Tax Harmonization Research Articles

Is Environmental Tax Harmonization Desirable in Global Value Chains?

AbstractThe spatial unbundling of parts production and assembly currently characterizes globalization, leading to the worldwide dispersion of pollution. We consider socially optimal (cooperative) environmental taxes in a two-country model of global value chains in which the location of both parts and assembly can differ. When unbundling costs are so high that parts and assembly must colocate in the pre-globalized world, pollution is spatially concentrated, and harmonizing environmental taxes maximizes global welfare. In contrast, with low unbundling costs triggering the dispersion of parts and thus pollution throughout the world as today, harmonization fails to maximize global welfare. Similar results hold when the two countries non-cooperatively choose their environmental taxes.

Discrete Process of Development and Effective Functioning of the Fiscal System of the Ukraine and EU Countries

The article considers the discrete process of development and effective functioning of the fiscal system of the European Union and Ukraine. A comprehensive methodological approach to the development, sustainability and efficiency of the fiscal system, which provides structural restructuring of the economic system and affects the ‘fiscal maneuver’ of the initial formative component, balances the specific interests of all subjects of redistributive relations. The typology of fiscal systems depending on the approved level of income tax rates, wages and other taxes is studied. The method of estimating the level of tax burden at the macro level is substantiated, which shows the share of GDP that is redistributed through the total amount of tax revenues to the budgets of all levels and extra-budgetary funds. The method of determining the level of tax burden and its impact on the consumer market and production (of goods), as well as the coefficient of elasticity of tax revenues to the State Budget, which embodies the fiscal effect of the impact on the system of tax revenues is shown. The three-stage structure of indicators is determined, which allows to calculate the integrated indicator of the state of the fiscal system and to determine the dynamics of the level of its security by stimulant factors and disincentive factors. The normalized values of stimulus factors and disincentive factors, as well as an integrated indicator of the state of the fiscal system of Ukraine are estimated and determined. The share of direct and indirect taxes in the GDP, as well as the structure of tax payments in the revenues of state budgets of EU member states are analyzed. A modification of the taxonomic indicator of indicative development of the fiscal system (indirect tax harmonization index) has been developed, which characterizes the level and dynamics, as well as changes in the directions and scales of consumption taxation in EU member states and Ukraine under conditions of functioning in a single economic space with a certain degree of harmonization of the sphere of indirect taxes.

Country Note: Legal Framework of Direct Taxation in the Eurasian Economic Union: Specific Ways of Harmonization and Comparison with Existing European Models

The article considers directions of harmonization in the area of direct taxation in the Eurasian Economic Union (EAEU). The article also examines the actions of the EAEU Member States on the implementation of the Base Erosion and Profit Shifting (BEPS) Action Plan in national tax legislation. Nigeria, local government, local people, tax, taxing powers, impose tax, collect tax, federalism, socio-legal problems; lack of financial authority. The author comes to the conclusion that the EAEU Treaty and other supranational acts show few limits of tax harmonization and mainly in the area of indirect taxation. In the area of direct taxation, the establishment of the principle of non-discrimination and convergence in the area of taxation of personal income are elements of harmonization in the area of direct taxation. At the national level, Member States have set the same taxes, including corporate income tax and personal income tax. However, in the absence of supranational acts of secondary law, national tax systems differ significantly. This is caused by the fact that the area of direct taxation is highly sensitive from the positions of tax sovereignty of Member States. The important part of the survey is the comparative study. The European Union (EU) has become the most comprehensive form of interstate integration. However, financial and political crises in Europe have shown the need to give up some of the sovereign rights of Member States in order to ensure a coherent policy. The European experience is of great theoretical and practical importance for creating new legal mechanisms of tax regulation in the EAEU. The models of functioning of the EAEU Court and of the European Court of Justice (ECJ) in the area of taxation are also compared in the article. Nigeria, local government, local people, tax, taxing powers, impose tax, collect tax, federalism, socio-legal problems; lack of financial authority.

Excise duties harmonisation and smoking in a model with cross-border arbitrage

We use the 2007–2018 monthly data for five Western Balkan (WB) countries to estimate the impact of harmonisation of excise duties with the EU rules on the demand for cigarettes and tax revenues by taking into account the cross-border shopping effect. Both in time series and panel regressions we find strong evidence on cross-border arbitrage. The price elasticity of demand for cigarettes in WB countries is close to − 1, while the cross-border elasticity is 0.24. Full harmonisation of taxes with the EU directives would trigger a substantial decline in the demand for cigarettes on the legal market in the WB of 25.5% (approx. 931,000 smoker equivalents). In spite of a considerable behavioural reaction, harmonisation would still have positive effects on tax revenues of almost a half percent of GDP. The impact on cigarette consumption and tax revenues in a particular country depends on the relative magnitude of its own and cross-border price elasticity and the relative size of its tax rate gap compared to neighbouring countries. Failing to account for cross-border arbitrage in evaluating the impact of an increase in cigarette taxes leads to the results on demand effects being significantly overestimated and tax revenue effects underestimated.

