Tax Purposes Research Articles

Full Federal Court Allows PepsiCo’s Appeal and Reverses Decision to Impose Royalty Withholding Tax and Diverted Profits Tax on “Embedded Royalties”

In PepsiCo, Inc v. Commissioner of Taxation, the Full Federal Court has allowed PepsiCo’s appeal against the decision of Moshinsky J at first instance, ruling that: (i) no portion of payments made to PepsiCo under an Exclusive Bottling Agreement by an unrelated bottler and distributor – for syrup concentrate for manufacturing soft drinks – was a “royalty” for Australian royalty withholding tax (RWHT) purposes and (ii) PepsiCo did not obtain a “tax benefit” by not paying RWHT and therefore was not liable to pay diverted profits tax (DPT). The decisions of the Full Court and the trial judge are the first to consider the Australian tax treatment of “embedded royalties” and the DPT rules (which were introduced in 2017) and include detailed reviews of the tax issues raised by the licensing of valuable trademarks and intellectual property.

Environmental Taxation and Sustainable Environmental Protection - Reality or Myth? An Integrative Review

The increase in environmental pollution has different origins, and in each of them we can observe the actions and activities of human beings, whether natural or legal persons. In response to this, the legal figure of the environmental tax has been applied as a strategy and means of income to prevent, compensate for environmental damage and improve ecological quality, constituting a route to improve sustainable environmental protection. In this sense, this article examines, based on the scientific literature, the relationship between environmental taxation and sustainable development. The research topics are varied in terms of methodologies and theoretical perspectives, and the relationship between environmental taxes and their objectives remains controversial. The main findings of the review highlighted the importance and purpose of taxes; the difference between types of taxes; the justification for tax collection; and the orientation of the resources raised towards improving environmental protection and sustainable environment, which allows us to conclude on the need to reflect on the implementation of viable environmental policies aimed at ensuring social justice. In this sense, policy makers must have the appropriate profile that demonstrates expertise since sustainable development encompasses the protection of the environment by reducing pollution with educational and awareness-raising policies. Received: 11 July 2024 / Accepted: 30 October 2024 / Published: 05 November 2024

Equity in Tax—All Change after 1873?

Until the late 19th century, equity and common law courts were separate. Tax courts emerged from equity, and today equitable principles and maxims govern the tax legislation, as well as His Majesty’s Revenue & Customs guidance and the tribunals. Even though the equity and common law courts “fused” in 1873, there has only ever been one law: common law tempered by equity. Only the courts, remedies and procedures were different prior to 1873 (though a unified Court of Exchequer with equity and common law jurisdiction existed before 1841). The law was already a single entity by the late 19th century. There was no fusion of actual laws in 1873, only of courts and procedure. Equity already moderated tax law, with beneficial ownership being all that mattered for tax purposes then and today. Keywords: equity; common law; fusion; tax; beneficial ownership; Supreme Court of Judicature Act 1873.

Intra-Group Financing: Analysis of the Coexistence of the Arm’s Length Principle with the General Anti-Abuse Rules

The deduction of interest expenses for corporate tax purposes has attracted the attention of tax policymakers and multinational enterprises owing to concerns about base erosion and profit shifting. Prior to the transposition by Member States of the Anti-Tax Avoidance Directive that established a minimum standard, national rules to limit the tax deduction of interest expenses and anti-abuse rules to tackle perceived aggressive tax planning lacked uniformity and consistency at EU level. This resulted in legal disputes, especially in cross-border intra-group financing cases when transfer pricing based on the arm’s length principle is also applied. The Court of Justice of the European Union has set general guidelines and an interpretative framework. However, the opinion of the Advocate General in the X BV case (C-585/22), suggesting a departure from the Lexel case (C-484/19), raises significant concerns. In the authors’ opinion, this approach could lead to an overreaching application of the GAAR even to arrangements subject to the arm’s length principle that, based on economic rationality and substance, is intended to treat in the same way cross-border intra-group and third-party structures and transactions.

Penerapan model kolaboratif dalam kebijakan data tunggal industri emas bagi penerimaan negara dengan pendekatan multi helix

Indonesia is one of the largest gold producing countries in the world. Based on mineral commodity data, Indonesia’s gold reserves reached 2,600 tons. In addition, the mining production reached 66 metric tons in 2021 and 70 metric tons in 2022. However, there are various problems and challenges related to efforts to utilize gold minerals, one of which is the limited availability and validity data. Therefore, this research aims to analyze how a collaboration model related to the gold industry’s single data policy for tax purposes can be implemented using a Multi Helix approach. In the Multi Helix concept, the role of each actor has very close participation to create success in creating quality data in the gold industry sector and sustainable development. Furthermore, it is expected to contribute significantly to tax revenues. Aside from that, the existence of the SDI policy is intended to provide benefits for sustainable economic development by maintaining a good quality of environmental ecosystems. Additionally, SDI data is expected to have a hand in state revenues both in the form of taxes and royalties to the state optimally, thereby creating competitive and growing businesses.

