Tax Law Research Articles

An examination of direct and indirect taxation in OECD countries and the case of Greece

This paper attempts to analyze and interpret the principles of direct and indirect taxation. Initially, a theoretical approach to the general concepts and principles governing tax law is presented. It is followed by a presentation of the Greek tax and financial system. The key points demonstrating the harmonization of tax legislation, in accordance with the OECD (Organization for Economic Cooperation and Development) guidelines so far are highlighted. Any future reform of the Greek national tax system should incorporate the fundamental principles of national tax policy. Additionally, it must be in line with OECD principles and guidelines. The further implementation of the Organization's recommendations will shift the balance between direct and indirect taxation, leading to strengthening the first and reducing the second. Over the last decades, the ratio of direct to indirect taxes has been on the increase, particularly in developed countries. The main reason is that direct taxation is socially just and effective. Direct taxation is attributed by the liable person, while indirect taxation is transferred according to the ability of each person to react to the relevant market. The OECD supports, for member countries, the strengthening of direct taxation, which takes into account income and other social criteria and satisfies both the criterion of efficiency and the criterion of fair distribution of economic burdens. On the contrary, indirect taxation is reduced to inversely progressive taxation in terms of the income of consumers and is not consistent with the OECD principles of socially just and effective taxation in economically developed countries. The taxation of the citizens in general follows the principle of the citizens contributing to the public burdens according to their powers, for there is nothing more unjust than to treat unequal men as equals. From this proportional treatment of the taxing units, the constitutional principle of equality is also satisfied by reflection.

Civil liability of the sole executive body of a business company: correlation with labor and tax law institutions

In modern conditions of business turnover, characterized by the desire of business entities to achieve the benefits and goals of social corporate responsibility, the issues of preserving the balance of interests of parties that have a diversified status are of particular relevance. Such subjects include the general director, who is simultaneously a management body, an employee and a taxpayer, being in relations with a business company regulated by both corporate, labor and tax law norms, which allows to qualify his status as a diversified one. The issue of correlation of the norms of three branches of law in relation to the status of the chief executive officer (CEO) through the prism of the institute of civil liability in the form of compensation for losses caused to the company by incentive (bonus) payments to the CEO is considered. The article assesses the law enforcement practice in disputes concerning the recovery of this category of losses from the director, where the courts give priority to the norms of corporate law without taking into account the explanations of the Constitutional Court of the Russian Federation on the unconditional right of an employee to receive bonuses, which are a variable component of salary. The court approaches are analyzed and their justifications are given with regard to the inclusion of the amounts of personal income tax paid by the company to the budget of the Russian Federation into the damages recovered from the CEO. The conclusions are made about the priority importance of labor and tax legislation norms in correlation with corporate law norms when applying the institute of directors’ indemnification for losses. The results of the study can be used for the development by the Supreme Court of the Russian Federation of appropriate explanations to the courts of lower instances on consideration of disputes on the recovery of losses from the sole executive body of a business company.

The effect of addback statutes on CEO compensation

AbstractExploiting the adoption of addback statutes, which occurred at different times, as exogenous shocks to corporate taxable income, we examine the effect of tax policy changes on the compensation of chief executive officers (CEOs). We provide evidence that CEOs of firms headquartered in states affected by addback statutes experienced a decrease in total compensation; the decrease is stronger for firms with higher intangibles and asset replacement costs relative to book values, and weaker for firms whose CEOs are more powerful. Our results have important implications for policy‐makers who strive to combat pay inequality and managerial myopia through tax laws.

Adverse Possession Laws: A Comparison Between Taxation Law and Property Law

This paper explores the intricate relationship between taxation and adverse possession, focusing on the implications for government revenue. Adverse possession allows individuals to claim legal title to property after continuous, open, and hostile occupation for a statutory period, while taxation ensures that property owners contribute to government finances through property taxes. The interaction of these legal frameworks presents challenges, particularly regarding unpaid taxes during the possession period and the responsibility of tax compliance. The potential for tax arrears, tax liens, and property sales to recover lost revenue are critical issues for governments seeking to maintain revenue stability. Additionally, the ambiguity surrounding taxpayer responsibility during adverse possession can lead to gaps in tax collection. This paper analyzes these challenges and highlights potential solutions, including legislative reforms requiring tax payments by adverse possessors and improved tax collection mechanisms to safeguard public revenue. By examining the overlap between adverse possession and taxation law, this paper aims to provide insights into preserving government revenue while addressing the complexities of land ownership transitions.

