Tax Matters Research Articles

Anti-BEPS Measures and Their Impact on Business Performance of Multinational Enterprises

Abstract This paper discusses the harmful tax practices of multinational enterprises (MNEs) and the fight of international organizations against them. We focus on the anti-tax base erosion and profit shifting project (anti-BEPS project) of the Organisation for Economic Co-operation and Development (OECD), namely its 15 actions, which we present in the first part of the paper, using descriptive and analytical methods. In the second part, we use critical and synthetic methods to assess how the selected aspects of multinational business will be impacted with described actions. Our conclusions show that MNEs will have to adapt their business structures and plans according to new tax regulations, which will also lower their profit levels due to unavailability of established harmful tax structures for lowering their tax bases. At the same time, our results indicate that the legal approach in introducing new measures on the subject field, lead to legal uncertainty in tax matters. Due to the scope of analysed problems, it was impossible to introduce individual problems in depth; however, we provide readers with the general characteristics and goals of introduced actions that are necessary for understanding our evaluation of their impact on certain fields of international business. Our paper contributes to literature and practice, as it provides general insight into recent and important international tax law developments that enterprises will have to consider when doing business across borders.

Analisis Penerapan Program Tax Amnesty Di Indonesia

This study aims to analyze the application of the Tax Amnesty Program and the results generated by the Program to the Level of Taxpayer Compliance, Tax Management, and its Contribution to the Establishment of the Taxation System. The type of research conducted is descriptive qualitative research by collecting materials from the literature, website research and then discussing the Tax Amnesty event based on materials taken from the literature. The results of this study indicate that the Tax Amnesty Program is able to increase Taxpayer Risk Levels, provide taxpayers with ease in their tax matters, but the Tax Amnesty Program does not have a stake in tax management from taxpayers. It is also found that the Tax Amnesty Program has several weaknesses that have been anticipated by other Government Regulations.

Asuntos tributarios en la jurisprudencia de la Corte Interamericana de Derechos Humanos

El objetivo del presente trabajo es mostrar cómo la jurisprudencia de la Corte Interamericana de Derechos Humanos ha tratado temas sobre tributación con diversos propósitos y en distintas circunstancias. La Carta Interamericana de Derechos Humanos no aborda de modo directo los derechos del contribuyente, y solo efectúa una mención específica a asuntos fiscales en materia procesal. Pese a ello, la experiencia del Tribunal Europeo de Derechos Humanos da cuenta de la posibilidad de que un tribunal como la Corte Interamericana de Derechos Humanos pueda abordar de modo más amplio esta clase de asuntos a través del reclamo por otros derechos que incidan en asuntos tributarios. No obstante lo anterior, existen consecuencias tributarias de las decisiones de la Corte y, generalmente, se ha pronunciado en relación con dichas cuestiones. A juicio de los autores, esta clase de asuntos deberían ser abordados por la doctrina de un modo más habitual a fin de lograr un mayor desarrollo dogmático al servicio de la solución de esta clase de problemas.

Baseball Arbitration: The Trendiest Alternative Dispute Resolution Mechanism in International Taxation

This study addresses an alternative mechanism for the settlement of international tax disputes: so-called baseball arbitration. Although contracting states are able to adopt several formats to design alternative dispute resolution mechanisms, the author presents a concept of tax treaty baseball arbitration based on the approaches that have been envisaged by various international organizations and states. The article addresses in detail the main features and procedural rules related to baseball arbitration in international tax matters. Among these, special emphasis is placed on the accessory character, mandatory nature, enforceability and scope of the procedure. Other critical issues, such as the selection of the arbitrators, the presentation of offers and supporting arguments, taxpayer participation, secrecy and transparency of the procedure are analysed by anticipating possible practical, policy and legal difficulties that this new approach to tax treaty dispute settlement may raise.

The Gatekeeper Court: For the Revenue or for the Taxpayer?

Since its establishment four decades ago, the Federal Court of Australia ('the Court') has become the leading tax court in the nation. Twenty-five years ago, while denying special leave to appeal from the Full Court of the Federal Court to the Commissioner of Taxation in Westfield Ltd v FCT, Mason CJ stated that the Full Court should be 'the ultimate Court of appeal in taxation matters subject only to the exceptional cases in which this Court grants special leave to appeal'.