Is Environmental Tax Harmonization Desirable in Global Value Chains?

The spatial unbundling of parts production and assembly currently characterizes globalization, leading to the worldwide dispersion of pollution. We consider socially optimal (cooperative) environmental taxes in a two-country model of global value chains in which the location of both parts and assembly can differ. When unbundling costs are so high that parts and assembly must colocate in the pre-globalized world, pollution is spatially concentrated, and harmonizing environmental taxes maximizes global welfare. In contrast, with low unbundling costs triggering the dispersion of parts and thus pollution throughout the world as today, harmonization fails to maximize global welfare. Similar results hold when the two countries non-cooperatively choose their environmental taxes.

Article 116 TFEU – The Nuclear Option for Qualified Majority Tax Harmonization?

Article 116 TFEU – The Nuclear Option for Qualified Majority Tax Harmonization?

Tax Incentives: An Effective Mechanism to Achieve EU Harmonization?

For decades, European Union (EU) wide corporate tax harmonization has been sought to eradicate business relocation for tax reasons. It is hoped that this harmonization will ensure that companies pay taxes in the countries where they operate. One mechanism that countries use to achieve this harmonization is tax incentives. Yet each country establishes its own incentive structure, according to its statutory tax rate. This study analyzes the effective tax burden in the initial 15 EU member states between 2006 and 2014 to identify significant differences that prevent tax harmonization across these countries. The statutory and effective tax rates are used to evaluate the tax burden. The net tax incentives and disincentives are also considered. The analysis shows that between 2006 and 2014, these 15 member states used tax incentives to close the gaps among these countries’ tax burdens. Countries with above-average effective tax rates offered greater tax incentives than countries with below-average effective tax rates. However, though these tax policies reduced the gap in the tax burden, harmonization of the effective tax rate was not achieved during the study period.

Политика гармонизации акцизов в ЕС и ЕАЭС

Objective: to develop recommendations for improving the EAEU policy in the field of excise duties harmonization based on comparative characteristics of the types of harmonization policies applied in the EU and the EAEU.Methods: general methods of cognition (deduction and induction, analysis and synthesis, description and generalization) and specific scientific methods of cognition (comparison method, tabular and graphical method of data representation) were used. Results: the actively developing processes of globalization, international integration and digitalization cause the need to update and adapt national tax systems. At the same time, the global practice and theory of taxation demonstrate the absence of a unified approach to the harmonization of taxation, especially with regard to indirect taxation. In order to assess the mechanisms of tax harmonization, specific features of the policy of harmonization of excise taxes applied in the EU and the EAEU are considered, which, in particular, include the issues of harmonization of objects of taxation (excisable goods), tax base, tax rates and the mechanism of tax procedures. The effects and risks of the non-restrictive policy of the European Union and the restrictive excise policy of the EAEU are analyzed. The assessment of the actual results of harmonization in the integration associations under consideration allowed determining the priority areas of harmonization in the Eurasian space by using mixed-type policies.Scientific novelty: it consists in the development of theoretical and methodological foundations for the formation of a coherent excise policy within the Eurasian Economic Union, based on the advantages and disadvantages of two types of harmonization policies (restrictive and non-restrictive) and taking into account the existing practical experience of their implementation. Practical significance: the main provisions and conclusions of the article can be used in scientific and pedagogical activities when considering issues of excise taxation, as well as in determining the priority directions of the tax system development of the Russian Federation.

Free Competition and Fiscal Policy in European Union

Fiscal policy and the harmonization of tax laws are extremely important in order to prevent distortions of free competition in UE. The process of European Union construction is based on integration and liberalization of markets in order a loyal and free competition. This issue is really important in order to crisis superaction. In this context the fiscal policy has a very significant impact on countries economics in EU and on company’s management, especially for those most exposed to globalization. The impact of taxes on free competition, economic growth and employment is quite evident since the EU foundation. So, it would be expected a more significant progress towards fiscal harmonization among EU countries. However, until now the question of tax harmonization had no results. It remains a sensitive question in EU. Almost two decades after the entry of the Euro, after a deep economic crisis that endangered the European project, face to BREXIT, we raised some questions as base to this work: what are the political and institutional limitations to tax harmonization in EU? Why there are no further progress was made in the field of tax harmonization, at least, in company’s income? How does this affect social cohesion? What are the effects on economic and social cohesion? This study intends to reflect on the political and institutional constraints of the tax harmonization, quite necessary to the effective process of economic and social integration within the EU. As methodology, we will use a comparative study about income taxes in several EU countries and the relation to GDP, as well the deductive method to analyze the results we find and some reference studies on the subject. In conclusion, we will present the analyze the results and try to answer to these questions. With this study we pretend give a contribution in order to find an answer to the investigation questions.