The impact of green tax system on idiosyncratic risk: evidence from China’s environmental protection tax law

ABSTRACT China’s enactment of the Environmental Protection Tax (EPT) Law is a pivotal milestone in the transition towards a green tax system; however, its impact on enterprises capital market performance remains unclear. We adopt a difference-in-differences approach to investigate the influence of green taxation on the idiosyncratic risk of listed companies. The findings reveal a significant reduction in idiosyncratic risk for heavily polluting enterprises following the introduction of the EPT Law, thus suggesting that green taxation contributes to firms’ enhanced capital market performance. This effect acts through environmental, social, and governance performance and is more pronounced for firms with a stronger resource base.

Tax control and corporate VAT compliance: An empirical assessment of the moderating role of tax strategy

Tax control frameworks (TCF) of higher quality are seen by tax authorities and the OECD as a prerequisite for corporate tax compliance. However, a higher quality TCF can also enable organizations to reduce their tax burden by providing information that allows them to make the best use of opportunities within the boundaries of the tax law. We investigate the effect of TCF quality on tax compliance by looking at the tax strategy of the organization and whether the organization unintentionally or intentionally fails to comply. We focus on Value Added Tax (VAT) and test our hypotheses using a sample of large organizations, using a combination of survey data and tax audit results from the Netherlands. Our results show that a TCF of higher quality is positively associated with VAT compliance, resulting in both less unintentional and less intentional errors requiring tax adjustment. For organizations with a more conservative tax strategy, we find that the quality of the TCF does not affect the level of intentional non-compliance. For organizations with a more aggressive tax strategy, however, the level of intentional non-compliance is conditional upon the quality of the TCF, with a lower (higher) quality TCF leading to more (less) intentional non-compliance.

30 Years of the Economic European Area; a Tax Law Perspective

In 2024, the European Economic Area (EEA) will have existed for thirty years. During that time, the EEA Agreement has served its cause to enlarge the European internal market to Iceland, Liechtenstein, and Norway. Covering fundamental freedoms that need to be interpreted comparably to the Treaty on the Functioning of the EU’s (TFEU’s) fundamental freedoms, a significant amount of case law interpreting the EEA Agreement’s fundamental freedoms has been established from both the CJEU and the European Free Trade Association (EFTA) Court. The author attempts to elucidate the approach taken by both courts to come to judgments creating a homogenous interpretation and application of EU law to the largest possible extent. Besides that, the extension of EU directives to cover EEA situations is relevant. The EEA Agreement foresees a procedure for that, but it does not thus far cover substantive direct tax directives. The author argues that some arguments still exist following which EU direct tax directives should actually be added to the EEA Agreement.

The Impact of Tax Planning on Earnings Management in Manufacturing Firms

General Background: Tax planning is a legal strategy employed by taxpayers to minimize their tax liabilities through effective utilization of existing tax laws, ultimately enhancing taxation efficiency. Specific Background: Tax planning's direct impact on earnings management in manufacturing firms, especially in emerging markets like Indonesia, is still underexplored despite its importance. Knowledge Gap: Previous studies have primarily examined the correlation between tax planning and financial performance, neglecting the moderating influence of firm value. Aims: The study examines the influence of tax planning on earnings management in manufacturing companies listed on the Indonesia Stock Exchange from 2017-2020, considering firm value as a moderating factor. Results: Utilizing a quantitative, associative research methodology and secondary data from IDX, the analysis revealed that tax planning significantly affects earnings management (significance level: 0.008), confirming the first hypothesis. Furthermore, the findings indicate that firm value positively moderates the relationship between tax planning and earnings management (significance level: 0.000), thus supporting the second hypothesis. Novelty: This study bridges the gap between tax planning, earnings management, and the moderating effects of firm value in a developing economy. Implications: The study highlights the importance of strategic tax planning for manufacturing firms to improve earnings management, emphasizing the need for firm value consideration in tax-related decision-making. Highlights: Tax planning significantly impacts earnings management in manufacturing firms. Firm value moderates the relationship between tax planning and earnings management. Utilizes quantitative research with secondary data from IDX website. Keywords: tax planning, earnings management, firm value, manufacturing companies, Indonesia Stock Exchange

The Pillar 2 Directive and the Qualified Domestic (Minimum) Top-up Tax Puzzle

The article argues for using a teleological interpretation of the Pillar 2 Directive to allow EU Member States to comply with Pillar 2’s soft law requirements for the qualified domestic minimum top-up tax (QDMTT) and its safe harbour (SH). This interpretation is necessary because the directive’s text is not aligned with certain requirements under Pillar 2 soft law since the directive was adopted before the Inclusive Framework issued any administrative guidance. Without the teleological interpretation, EU Member States cannot comply with the qualified domestic top-up tax (QDTT) requirements and, therefore, cannot attain its SH. This would decrease taxpayers’ legal certainty and undermine EU Member States’ fiscal interests.To pursue the argument, the article analyses Pillar 2’s soft law, i.e., the model rules, the commentary, and two sets of administrative guidance related to the QDMTT and its SH, and compares their provisions with the relevant provisions of the Pillar 2 Directive. Consequently, the study offers solutions to discrepancies between these two sets of rules and joins a broader discussion regarding the relationship between EU tax law and soft law.