Tax Evasion in Cameroon: Causes and Remedies

The Cameroon government imposes charges on citizens and corporate bodies called taxes in a bid to raise funds to pay for public services or facilities. It also uses taxation in the redistribution of wealth, and in encouraging or discouraging the consumption of some goods and services. In a circular No. 001/C/MINFI of 2nd January 2018 by the Ministry of Finance of Cameroon, stringent measures were undertaken regarding the detection of “concealed” income or tax evasion, a phenomenon that stifles government efforts in realising its tax objectives. As a consequence, this study sought to investigate the causes of tax evasion in Cameroon and propose remedies. Data was collected through a survey carried out in the cities of Douala, Bafoussam and Bamenda, and analysed using the Ordinary Least Square (OLS) estimation technique. The empirical results were of positive and statistical significance and revealed that tax evasion in Cameroon is caused by high tax rates, complex and opaque tax laws, inefficient and corrupt tax inspectors, low income of taxpayers, evasion benefits outweighing detection penalties, poor perception of the judicial system and dissatisfaction with the quality and magnitude of public services and goods. Remedies proposed were that there should be a reduction and clear justification of tax rates, simplification of tax laws and effective education of taxpayers, creation of a more conducive business environment to boost business income, raise tax penalties, identify and deal with inefficient and corrupt tax authorities, liberate the judiciary to be truly independent to show proof of fairness and transparency in the treatment of tax matters and politicians being transparent and accountable for their decisions and use of public money. Tax ethics should be introduced and enforced in schools order to build a culture of tax compliance in citizens, assiduity and honesty in tax authorities, and transparency and accountability in politicians and everyone in public offices.

Stabilizing 'Pillar One': Corporate Profit Reallocation in an Uncertain Environment

This paper is about how the world reestablishes international tax order. The paper focuses on the OECD’s work on profit reallocation and asks whether this multilateral effort can be successful in stabilizing the international tax system. The analysis centers on the current leading concepts for reallocating profit among jurisdictions under what is known as “Pillar One” of the OECD work programme. To analyze whether any Pillar One concept can be turned into a stable multilateral regime, it is necessary to specify certain elements of what a proposal to reallocate profits might entail. Accordingly, this paper sets out two strawman proposals. One strawman uses a “market intangibles” concept that explicitly separates routine and residual returns. The other strawman may reach a similar result, but does not explicitly attempt to separate routine and residual returns. Instead, in current OECD parlance, it might be described as a “distribution-based” approach. The paper asks whether either of the two strawmen could be agreed and stabilized multilaterally given the tools of modern international tax diplomacy. I conclude that the current procedural and institutional architecture for cementing international tax relations among states is inadequate to stabilize either of the strawmen. Nevertheless, with certain changes, reestablishing order may be possible. Moreover, I conclude that there are six key structural decisions that impact the ability to stabilize the international tax architecture in any Pillar One approach, and that these decisions are likely to be implicitly made in the course of choosing a political direction for Pillar One work in 2019. The choices made with regard to these decisions determine whether or not it will be possible to stabilize Pillar One. Even if good resolutions are reached along these six dimensions, there are only a couple paths to stabilize the system. One path would involve using every tool in the current OECD arsenal in new and more expansive ways, and then substantially depoliticize international tax matters and remove G20 involvement, such that logics of appropriateness developed among tax administrators isolated from political pressures and acting through transnational networks could lend stability to a new set of rules and principles. Even then, only a few Pillar One compromises could be stabilized this way. The alternative path, which could stabilize a broader range of proposals, requires formalizing the new regime in international law through a true multilateral treaty.

El Estado de Derecho y la seguridad jurídica. Lo que debe resguardar el DEDECON

The complexity of the tax system, the constant legislative changes, the lack of control of the discretionary powers by the tax administration, the high interest rate that generates a tax reassessment, and in general, the growing need to collect taxes, generate a legal uncertainty in tax matters, which seriously affects the taxpayers’ rights. Within other measures, to strengthen the rule of law in tax matters, it is essential to create the Taxpayer Advocacy Service (Defensoria del Contribuyente, or, DEDECON), as proposed by the Tax Modernization Project of the Executive.

Tax Evasion in Cameroon: Causes and Remedies

The Cameroon government imposes charges on citizens and corporate bodies called taxes in a bid to raise funds to pay for public services or facilities. It also uses taxation in the redistribution of wealth, and in encouraging or discouraging the consumption of some goods and services. In a circular No. 001/C/MINFI of 2 nd January 2018 by the Ministry of Finance of Cameroon, stringent measures were undertaken regarding the detection of “concealed” income or tax evasion, a phenomenon that stifles government efforts in realising its tax objectives. As a consequence, this study sought to investigate the causes of tax evasion in Cameroon and propose remedies. Data was collected through a survey carried out in the cities of Douala, Bafoussam and Bamenda, and analysed using the Ordinary Least Square (OLS) estimation technique. The empirical results were of positive and statistical significance and revealed that tax evasion in Cameroon is caused by high tax rates, complex and opaque tax laws, inefficient and corrupt tax inspectors, low income of taxpayers, evasion benefits outweighing detection penalties, poor perception of the judicial system and dissatisfaction with the quality and magnitude of public services and goods. Remedies proposed were that there should be a reduction and clear justification of tax rates, simplification of tax laws and effective education of taxpayers, creation of a more conducive business environment to boost business income, raise tax penalties, identify and deal with inefficient and corrupt tax authorities, liberate the judiciary to be truly independent to show proof of fairness and transparency in the treatment of tax matters and politicians being transparent and accountable for their decisions and use of public money. Tax ethics should be introduced and enforced in schools in order to build a culture of tax compliance in citizens, assiduity and honesty in tax authorities, and transparency and accountability in politicians and everyone in public offices. Keywords: Tax compliance, tax evasion, tax ethics, Cameroon. DOI : 10.7176/RJFA/10-14-08 Publication date :July 31 st 2019

