Preferential Tax Research Articles

PROGRAMMES TO COMBAT THE ECONOMIC IMPACT OF THE COVID-19 PANDEMIC IN KAZAKHSTAN AND UKRAINE AND UNEMPLOYMENT

The following article presents economic programmes to combat the negative effects of the COVID-19 pandemic. The analysed programmes were undertaken by the governments of Ukraine and Kazakhstan. They contributed to reducing unemployment in both countries. The findings of Ukrainian researchers focused mainly on estimating losses in the SME sector, especially in the hotel, tourism and transport sectors. Scientific literature in Kazakhstan has focused on examining the effects of the government program to counteract the economic effects of the COVID-19 pandemic, especially from the labour market perspective (employees). The methods used in the paper include literature studies, analysis of government programmes in the combat against the economic effects of the pandemic and comparative analysis of statistical data of employed and unemployed people in Ukraine and Kazakhstan. The article focuses on identifying the countermeasures undertaken by the governments of Kazakhstan and Ukraine aimed at entrepreneurs and employees. The author also assessed the effects of the COVID-19 pandemic on the labour market, mainly in terms of unemployment. In the Ukrainian government programme, the main emphasis was placed on supporting entrepreneurs and the self-employed. The government also provided tax preferences, loan grace periods, financial support for enterprises that limited or stopped performance during the pandemic, and special financial assistance for agribusiness. The programme of the Kazakh government was addressed to entrepreneurs, self-employed and employees. The implementation of the programme in Kazakhstan did not encounter any difficulties, while in Ukraine the local authorities did not comply with the decisions of the central authorities. The closure of many businesses or reductions in working hours contributed to rising unemployment in both countries. Kazakhstan was in a more favourable situation, where a small and short-term increase in unemployment was recorded during the COVID-19 pandemic period. In Ukraine, the decline in employment in all sectors of the economy was much greater than in Kazakhstan and meant a significant increase in unemployment.

Impact of the state tax and legal policy on the development of the institution of tax liability in the conditions of digitalization

The study examines the development of the content of the institution of tax liability in the economy digitalization context as a result of implementation of relevant measures of state tax policy. The purpose of the study is to analyze the totality of program documents, as well as regulatory legal acts of the Russian Federation focused on those areas of tax policy that are related to tax liability as a backbone institution of tax law, studied in the context of its digital transformation. Such study is valuable in terms of identifying the main directions (trends) of tax and legal policy as fundamental principles of tax liability institution in the context of introduction and use of digital technologies. This naturally updates the discussion on the issue of defining the concept and establishing the content of the category tax policy, including from the point of view of classifying a wide range of tax policy sources. At present, the main goal of implementing tax policy is to provide tax preferences to businesses, including through the abolition of certain tax obligations or simplification of the procedure for their implementation. Further measures of tax policy in relation to the tax liability institution may be formulated as follows: transferring the tax burden from taxpaying organizations to individuals and increasing the number of tax benefits whose implementation becomes possible with the use of digital technologies.

How The "Great Resignation" and COVID Unemployment Have Eroded the Employer Sponsored Insurance Model and Access to Healthcare.

Pre-pandemic, employer-sponsored health insurance (ESI) covered 175 million workers and their dependents, the equivalent of 49% of the country's total population. ESI, a valuable tax preference to employer and employee alike, spurred worker job dependence on employers resulting in access to healthcare dependent upon continued employment. With the advent of the pandemic and the dramatic increase in unemployment, the number of uninsured increased by more than 2.7 million people. Then, unemployment proliferated further by an unprecedented exit from the workforce dubbed the "Great Resignation." Over 47 million Americans voluntarilyquit their jobs in a movement characterized as a general labor strike. The pandemic opened the floodgates to workers' concerns about COVID safety in the workplace, wage stagnationdespite increases in the cost of living, enduring job dissatisfaction, and increased demand for a remote-working environment. Data shows that the unemployed shifted to the Affordable Care Act marketplace or to the public payer option, Medicaid, for coverage. This shift signals a change, post-pandemic, away from the destabilizing system of access to care based on employment and unwanted job dependence and provides a policy argument favoring the more stabilizing influence of public insurance options in the health insurance market.