Inter-Nation Equity And The Regulation of Tax Competition via the Global Minimum Tax Rule: A Case for Improvement

The Organization for Economic Co-operation and Development (OECD) is an institution that influences policymaking in international tax law, and it is changing the international tax architecture to deal with tax competition by encouraging countries to adopt a global minimum tax rule. This emerging rule – called Pillar Two in international tax circles – is inadequate for dealing with poverty and inequality in an asymmetrical global context. The rule is premised on the notion and argument that tax competition is a problem for international tax law. Notwithstanding, there is existing research and evidence to show that tax competition can also be a solution to the enormous challenge of poverty and inequality as it can have a redistributive effect. This is a valuable factor amid the inefficiently asymmetrical global society with extreme poverty in many countries and enormous wealth in a few others.This article submits that the Pillar Two minimum tax rule – the Global Anti-Base Erosion (GloBE) Rules encompassing the income inclusion rule (IIR), undertaxed payment/profit rule (UTPR), and qualified domestic minimum top-up tax (QDMTT) – should incorporate inter-nation equity to prevent exacerbating global inequality and poverty. Pillar Two intensifies these for at least two reasons: (1) it restricts the positive redistributive effects of tax competition on an inefficiently asymmetrical global society, and (2) it encourages tax competition more suited for high-income countries (HICs) and less suited for those that are low-income countries (LICs). There is latitude to incorporate a differentiated principle deriving from inter-nation equity into this new Pillar Two rule designed to regulate tax competition globally. This proposal requires that the emerging rule be disenabled in certain circumstances to enable LICs to choose whether to apply the rule without being worse off. The article’s proposal seeks to allow LICs room for effective tax competition needed to attain sustainable development goals.

The Weakening of Taxpayer Rights in the Exchange of Information between Tax Authorities

Developments in international legislation and the growing digitalization of tax law support the development of global networks between tax authorities. We are witnessing an integration of databases that will lead to increasingly intense coordination of the fight against tax evasion at a supranational level. As in social networks and digital commerce, databases are increasingly enriched, contain increasingly precise information on the individual taxpayer and use common languages that allow for automated exchanges of information. While waiting for the creation of a global database – not conditioned by the constraints of reciprocity and abstractly usable by all authorized entities who need it – the first risks of limitation of the taxpayer’s rights are emerging. In fact, these phenomena have dark sides that are starting to emerge in use, at a national level and with respect to individual taxpayers, of interpolated databases. Moreover, a growing amount of information flows from heterogeneous and increasingly widespread sources, sometimes not protected by the requirements of professionalism, legality and public trust since data collection and entry can be delegated to economic entities, intermediaries and consultants. The absence of an authority responsible for the unitary management of global databases and for the resolution of their conflicts, the slow and timid affirmation (only in some national systems) of the taxpayer’s right of access to information concerning them, the difficult configuration of the faculty to request the correction of erroneous data and of the specular public power to remove the reported inaccuracies, weaken the system of protections gradually erected to protect the taxpayer’s position. In this way, the coordination of national systems that contemporary tax law creates is strongly unbalanced on the side of the protection of tax interests. International and European tax law should instead provide greater guarantees in favor of the taxpayers, defending their right to fair taxation.

Back Duty Audit and Companies Income Tax Compliance in the Federal Capital Territory, Nigeria: The Moderating Role of Tax Officers’ Expertise

Low tax compliance is a serious problem that has continued to ravage the Nigerian tax system which has forced the government to source for an alternative means of financing its budget. To tackle this issue, the government has introduced tax audit to enhance tax compliance. This study examines back duty audit and companies income tax compliance in Nigeria, the moderating role of tax officers’ expertise. The population of the study comprises 304 FIRS staff in the audit department in the Federal Capital Territory, Abuja. Taro Yamane formula was used to determine a sample size of 173. Multiple regression was used to analyze the data and to test the hypotheses of the study with the help of STATA version 13. The result revealed that back duty audit has a positive and significant effect on companies income tax compliance. The moderator, tax officers’ expertise has a positive and significant effect on companies income tax compliance. When the moderator interacted with back duty audit, the result was positive and statistically significant. The study recommended that the FIRS should emphasize more on routine audit because it helps to increase compliance by companies now and in the future. Secondly, the tax officers should constantly reach out to companies’ representatives to help them resolve complexity in the tax laws.