The slippery slope of QMV in tax matters

The slippery slope of QMV in tax matters

The EU Standard of Good Governance in Tax Matters for Third (Non-EU) Countries

This article analyses the standard of good governance in tax matters introduced by the Economic and Financial Affairs Council (ECOFIN) in 2008, with a view to tackle tax fraud and tax evasion. At that time, the standard included transparency, exchange of information and fair tax competition. Later on, several OECD and EU developments have changed the content of this standard. As of April 2018, the standard of good governance includes also the four Minimum Standards of the Project to tackle base erosion and profit shifting (BEPS) practices by multinationals. This standard has been introduced by the EU as a precondition for third (non-EU) countries that receive EU development aid, conclude strategic partnership agreements, free trade and economic partnership agreements and more recently as a standard that determines whether the third (non- EU) country should be included in a single EU common list of non-cooperative jurisdictions. This article aims answers two questions (1) whether the standard of good governance in tax matters is an import and/or export of EU norms? and (2) what is the legal status of this standard vis-á-vis third (non-EU) countries? Finally, this article provides conclusions and recommendations for further research.

Os meios adequados de solução de conflitos no sistema tributário brasileiro: Abordagem sobre a possibilidade e o momento da aplicação do instituto da arbitragem nas relações jurídicas que envolvem o Fisco brasileiro

Brazil has a large number of lawsuits. Approximately one-third of them are concerned with tax collection issues. Normally, thousands of administrative processes involving this matter are established prior to their question. This fact makes scholars look for more efficient means to solve the two-way conflicts. Arbitration, which corresponds to one of the means suitable to the resolution of conflicts, has been cited as the best and most efficient mechanism, and therefore, there is a legal rule to regulate its use in the tax order. The purpose of this paper is to indicate means that allow its independent use of the existence of a general rule on tax matters, as foreseen in the current Federal Constitution of Brazil.

Citizenship and Tax

Since the time of the ancient Greeks and Romans, citizenship has defined the membership of an individual to a polity. Despite being a central pillar of national states and a supranational institution like the European Union, the importance of citizenship has progressively declined due to globalization and increased cross-border mobility. Indeed, citizenship has almost been abandoned as a connecting factor for establishing a state’s tax jurisdiction. This article, however, argues that such a perception is partly misplaced. Far from being a relic of the past, citizenship still maintains relevance in today’s international tax arena. Citizenship can serve, at times, either to extend or restrict a state’s taxing rights over an individual’s income. And yet, the use of citizenship for tax purposes is often instrumental and does not reflect the effective participation of an individual in a polity, which might ultimately suggest abandoning citizenship altogether as a relevant connecting factor in jurisdictional tax matters.

The Relevance of the Procedural Framework Principles in the Direct Tax Cases of the CJEU

The European Court of Justice (hereinafter the ‘CJEU’ or the ‘Court’) has developed a judicial approach in which it has judged whether domestic direct tax measures (income or corporate taxes) violate the principle of non-discrimination found in the Treaty, as reflected in the so called fundamental freedoms: free movement of goods, free movement of workers, freedom of establishment, free movement of services, and free movement of capital. Commentators have developed an in-depth analysis of tax discrimination or restrictions, but have devoted scant attention to procedural non-tax issues that play a very important role in shaping the actual decisions of the Court in tax matters. Te Court has relied on its judicial tradition in the broad sense, particularly in respect to procedural issues. This process resulted in a discernible set of criteria that are defined here as ‘framework principles’. The first of these principles is that in spite of the fact that Member States retain their tax sovereignty, there can be actual breaches of EU tax law that are sanctioned by the Court. The second principle is that, in spite of the fact that there are national tax interpretive traditions, there are indeed common guidelines for uniform interpretation in tax cases. A third framework principle is that national courts have a monopoly over relevant tax questions which must be referred to the CJEU, a principle that results in a judicial network that connect different adjudicative agents. A final framework principle in tax cases is that Member States as a result of rulings by the Court must refund taxes to taxpayers and this poses major problems particularly in the current climate of budget restrictions.