A Study on the Impact of Low-Carbon Policies on New Energy Vehicle Marketing in the Age of Artificial Intelligence

Abstract The country’s low-carbon policy makes the new energy industry vigorously promoted, and at the same time, the addition of artificial intelligence technology also makes the new energy and traditional fuel vehicles pull apart. This paper decomposes the influencing factors of transportation carbon emission by measuring the energy saving and emission reduction of transportation of new energy vehicles, using the extended Kaya constant equation of transportation carbon emission and the generalized Fisher index method. From the government subsidies and tax incentives in low carbon policies, the impact of policies on the performance of new energy vehicle enterprises is explored by analyzing the empirical regression results. The results show that the correlation coefficients of financial subsidies and enterprise performance are 0.135, 0.09, and 0.081, and the correlation coefficients of tax preferences and enterprise performance are 0.075, 0.172, 0.08, respectively, which indicate that low-carbon policies have positive incentive effects on new energy vehicle marketing. This paper provides a reference for the related low-carbon policy incentive theory.

Specialized Status and Tax Preferences: A Factor for Economic Growth? Following the Example of Gabrovo in the 16th and 18th Centuries

Specialized Status and Tax Preferences: A Factor for Economic Growth? Following the Example of Gabrovo in the 16th and 18th Centuries

Legal provision of state financial support to the agricultural sector in the war and postwar periods

The article is devoted to the study of the current state of legal support of the state financial support of the domestic agricultural sector, the formulation of vectors for the improvement of the relevant legislation in the war and post-war periods, the development of proposals for the proper legal support of the outlined sphere.
 The analysis of normative acts regulating relations in the sphere of state support of the agricultural sector in the conditions of martial law showed their significant renewal. In particular, in terms of state credit support, the support of agricultural producers has been recognized as a priority area and a number of preferences have been preserved specifically for these subjects. A similar approach is applied to the financial support of economic entities of the agro-industrial complex through the compensation of leasing payments. The abolition of the zero compensatory rate for loans and zero compensatory remuneration for leasing is positioned by the authors of the article as a negative factor that makes it difficult for agribusiness subjects to realize the right to state financial support. The ineffectiveness of state support to the agricultural sector in the form of budget subsidies has been proven. This is a confirmation of the difficult situation in the economy of Ukraine, the reduction of budget funding in this direction and an argument in favor of finding alternative, less burdensome for the state, ways of support. The effectiveness of the activation of indirect and indirect support to the agricultural sector, through the creation of conditions for the better functioning of agribusiness (preferential taxation, customs benefits), involvement of the functions of international institutions, is substantiated.
 Attention is focused on the need to consolidate at the legislative level already introduced at the level of by-laws this type of state support for the agricultural sector, such as grant support, with further development of this direction in the post­war period.
 The legal principles of state support of agribusiness entities in terms of compensation for damage caused as a result of the war have been analyzed. It has been proven that the expansion of the directions for determining damage and losses caused to Ukraine as a result of the armed aggression of the Russian Federation in the direction of «damage caused to personal peasant farms and/or farms registered as natural persons - entrepreneurs», as well as the approval of the methodology for determining this damage is a progressive step in the direction of realizing the right of these subjects of the agricultural sector to compensation for the damage caused to them by the war and will contribute to post-war reconstruction.