The Analysis of the Cross-border Corporate Profit’s Taxation

Ensuring the same competition conditions for the companies in EU requires tax harmonization between Member States. In this paper, we review some elements of the harmonization efforts. We will discuss the OECD guidelines on direct taxation and the transfer price regulation as a way to regulate corporate tax optimization behaviour. Based on the Effective Average Tax Rate we introduce the differences in the taxation of profits between Member States. The Common Consolidated Corporate Tax Base is one of the key elements in the harmonization of cross-border corporate profit taxation, so our study has a special focus on the proposal. The undisputed advantage of the CCCTB would be the simplification of the taxation of transactions between Member States. However, it also raises the question of how it limits the ability of each Member State to attract capital and to what extent can assign the profit tax to the given country in proportion to the operation of a company and with this how to realize that the base of the corporate tax focuses on the place of activity.
 
 

Thoughts on a Fiscal Union in EMU

Abstract Using an estimated large-scale New Keynesian model, we assess the consequences of introducing a fiscal union within EMU. We differentiate between three different scenarios: public revenue equalisation, tax harmonisation and a centralised fiscal authority. Our results indicate that no country would significantly benefit from introducing any form of fiscal union. Comparing long-term, that is, steady state, effects we have winners and losers depending on the scenario. Differences in terms of business cycle statistics as well as in terms of risk sharing of asymmetric shocks are minor. This also explains why welfare differences are small across the fiscal union scenarios. A counterfactual exercise indicates that with a fiscal union regime already installed at the start of EMU, key macroeconomic variables would have reacted very similarly while debt dynamics would have changed notably.

Levying VAT in the EU Customs Union: Towards a Single Indirect Tax Area? The Ordeal of Indirect Tax Harmonisation

This contribution deals with the latest proposals regarding levying VAT in the European Union (EU) Customs Union. The present system, which has been in place since 1993 and was supposed to be transitional, splits every cross-border transaction into an exempted cross-border supply and a taxable cross-border acquisition. It is like a customs system, but lacks equivalent controls and is therefore the root of cross-border fraud. After many years of unsuccessful attempts, the Commission abandoned the objective of implementing definitive VAT arrangements based on the principle of taxing all cross-border supplies of goods in the Member State of their origin, under the same conditions that apply to domestic trade including VAT rates. The European Parliament and the Council agreed that the definitive system should be based on the principle of taxation in the Member State of the destination of the goods. After a brief discussion of the VAT Action Plan of 2016 (Section 1), the e-commerce package in the form of Directive (EU) 2017/2455 is dealt with (Section 2), followed by the proposal to harmonise and simplify certain rules in the VAT system and introduce the definitive system, only partially adopted (Section 3). Section 4 deals with the proposal to introduce detailed measures of the definitive VAT system. The proposed harmonisation and simplification of certain rules were meant to become applicable on 1 January 2019, but will become only partially applicable on 2020. It is proposed to make the detailed measures of the definitive VAT system applicable in 2022. It remains to be seen whether the Member States are willing to accept the definitive VAT system at all; hence the subtitle ‘the ordeal of indirect tax harmonisation’.