Exploring the impact of AI-driven and blockchain-enabled tax filing systems on smes in the era of technological innovation: A review of benefits, challenges, and adoption barriers

The emergence of blockchain technology and artificial intelligence (AI) presents transformative opportunities for tax compliance, especially for small and medium-sized enterprises (SMEs). These technologies promise to enhance tax system accuracy, efficiency, and transparency. However, their adoption is accompanied by significant challenges and barriers. This review analyzes the benefits, challenges, and future prospects of integrating AI and blockchain technologies into tax systems, with a focus on their impact on SMEs. It seeks to provide insights into how these technologies can reshape tax compliance and identify areas requiring further research. The review revealed that AI enhances accuracy and compliance through advanced predictive models and explainable AI, while blockchain ensures transparency and trust with its immutable ledger and smart contracts. Despite these benefits, SMEs face technical and financial constraints, such as high implementation costs and integration complexities. Regulatory and legal challenges, including evolving tax laws and data privacy requirements, further complicate adoption. Additionally, resistance to new technologies and skill gaps within SMEs hinder widespread implementation. Scalability and customization issues also pose significant barriers. In conclusion, AI and blockchain technologies substantially improve tax compliance but come with notable challenges. These technologies promise enhanced accuracy and efficiency for SMEs, yet overcoming barriers related to cost, integration, and regulation is essential for successful adoption. It was recommended that future research should focus on developing SME-specific solutions, addressing regulatory adaptations, and conducting comparative analyses of traditional versus AI-driven tax systems. By tackling these areas, stakeholders can better support SMEs in leveraging AI and blockchain technologies for more effective and transparent tax compliance.

Effect of Capital Deductions on the Financial Performance of Listed Companies at the Nairobi Securities Exchange in Kenya

Purpose: Shareholders’ wealth maximization is a priority objective of every corporate entity. The issue of corporate tax planning and firm value is gaining relevance following the recent financial crises which resulted in the increasing collapse of global and local companies. The purpose of this study was to investigate the effect of capital deductions on the financial performance of companies listed at the Nairobi Securities Exchange (NSE) in Kenya. The study was anchored on signaling theory. Methodology: The study adopted both explanatory and longitudinal research. Secondary data for the study for the period between 2013-2022 was extracted from annual financial statements of 57 listed firms targeted for analysis. The data for the study was analyzed through descriptive and inferential statistics using statistical techniques including Pearson correlation coefficient and regression analysis. All the analyses were done using the STATA version 13.0 Pearson correlation results revealed a significant association between study variables and financial performance. Multiple Linear regression model was used to analyze relationships and the effect of the study variables. Results: The study findings established that capital deductions (β = 0.844, p-value = 0.000, <0.05) have a positive and significant effect on financial performance. The study contributes to knowledge by revealing new insights that tax planning has a significant effect on financial performance of listed firms in Kenya. Specifically, it was established that capital deductions have a significant effect on financial performance of listed firms. Conclusion: The study concludes that a holistic approach to tax planning and an optimal mix of tax planning strategies are important determinants and have a positive contributory effect on firm performance. The study recommends that companies’ management should strive to have an in-depth understanding of tax laws to take advantage of every opportunity that will reduce their tax liability thereby increasing their returns and value. The future researchers should explore the effect of Indirect tax incentives on financial performance.

Has the contemporary legislative chaos invalidated thedogmatics of tax law?

Has the contemporary legislative chaos invalidated thedogmatics of tax law?

"Context as a Reason for Exclusion of the Application of Domestic Tax Laws Under the Tax Treaty"

"Context as a Reason for Exclusion of the Application of Domestic Tax Laws Under the Tax Treaty"