Multinationals' profits in China: Impact of tax avoidance

Based on proprietary and hand-collected source country information on foreign-owned firms in China, this paper empirically explores the effect of the tax avoidance of multinational firms on the profit rate of foreign-owned firms. Foreign firms in China previously benefited from various preferential tax policies and had a lower effective tax rate compared to domestic firms. The results show that the increase in the difference between the statutory maximum tax rate in the parent country and the domestic tax rate will increase foreign firms' pretax profit margin. This effect is more pronounced for younger firms and wholly foreign-owned firms. Further tests indicate that the transfer pricing in export and import activity of foreign firms is an important channel for multinational firms to shift profits. In year 2008, the implementation of the new Enterprise Income Tax Law has unified the corporate tax rate for both domestic and foreign firms at 25 percent. The tax reform reduces the profit margin of foreign firms, especially those with larger tax rate differentials. This paper explains multinational firms' profit performance from the novel perspective of tax avoidance.

Environmental protection tax on enterprise environmental, social and governance performance: A multi-perspective analysis based on financing constraints

This article fills the research gaps of existing studies on the mechanism between environmental policy and corporate performance in environmental, social, and governance (ESG). The study finds that implementing environmental protection tax can improve the ESG performance of heavily polluting firms. By examining the mediating effects of factors based on financing constraints, the study further explores the link between environmental protection tax introduction and ESG performance of companies. In addition, the heterogeneity analysis in terms of tax preference, total operating cost, and monopoly power, shows that heavily polluting firms with higher tax preferences, higher total operating costs, or weaker monopoly power are more likely to enhance their performance on ESG issues after introducing the environmental tax. This research provides essential theoretical and practical implications for revealing the connection that exists between environmental tax policy and the sustainability of companies.

Unintended effects of preferential tax assessment on farmland protection: Evidence from Utah's farmland assessment act

AbstractThis study examines the effect of Utah's Greenbelt program, the state's preferential tax‐assessment effort to protect farmland, using an instrumental variable‐fixed effects strategy. We find that an unintended effect of the program leads to more conversion of agricultural land to development than the protection it provides. The protection effect is concentrated on parcels with smaller agricultural areas, while conversion occurs on parcels with larger agricultural areas. Our findings shed light on the rationale of a proposed amendment to the policy—Utah House Bill 25—which did not pass during the 2016 legislative session.

Corporate Tax Benefits from Hometown-Connected Politicians

ABSTRACT This study examines whether politicians exhibit hometown favoritism in assigning preferential corporate income tax rates. We find that firms with hometown connections to incumbent provincial leaders experience favorable tax treatment. This effect is more pronounced when those leaders have strong hometown preferences and weaker when they have a strong incentive to seek promotion, suggesting that social incentives are the primary drivers of the effects on corporate tax benefits of hometown favoritism by politicians. Moreover, this effect is intensified when members of senior management have personal connections with the provincial leader. The mechanism test reveals that the provincial governments tend to qualify connected firms for preferential tax policies under their jurisdictions. Overall, our results suggest that hometown favoritism by politicians promotes tax benefits for business entities. Data Availability: Data are available from the public sources cited in the text. JEL Classification: H26; H71; M48.

State support of Investment Projects Within the Framework of an Agreement on the Protection and Promotion of Capital Investments: A Methodological Rationale