Exploring the Impact of EU Law on Energy and Environmental Taxation

This chapter shows that EU law has shaped – and continues to shape – the development of environmental tax measures at both EU and Member State level. Firstly, at the EU level, the EU’s institutional framework has actually inhibited the harmonisation of environmentally-driven taxes. An analysis of the historical development of EU provisions surrounding energy taxation illustrates this point (sections 2.1. & 2.2). So far, the energy taxation directive remains largely disconnected from the EU’s climate policy, including the EU Emissions Trading Scheme (section 2.3). Secondly, EU substantive law has had an ambiguous impact on Member States’ environmental tax policy (section 3). On the one hand, EU substantive law has been interpreted by the EU Court of Justice in a way that encourages Member States to adopt environmental tax measures that are environmentally-driven and structured accordingly. Indeed, the environmental purpose of Member States’ tax measures seems to play a positive role in the assessment of their compatibility with EU law, including State aid provisions (section 3.1), the fundamental freedoms (section 3.2) and the energy taxation directive (section 3.3). On the other hand, in some instances, EU law strictly limits Member States’ ability to adopt environmentally-driven tax measures. Moreover, EU secondary law disregards the purpose of environmental taxes in order to classify them for statistical purposes (section 3.4). The broad picture that emerges from the analysis of existing legislation, case-law and literature highlights that institutional and substantive EU law has shaped the use of environmental tax measures in a way that does not ensure the alignment of these taxes with the EU’s and Member States’ environmental and climate ambitions. Therefore, the last section of this chapter suggests new areas of research, which could improve the consistency of environmental tax policy at both EU and Member State levels (section 4).

Impact of Harmonization on the Implicit Tax Rate of Consumption

This paper brings to the foreground an indicator rather less used in specialized studies - the implicit tax rate of consumption - as an effective tax rate of consumption. In an empirical analysis, we try to analyse the impact of the main determinants on the implicit tax rate of consumption. The analysis is based on the panel technique in order to show the impact of tax harmonization on consumer taxation at EU27, EU15 and NMS12 levels, testing three hypotheses: (1) the implicit tax rate of consumption is directly influenced by the economic growth rate; (2) the effects of harmonization are more pronounced in the new EU member states; (3) during an economic crisis, the budget deficit and public debt determine changes in the implicit tax rate.

The ECJ’s Decisions in the Danish “Beneficial Ownership” Cases: Impact on the Reaction to Tax Avoidance in the European Union

This article provides a critical analysis of the long-awaited Danish beneficial ownership cases, delivered by the Court of Justice of the European Union in February 2019, concerning the prevention of tax avoidance/tax abuse in respect of the Parent-Subsidiary Directive and the Interest and Royalties Directive. The author discusses one of the aspects of the concerned decisions that is an attempt of the Court to clarify that the “abuse of rights” concept constitutes a general principle of EU law that applies to all areas of EU legislation in a uniform manner. He also analyses the possible consequences of the decisions for EU tax litigation and even for the negotiations of future corporate tax harmonization.

EXTRA-TAXATION AND PROPERTY RIGHT IN THE EUROPEAN UNION LAW

Indirect taxes are the essence -and the main priority- of tax harmonization in the European Union. The vast majority of EU tax harmonization directives refer to this type of taxation. At the same time, indirect taxes constitute the field in which the principles of tax justice are less defined, either regarding EU Member States, or the institutions of the European Union. This is an issue about which no explicit reference has been found within the EU original or primary law; we don’t find it in the Treaty of the European Union or in the Treaty on the Functioning of the European Union. The materialization of the fundamental rights in the area of community taxation will be of crucial importance for the concretion of these principles, especially in relation to the property right. Thus, within the fiscal harmonization of indirect taxation, the extra-fiscal perspective and, particularly within it, the environmental issues, are of especial relevance. We should bear in mind that excise duties represent an essential field within tax harmonization and within them, taxation of energy and energy products is paramount. These products, due to their highly pollutant nature, have an environmental transcendence that needs to be taken into consideration.

Uwarunkowania prawne funkcjonowania podatków i systemów podatkowych w krajach Unii Europejskiej – zarys zagadnienia

Taxes constitute the main source of budget revenue. Therefore, they have a significant impact on the functioning and a state of a public finance. Thus, a creation of the most transparent and efficient system of tax collection is fundamental to a fiscal policy, including a tax policy. The aim of the article is to discuss legal implications of taxes and tax systems. The issues of concern, includes harmonisation of taxes in the European Union. Moreover, the article attempts to draw attention to the types of taxes imposed by the EU countries in order to present discrepancies between these countries, including the Eurozone countries, in which the process of unification of taxes advanced to the greatest extent. EU legislation is constantly evolving owing to, among others, the EU’s enlargement, a development of technologies or geopolitical background of the individual EU countries. Hence, the EU countries are required to constantly adjust their national legislations(by e.g. making it more specific), because the EU directives are indicators to make changes in national laws. Moreover, despite the fact that the EU aims at unification of tax systems in its countries, differences in the tax scales and tax rates can still be noticed. Simultaneously, categorisation of taxes which are functioning in the EU countries, including the Eurozone counties, shows some discrepancies between taxes. This concerns in particular an extend of an impact of taxes relating to social insurance on the revenue of a government and self-government institutions. The average level of share of these categories of taxes for the Eurozone countries (it amounted to 37.1%) and it was 4 percentage points higher than for the EU-28 countries. On the other hand, capital taxes played marginal roles in relation to other tax categories, 0.7% in the EU-28 countries and 0.8% in the euro area respectively.