Transfer Pricing End-of-Year Adjustments in the United Kingdom

The United Kingdom’s transfer pricing legislation, contained in Part 4 of the Taxation (International and Other Provisions) Act 2010, mandates that profits and losses for tax purposes be calculated as if arm’s length provisions were made between related parties, aligning with OECD guidance. This legislation generally only allows adjustments that increase UK profits (a feature often referred to as the “one-way street”), with exceptions only for mutual agreement procedure outcomes or compensating adjustments between UK resident entities, resulting in careful consideration of intercompany arrangements being required to minimize year-end adjustments.

State of Reciprocity: The “Looping Effect” in the Circular Production of Colonial Knowledge, Social Customs, and Tax Policy in Nineteenth- and Twentieth-Century Indonesia

Abstract This article traces Hacking's “looping effect” in colonial policies and practices of taxation, coerced labour, and governance in Indonesia. It argues that knowledge production for the purpose of taxation was a two-way, interactive process which was in particular influenced by complexes of local indigenous social organization, institutions, mentalities, and behaviour as expressed through adat (Indonesian systems of political-social norms and customary law). Such patterns and systems, the article reveals, were internalized into and started working reciprocally with colonial policy, knowledge production, and administrative practices. Taxation made up and changed people, but underlying strategies to categorize and “make known” subjects were also recognized and actively used, evaded, or influenced by these subjects and by local intermediaries. Consequently, colonial knowledge created an institutional framework that reoriented the self-perception of these subjects and intermediaries, which then changed and reconditioned popular responses to the colonial state. Systems of colonial knowledge were thus modified to eventually fit the realities they were supposed to describe, influence, and legitimize, creating a looping effect between colonial, “made up,” and actual social realities.

Interpretation and Application of General Anti-Avoidance Rules after BEPS and ATAD: Nordic Perspectives

This paper compares general measures against tax avoidance and the design of general anti-avoidance rules (GAARs) in Denmark, Finland, Norway, and Sweden. It focuses on aspects such as tax benefits, tax purposes, economic substance, and breaches of legislative purpose. The paper also examines potential compliance issues between national GAARs, tax treaties, and the European Union’s Anti-Tax Avoidance Directive (ATAD). The analysis highlights variations in how the national GAARs apply economic substance considerations and the level of pragmatism allowed when assessing conflicts with the purpose of the circumvented legislation. Additionally, it shows that differences in the wording of the GAARs, such as requirements related to tax purposes, do not necessarily result in practical differences due to other GAAR elements reducing or nullifying them. For similar reasons, the authors conclude that compliance issues between the national GAARs and the ATAD GAAR’s requirements are unlikely, despite some differences in wording. Whilst focusing on the Nordic region, the paper offers insights relevant to broader international contexts, as the diverse approaches, distinctions, and issues identified mirror tax developments worldwide.

Cultural inheritance and technological evolution: a response to Bentley & O'Brien

In response to Bentley and O'Brien's (2024) article, I wish to focus on a specific aspect of cultural inheritance—that of technological innovation in later prehistory. In essence, I agree that “inherited social practices and knowledge” (2024: 1407) are indeed the backbone of technological transmission. Many examples can be cited where technological expertise (potting, metalworking, etc.) is passed down within a family or through apprenticeship schemes. For example, the first Ming Emperor of China (Hongwu, reigned AD 1368–1398) initiated in 1381 a census (the ‘Yellow Book’) in which households were classified for taxation purposes into one of four categories: general, military families, artisans and salt-producers. Artisans were classified by trade and the implication is that the family trade was fixed and inherited (Huang 1974: 32). This system continued until at least the end of the Ming dynasty (AD 1644).

Legislative Purpose — The Unwritten Criterion in Classifying Goods: A Case Study of Israel Law

The International Convention on the Harmonized Commodity Description and Coding System (HS Convention) or HS, which seeks to establish uniform rules for the classification of products for customs and indirect tax purposes, is considered a resounding success. Its main objective is to ensure that a given product is classified in the same way in all World Customs Organization (WCO) member countries. The HS Convention does not specify the duty rates on each product, leaving it to the discretion of the member states, nor does it consider the legislative purpose of each country — to tax or exempt a product. This paper examines the issue of legislative purpose and concludes that considering the domestic legislative purpose when classifying leads to a lack of uniformity in the classification method and undermines the principle underlying the HS Convention. The issue has not been widely discussed in the literature; therefore, this paper makes a novel contribution to the literature on this topic.