The subject of research is economic interactions related to the implementation of an investment project within the framework of an agreement on the protection and promotion of investments (hereinafter referred to as the APCI).Purpose: methodological substantiation of the expediency of providing state support measures to ensure the minimum profitability of an investment project implemented within the framework of the APCI.Objectives: to propose an indicator that reflects the minimum profitability of an investment project, the mechanism for its usage to determine state support measures, additional state support measures in cases where they are not sufficiently established in the legislation.Methods: analysis of approaches to determining the discount rate; statistical (observation, grouping, method of indicators) for calculating industry-specific ROIC values; content analysis to select state support measures.Results: it is proposed to use the ROIC indicator as the minimum profitability of a commercial investment project. The indicator was calculated according to the data of all organizations that are not subjects of medium and small enterprises operating in the period 2012–2021. The sample included 133 organizations that make up eight subclasses of Russian classifier of types of economic activity (pulp and paper production; production of fertilizers and nitrogen compounds; production of pesticides, etc.; production of paints, varnishes, etc.; production of pharmaceutical substances; production of medicines; activities in the field of telecommunications; development of computer software). Based on the data from 1011 observations, the median value of ROIC for each subclass was calculated, the reliability of which is confirmed by the approved minimum rates of return on invested capital for calculating the tariffs of regulated organizations. A mechanism is proposed for using ROIC to determine state support measures within the framework of the APCI, including: determining the median value of ROIC for foreign economic activity, calculating ROIC for an investment project, and determining state support measures by their ratio. As additional measures of state support within the framework of the APCI, it is proposed to establish tax preferences (lower tax rates, tax benefits, tax deductions), as well as accelerated depreciation of fixed assets. The proposed developments create a methodological basis for substantiating the provision of various state support measures within the framework of the APCI.

Legal regulation of the application of benefits on mandatory payments by individual subjects of financial law

Issues related to tax benefits are an integral part of the stimulus function of taxes. The article is devoted to the analysis of doctrinal definitions of “tax exemption”, correlation of this concept with the term tax preference. The article provides a classification of tax benefits with practical examples. For the purposes of the research the authors consider various approaches to definition of a “tax benefit”, the norms and law-enforcement practice substantiating differentiation of the mentioned concept and the term “tax preference” are investigated. A separate consideration of the provisions on taxation of innovative activities and IT-companies. In addition, the authors formulated a proposal to improve the legislation in this area.

How does environmental regulation affect corporate tax burdens? Evidence from China's environmental courts

This research examines how environmental regulation impacts corporate tax burdens. Although the literature argues that environmental policies exacerbate firms' tax avoidance, we offer a new insight from the perspective of government behaviour. Using the difference-in-differences approach and data on Chinese listed manufacturing firms from 2003 to 2019, we find that the establishment of environmental courts in China results in a 1.70 percent increase in corporate effective tax rates. The effect is significant only for private firms and is more pronounced in cities with stringent environmental regulations and fiscal stress. Tougher tax enforcement and the reduction of preferential tax policies are two potential channels. Given that environmental regulation reduces the tax base, local governments implement tougher tax enforcement and reduce preferential tax policies to maintain necessary tax revenues. Our study highlights the role of government in determining corporate tax burdens and evaluates the hidden tax costs of environmental regulation.

Pillar Two and Developing Countries: The Perils of Jurisdictional Blending

In this article, the author analyses the jurisdictional approach to blending for the calculation of the ETR, which is an essential feature of the IIR according to the model rules on GloBE. The author supports that the jurisdictional approach to blending raises a major issue by providing incentives for transferring preferential tax regimes from low and middle-lower economies to middle-higher and high-income economies in certain circumstances. Therefore, considering the need to strike a better balance on safeguarding the tax sovereignty of all jurisdictions involved (i.e. not just the tax sovereignty of large, rich economies, but also small, poor economies), the author argues in favour of other approaches on blending. In this context, from the perspective of developing countries, given the perils of the jurisdictional approach and lack of measures that are sufficient to compensate for the loss of tax sovereignty that the GloBE proposal may cause, the global approach on blending would be preferable as a first-best option, and an entity blending or even a no-blending approach would be a second-best option.

Emigration, Social Remittances and Fiscal Policy Preferences: Experimental Evidence From Mexico

How does emigration affect tax preferences in migrant-sending countries? Experiencing public services in a high tax-capacity destination may reduce support for tax increases by throwing fiscal failure at home into stark relief (the socialization hypothesis). Alternatively, migrants’ exclusion from certain public services may increase desire to fund these services in migrant origin countries (the exclusion hypothesis). We test these competing hypotheses with an online survey experiment in Mexico and explore variation in US healthcare access on fiscal policy preferences of migrant households. Migrant households, especially those with returned migrant members, are more supportive of taxation when tax revenue is earmarked for healthcare, a service to which many Mexican immigrants in the US lack access. It is migrants’ exclusion from, rather than their socialization into, the fiscal contract in destination countries that influences fiscal policy preferences in their countries of origin.