Whether States Have Capacity to Sustain Projected Growth in GST Collection During the GST Compensation Period?

Achieving harmonisation in design, structure and administration of taxes on goods and services was the major driving force behind the introduction of goods and services tax (GST) in India. Goods and services tax subsumes many taxes from both union and state tax bases. Achieving tax harmonisation in a federal system curtails fiscal autonomy of both the union and sub-national governments and therefore faces steep resistance. Revenue uncertainty associated with any tax reform is a major cause for concern for all governments and therefore the assurance of revenue protection given by the union government to states helped to achieve broad consensus in favour of GST. On average, state taxes subsumed under the GST used to contribute two-third of own tax revenue and finance one-third of total expenditure for general category states. Unlike the union government, states have limited taxation power (tax handles) to generate additional revenue to cope up with any major revenue shortfall on account of GST collection. Therefore, the revenue protection enshrined under the GST Compensation Act has played an important role behind introduction of GST in India. This has also helped the GST Council to experiment with design, structure and administration of GST during the GST compensation period (first 5 years of GST implementation) to moderate the impact of GST on Indian economy as well as facilitate ease of tax compliance. Given the ongoing shortfall in GST collection, many scholars believe that liberal GST revenue protection granted under the GST Compensation Act to states is unjustifiable. The GST compensation period will be over by June 2022, and thereafter GST collection of individual states is expected to depend on their tax capacity as well as tax effort. It is worthy to investigate whether states have tax capacity to sustain 14 per cent growth rate in tax collection, as projected in the GST Compensation Act. The objective of this article is to estimate tax capacity of the states with reference to major tax revenue subsumed under GST and see whether states could sustain 14 per cent growth in their GST collection during the GST compensation period if they put adequate tax effort. JEL Classification: H21, H68, H71, H77

Cross-border purchasing of cigarettes among smokers in Six Countries of the EUREST-PLUS ITC Europe Surveys.

INTRODUCTIONThe availability of lower-cost cigarettes in neighboring countries provides price-sensitive smokers with incentives to purchase cheaper out-of-country cigarettes. This study estimates the prevalence of and factors associated with cross-border purchasing of cheaper cigarettes among smokers from Germany, Greece, Hungary, Poland, Romania, and Spain. The prevalence of cross-border purchasing was estimated by residential location, defined as living in regions bordering a lower-price country (where prices were at least €1/pack lower), regions bordering a similar- or higher-price country, and internal non-border regions.METHODSData were from a survey of nationally representative samples of adult smokers (n=6011) from Germany, Greece, Hungary, Poland, Romania, and Spain. The primary outcome was purchasing cheaper out-of-country cigarettes in the previous six months. Residential location was defined using The Nomenclature of Territorial Units for Statistics (NUTS2 in Germany and NUTS3 in the other countries). Multivariable logistic regression tested differences in purchasing cheaper out-of-country cigarettes by country and residential location.RESULTSResidential location was associated with purchasing cheaper out-of-country cigarettes in Germany and Poland (p<0.05): 31% of German and 11% of Polish smokers living in regions bordering lower-price countries reported purchasing cheaper out-of-country cigarettes in the previous six months. Smokers living in regions bordering lower-price countries had 4.21 times greater odds of purchasing cheaper out-of-country cigarettes compared to smokers living in non-border regions.CONCLUSIONSOverall, only a minority of smokers in the six countries purchased cheaper cigarettes outside their country. However, smokers living in regions bordering countries where cigarettes were at least €1/pack lower than their home country had significantly higher odds of purchasing cheaper out-of-country cigarettes. This effect was especially prominent among German smokers. Tax harmonization policies designed to minimize cross-border price differentials can eliminate lower-priced alternatives for price-sensitive smokers.

Who benefits from partial tax coordination?

AbstractIn this paper, we investigate whether partial tax coordination is beneficial to countries within and outside a tax union, in which countries are supposed to compete in taxes and infrastructure. Our results demonstrate that a subgroup of countries agreeing on a common tax rate can harm both member and nonmember states. This is in contrast to the classical findings that partial tax harmonisation is Pareto improving. When a minimum tax rate is imposed within a tax union, we demonstrate that it does not necessarily improve the welfare of the member countries. Moreover, both the high‐tax and low‐tax countries can be worse off. This conclusion is at odds with the classical result that a high‐tax country benefits from the imposition of a lower tax bound.