Estimation of Tax Benefit of US Nonprofit Hospitals

Nonprofit hospitals are under increasing scrutiny to justify the generous tax benefit they receive due to their tax-exempt status. Quantifying the value of the tax benefit they receive at the federal, state, and local levels is critical for designing informed public health policies and ensuring nonprofit hospitals' taxpayer accountability. To estimate the financial benefit that nonprofit hospitals derive from their tax-exempt status and assess how the benefit is distributed across state and local communities. Using methodologies and measures consistent with current tax law and practice and data from 2021 Medicare Cost Reports, this study calculated the total financial benefit from nonprofit hospitals' tax-exempt status for all US nonprofit hospitals with the required Cost Reports data. Nonprofit hospitals' total tax benefit, which equals the sum of federal and state income tax, sales tax, property tax, the fair market value of charitable contributions from donors, savings from tax exemptions on issued bonds, and federal unemployment tax. A total of 2927 US nonprofit hospitals received a $37.4 billion total tax benefit in 2021 from federal income tax ($11.5 billion; 31%), sales tax ($9.1 billion; 24%), property tax ($7.8 billion; 21%), state income tax ($3.7 billion; 10%), charitable contributions ($3.2 billion; 8%), bond financing ($2.1 billion; 6%), and federal unemployment tax ($200 million; <1%). Tax benefit varied substantially across states, from $25 098 (Delaware) to $159 464 (Massachusetts) per hospital bed and from $19 (Alabama) to $275 (Massachusetts) per capita. Tax benefit was highly concentrated, with 7% (n = 212) of hospitals accounting for half of the total amount. This study highlights the wide variation of nonprofit hospitals' tax benefit across states, its high concentration among a small number of hospitals, and the primary role played by state and local taxes. Policy efforts to strengthen nonprofit hospitals' taxpayer accountability are likely to be more effective when pursued at the local level. The detailed standardized estimation road map can be used by various stakeholders to estimate tax benefit for external valuation and reporting purposes, updated as laws change, and improved upon as better data sources become available.

Factors Militating against the Efficacy of the Mutual Agreement Procedure: A Comparison between South Africa, Kenya, Uganda and Ghana

The effective resolution of transfer pricing disputes has been identified as one of the primary challenges to eliminate double taxation and/or double non-taxation as well as to enhance the free flow of trade and investment. This article investigates the unique challenges faced by selected African countries, including South Africa, Kenya, Uganda and Ghana, which militate against the use of the mutual agreement procedure (MAP) as a preferred Organisation for Economic Co-operation and Development (OECD) transfer pricing dispute resolution mechanism. The research used a qualitative legal review of existing literature in the selected regimes by comparing the domestic tax law framework in these countries. Transfer pricing manipulation is a significant source of illicit financial flows of capital as identified in the research by Global Financial Integrity on Africa, which drew from Ghana, Kenya and Uganda as case studies. South Africa and Kenya are considered as the gateways to Africa with many multinational enterprises (MNEs) taking residence in them before expanding to the rest of Africa. The article focuses specifically on a number of guidelines that should be in place for the effective use of the MAP in the resolution of tax treaty disputes. It also demonstrates how the absence of guidelines, or the lack of clarity thereof, discourages both taxpayers and revenue authorities from effectively using the MAP to resolve transfer pricing disputes. The absence of guidelines has resulted in many aggrieved taxpayers opting to approach the courts as opposed to using the MAP as a mechanism to resolve tax treaty disputes. Furthermore, it highlights the importance of how resolved transfer pricing disputes eliminates double taxation. The article recommends that the same benefits enjoyed under the domestic dispute resolution process be incorporated into the MAP. It also makes recommendations on how jurisdictions with a low tax treaty network can address this challenge to enable them to effectively use the MAP as a tax treaty dispute resolution.

Investment in tax haven jurisdiction by Indian MNCs: a conceptual study

PurposeThis study aims to understand the investments made by Indian MNCs in different tax havens to optimize their tax liabilities. The study also aims to provide insights into the conceptual framework of such practices, highlighting potential benefits and risks and providing policy recommendations that promote transparency, fairness and sustainable economic practices.Design/methodology/approachThe study involves a combination of quantitative and qualitative approaches. The quantitative aspect analyzes investments made by Nifty 50 companies in tax haven jurisdictions from the financial data of the parent company from 2019 to 2023. The qualitative aspect involves a conceptual framework developed from previous studies and examining the role of various organizations in combating tax avoidance. This mixed-method approach enables a comprehensive understanding of the motivations, impacts and regulatory responses related to the use of tax havens.FindingsThe paper provides conceptual and descriptive insights on investments made by Indian MNCs in tax havens during 2019–21 to save tax. The study suggests that while investing in tax havens, businesses give more priority to ease of doing business and other considerations such as a lower tax rate.Research limitations/implicationsThe present study suggests policymakers about the effectiveness of current tax laws and their enforcement, highlighting loopholes and potential avenues for modification.Originality/valueThis paper assesses the reasons for Indian MNCs starting subsidiaries and making investments in different tax haven jurisdictions and suggests appropriate measures to avoid the menace of tax havens.

Retraction Note: Green financing and environmental risk mitigation: is environmental protection tax law that important?

Retraction Note: Green financing and environmental risk mitigation: is environmental protection tax law that important?