Innovation of tax incentives in the context of integration of traditional industries and digital economy

Abstract With the development of the digital economy, the innovation of the tax preference method is necessary. This paper integrates traditional industries with the digital economy through digital technology, standardizes the tax preference data of digital industries by using a fuzzy comprehensive evaluation algorithm, and builds an innovative mechanism of tax preference by establishing two weighting indicators of tax relief ratio and Q value (tax relief locational entropy) through data feedback. To ensure the accuracy of the feedback indicators, the full-factor algorithm is invoked to detect the intensity of the mechanism’s preferences in the digital industry. To verify the effectiveness of the mechanism, the results of the practical analysis show that after the innovation mechanism constructed in this paper is put into practice, the proportion of tax breaks in two digital industries, manufacturing and industry, increases by 29% and 34%, respectively, and the Q values of the five industries increase by about 4.2% on average, and the yields all increase by about 5.12 percentage points. This illustrates that the tax preference innovation mechanism constructed in this paper can accelerate the economic development of industries and is conducive to giving full play to the positive incentive effect of tax preference on their material benefits.

Taxation of special investment contracts participants

16. Balandina A.S. Analysis of theoretical aspects of tax benefits and tax preferences. Vestnik Tomskogo gosudarstvenogo universiteta = Tomsk State University Journal, 2011, no. 4 (16), pp. 105–110. (In Russ.). 17. Danilova V.V. Tax preferences: the concept, types, goals and procedures for obtaining. Oplata truda: bukhgalterskii uchet i nalogooblozhenie, 2022, no. 4, pp. 19–26. (In Russ.). 18. Wells D.A. The Theory and Practice of Taxation. New York, D. Appleton and Company Publ., 1900. 666 p. 19. Chua A.T. Precedent and Principles of WTO Panel Jurisprudence. Berkeley Journal of International Law, 1998, vol. 16, iss. 2, pp. 171–196. 20. Belousov A.L. Preferential regimes for conduct of business: regulation problems and law improvement areas. Khozyaistvo i pravo = Economy and Law, 2022, no. 10, pp. 30–41. (In Russ.). 21. Belousov A.L. Legal aspects of formation and development of special investment contracts in the Russian Federation. Legal Bulletin, 2022, vol. 7, no. 4, pp. 9–16. (In Russ).The subject. The preferential tax regime provided to the participants of special investment contracts has been functioning in the Russian legal system for about 8 years. Despite the systematic "fine-tuning" of its legal regulation, taxpayers still face the legislative gaps and contradictions of separate normative provisions entailing tax risks. It seems appropriate to put forward the hypothesis that the existing tax treatment of the participants of special investment contracts is not devoid of these drawbacks, especially in terms of regional regulation, and could be improved. Purpose of the study. The article represents an attempt to verify the aforementioned hypothesis and deals with selected provisions of the Russian legislation regulating preferential tax regime for participants of special investment contracts, which in addition to the Russian Tax Code includes the Federal Law "On Industrial Policy in the Russian Federation", regional and municipal normative legal acts. Methodology. The methodological basis of this study are general scientific methods (analysis and synthesis, induction and deduction), private scientific methods (interpretation of legal acts), as well as content analysis, study of reports and analytical references of governmental organizations. The main results. The study revealed that the Russian legislation, mainly regional and municipal, is not fully developed. As a consequence, the preferential tax regime for the participants of special investment contracts cannot efficiently function on the entire Russian territory. Also, the regulatory framework adopted at the federal level uses incorrect terminological apparatus in terms of defining tax support measures available to participants of special investment contracts, which entails tax risks for them. Conclusions. The revealed drawbacks of the preferential tax regime for participants of special investment contracts can be leveled by means of point-by-point amendments to the federal legislation. To this end, the authors of the present study propose specific steps to overcome these drawbacks.

