformational changes in property taxation. The object of the study is property taxation in the context of the proliferation of various forms of digital assets, which are virtual property. The purpose of the article is to find correlations between digitalization, the need to limit overconsumption, which has increased during the pandemic of a new coronavirus infection, and the prospects for changes in property taxation. The possibilities of state tax regulation and interstate cooperation in the context of property taxation are considered. The prospects for expanding the effect of property taxation to the virtual spaces of the metauniverse are highlighted. The article uses general scientific research methods such as analysis, synthesis, generalization and analogy, and contains historical and cross-country comparison. The information base is formed on the basis of data from international organizations, consulting, analytical and research companies, as well as government agencies. As a result of the research, the hypothesis was confirmed that the current changes in the global economy require transformation of approaches to property taxation both at the state and international levels, taking into account the expansion of modern technology capabilities and the need to limit excessive consumption. Recommendations have been formulated to expand the scope of property taxation in virtual spaces and to increase the level of the wealth taxation of the wealthiest segments of the population possessing virtual forms of ownership.