Fundamental Rights and Merit Goods: The Case of the VAT Exemptions in the Public Interest

AbstractThis contribution aims at providing both a current example of how a collaboration in tax matters between economists and lawyers could be highly beneficial in tax matters and how fundamental values can step up in this conversation. In particular, the following analysis focuses on the exemptions for public interests listed in Article 132 of the EU Value Added Tax Directive (from now on VAT Directive) which refer to some of the traditional merit goods as so considered by economists. The same exemptions could be also read under the light of the European Fundamental Rights Charter which covers not only civil and political rights but also socio-economic ones. Moreover, since the entry into force of the Lisbon Treaty, we can find “social justice” as one of the core values that the Union is committed to promote and which therefore should guide the Union’s policies. However, economic studies have shown that there might be some downsides to the adoption of VAT exemptions, especially in terms of social and redistributive goals. VAT exemptions aimed at ensuring those merit goods/fundamental rights might erode the tax base and backlash on the wider goal of social justice. From a legal perspective, they lead to several interpretative issues. In spite of its theoretical interest and practical importance, there is still not too much literature on this topic and none addressing this issue from a fundamental rights and values perspective. The purpose of this paper is to be a starting point for further discussions on how economic and legal studies together can provide better solutions on how to handle merit goods in VAT by keeping in mind the broader picture of a fair tax system and legal principles, such as those enshrined in the Charter of Fundamental Rights of the European Union.

Tax autonomy and non-discrimination rules in the era of conflicting political goals: international and Polish perspective

The aim of this paper is to discuss non-discrimination rules concerning tax matters on the example of Polish case analysis. Author wishes to conduct research work in broader context. In this regard it is necessary to outline the current globalized world in which tax systems of states operate, discuss the concept of state’s tax autonomy and examine how the role of a state on tax matters has recently changed. Subsequently the non-discrimination rules from an international perspective shall be presented. It is also important to answer the question about the impact of those rules on state’s tax autonomy and about the role which they could play in reconciling political goals in the current globalized world. All of this contexts enables to examine non-discrimination rules from Polish perspective. Author introduces all of non-discrimination rules concerning taxation in Polish legal order, accordingly presents and studies Polish case law regarding those rules. Finally, overall conclusions of the research work are introduced which are intended to discuss the role, significance and the future of non-discrimination rules in contemporary globalized world, both from international and Polish perspective.

Incongruencia constitucional en el cobro del impuesto de división sobre bienes inmuebles de dominio público

El Estado, para el cumplimiento de sus atribuciones y la prestación de los servicios públicos, requiere de bienes inmuebles, que conforme a nuestra constitución están exentos de pagar contribuciones municipales, estatales y federales. La adquisición por donación de inmuebles destinados a la prestación de un servicio público, se interpreta cobrar el impuesto de división al donatario, a pesar de su aportación gratuita al Estado que destinará dicho bien al dominio público. La interpretación estricta en materia fiscal respecto de la exenciones y la falta de congruencia de la ley respecto de la Constitución que le faculta el cobro de impuestos inmobiliarios a los municipios, en que le expresa los casos en que se tendran por exentos estos, hace considerar una adición a la ley para evitar su inconstitucionalidad.

The potentials and limitations of tax dispute prevention and alternative resolution mechanisms

This paper deals with prevention and alternative dispute resolution (ADR) in tax matters, particularly in the light of the specific nature of administrative relations, which also include tax procedures. Given the involvement of stakeholders, ADR benefits both the taxpayers and the tax authority, enabling greater legal certainty and speedier finalisation of procedures. Yet, ADR also poses an open threat to the public interest and equality as international and constitutional administrative principles, and must therefore be limited in tax procedures. This also derives from the legal acts of the EU and the Council of Europe. In addition to theoretical frameworks and types of dispute prevention and resolution mechanisms studied by means of scientific literature review, legal sources analysis and comparative insights, the paper presents the Slovenian regulation and practice of the Financial Administration (FURS) over the past years. The aim of this research is to examine the de iure and de facto situation at the national level. The analysis shows that, in tax matters, ADR is noticeably more intensive at the international level than within national tax systems. On the other hand, individual countries prefer to establish regulatory mechanisms for prevention, which should result in even more desired avoidance of disputes. It can be concluded that efficient tax procedures require an integrated approach, including both dispute prevention and ADR, in order to ensure the principles of tax justice and systemic inclusion of all stakeholders in its governance.

Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion

We analyze the impact of exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, we find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. Furthermore, to test the sensitivity of our findings, we estimate countries' offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirm that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low income tax rates and strong financial secrecy.

Vulnerability and Exposure to Illicit Financial Flows Risk in Africa

Vulnerability and Exposure to Illicit Financial Flows Risk in Africa