Taxed fairly? How differences in perception shape attitudes towards progressive taxation

Abstract Empirically, the poor are more likely to support increases in the level of tax progressivity than the rich. Such income-stratified tax preferences can result from differences in preferences of what should be taxed as argued by previous literature. However, it may also result from income-stratified perceptions of what is taxed. This paper argues that the rich perceive higher levels of tax progressivity than the poor and that tax perceptions affect individuals’ support for progressive taxation. Using data from an Austrian survey experiment, we test this argument in three steps: First, in line with past research, we show that individuals’ income positions are connected to individuals’ tax preferences as a self-interest rationale would predict. However, second, we show that this variation is mainly driven by income-stratified tax perceptions. Third, randomly informing a subset of the sample about actual tax rates, we find that changing tax perceptions causally affects support for redistributive taxation among those who initially overestimated the level of tax progressivity. Our results indicate that tax perceptions are relevant for forming tax preferences and suggest that individuals are more polarized in their perceptions of who pays how much taxes than in their support for who should pay how much tax.

Words Matter: Measuring the Co-Operative Identity Crisis

Identity is at the core of a rich body of business communications research, spanning studies on organizational identity, branding, and corporate social responsibility. This work has, however, neglected the question of corporate identity from the perspective of co-operatives—democratically-controlled businesses owned and controlled by their users—and the existential challenge posed by an operating environment often hostile to the business model. At the same time, the question of identity permeates the scholarly organizational and co-operative literature, shaping studies into co-operative identity crises, isomorphism, and from a transactions-cost economics perspective, the co-operative lifecycle. Bridging these literatures, we develop a first-ever conceptual dictionary of terms that we associate with co-operative and investor-owned firms (IOFs). Using text-as-data techniques, we apply the dictionary to a 15-year sample of credit union (a type of co-operative) and bank (IOFs) annual report texts. The resulting model ranks credit unions and banks on a co-op versus IOF firm scale and identifies credit unions that may be at risk of losing their identity because of their use of IOF language. To validate our results, we employ a variety of strategies, including novel machine learning models. Generally, these strategies support the findings from our dictionary model but also suggest the model may not be picking up on some creeping isomorphic pressures on credit unions to conform to IOF language. We conclude by noting that identity questions have important real-world implications, noting potential legal and public policy implications (e.g., loss of preferential tax measures) and pointing to literature that associates co-operative “identity crises” with business failures and demutualizations which, in turn, can lead to higher consumer prices.

Green merger and acquisition and green technology innovation: Stimulating quantity or quality?

An increasing number of heavy pollution enterprises are enthusiastically involved in green merger and acquisition (GMA), but the impact on green technology innovation (eco-innovation) has yet to be explored. Does it stimulate the quantity or quality of eco-innovation? By manually collecting GMA engagements of China's heavy pollution enterprises from 2010 to 2020, this study employed the staggered DID method to explore this issue. The empirical results show that: (1) GMA significantly improves the quantity rather than the quality of eco-innovation. After a battery of robustness checks, such as the parallel trend test, placebo test, substitution variables, and an adjusted sample interval, the conclusion remains valid. (2) Through analyzing the motivation of GMA, we find that the desire to obtain government green innovation subsidies and enjoy tax preferences prevails, which results in the scale and quality of GMA tending to be smaller and worse, respectively. (3) Moreover, the decline in the quality of environmental disclosure and CSR provides further evidence that the quality of eco-innovation did not improve. Briefly, this study enriches theoretical grounding regarding strategies of GMA in heavy pollution enterprises and provides implications for governments in emerging economies to guide enterprises to sincerely promote both the quantity and quality of eco-innovation via GMA deals.