REFORMULANDO O JOGO TRIBUTÁRIO: DESAFIOS E SOLUÇÕES NAS TRANSAÇÕES DE GAMES ON-LINE

In recent years, computer games have gained widespread popularity, driven by technological advancements and internet expansion, leading to the prevalence of on-line gaming and the decline of physical media. The taxation of these games has become a debated issue, particularly regarding the differentiation between off-the-shelf and custom software. In 2021, the Brazilian Supreme Federal Court deemed software taxable as services. Uncertainties have arisen regarding in-game transactions, encompassing the acquisition of goods, rights, or financial operations. This article aims to understand whether transactions in on-line games qualify as the acquisition of goods or services, determining the applicable taxes, considering the Brazilian legal landscape post-Tax Reform. Specific objectives include grasping technical distinctions between goods, commodities, and services; conceptualizing and distinguishing software and on-line games from a technological perspective; outlining types of transactions in on-line games to support their legal classification; understanding the Supreme Court's rationale on software as services; and analyzing the impact of the Tax Reform on the taxation of in-game transactions. The research, characterized as pure and explanatory, employs a qualitative approach, deductive method, and bibliographic/documentary procedures. It concludes that the accurate taxation of on-line gaming transactions is a significant source of legal uncertainty, stemming from the classification and legality of tax incidence. The Tax Reform, by instituting a single tax for operations involving goods, services, and rights, holds the potential to resolve these uncertainties, rendering unnecessary the determination of the nature of operations for tax purposes.

Cross-Border Estate Planning and Its Income Tax Consequences in South Africa

This article analyses estate planning methods utilized in South Africa, including the avoidance of estate duty on death, and the consequences of such planning for income tax and capital gains tax purposes. It considers the position of South African residents, emigrants from South Africa and immigrants to South Africa.

Fiscal legibility and state development: Theory and evidence from colonial Mexico

AbstractWe examine how fiscal legibility, the ability of central authorities to observe local conditions for the purposes of taxation, shapes political centralization and state development. When rulers lack information about the periphery, they may benefit from ceding autonomy to tax‐collecting intermediaries to encourage fiscal performance. As information quality improves, rulers become better able to monitor and sanction local officials, allowing them to tighten control over taxation and establish more direct state presence. Centralization, in turn, encourages investment in improving fiscal legibility, leading to long‐term divergence in state development. We study the consequences of a technological innovation that dramatically improved the Spanish Crown's fiscal legibility in colonial Mexico: the discovery of the patio process to refine silver. We show that political centralization differentially accelerated in affected districts and that these areas subsequently saw disproportionate state investment in informational capacity, altering the trajectory of state development.

From Administrative Price to Market Value of Real Estate. The Evolution of the Valuation System in Poland

Abstract The article applies the method of historical research, using a temporal perspective dating back to 1985, to trace the evolution of market valuation principles for real estate in Poland. These principles evolved similarly to those in many other post-socialist countries, influenced by political and socio-economic transformations and the resulting list of objectives for which these values became essential. The changing legal regulations allowing for the emergence and development of a free real estate market played a decisive role in this process. It was also a period of preparing real estate valuation professionals to meet these requirements. Today, the methodology of valuation, under increasing pressure from various real estate market entities and the rapid advancement of intelligent data collection and processing technologies, is undergoing further evolution. In many countries, including Poland, lively discussions and disputes are ongoing regarding the legal authorization of statistical tools and automated valuation models in valuation practice. These possibilities are being considered particularly in the context of mass property valuations for tax purposes. The methodology involves the analysis of Polish legal provisions, foreign literature, and documents proving the gradual marketization of valuation principles.

Digital tax reform in Indonesia: Perspective on tax policy development

In Indonesia tax reform has undergone multiple revisions in recent years, all within a brief timeframe. Digital tax reform in Indonesia began with significant milestones in recent years to adapt to the digital economy’s challenges. The specific start date for digital tax reform in Indonesia can be traced back to the passing of the Tax Regulations Harmonization Law on 7th October 2021, which officially became Law No 7/2021 on 29th October 2021. This law marked a crucial step in Indonesia’s journey towards modernizing its tax system to address the implications of the digital economy. The provisions of this law have varying effective dates, such as for income tax purposes from the 2022 fiscal year and for VAT purposes from 1st April 2022. These changes under the Tax Regulations Harmonization Law are extensive and wide-reaching, signifying a pivotal moment in Indonesia’s digital tax reform efforts. This shows that the Indonesian government intends to radically overhaul the tax system, yet there are inconsistent approaches to deciding on the long-term course of tax policy. It is critical to investigate the concept of tax legislation in Indonesia in order to provide legal clarity on digital tax reform. Normative juridical research methodology is employed, together with a qualitative research strategy and descriptive-analytical research specifications. The findings suggest that the Indonesian government’s efforts to establish strict policies governing taxes on digital activity are inadequate and uneven. In order to apply to digital platform enterprises, the definition of permanent establishment as outlined in a number of national regulations must incorporate a substantial economic presence criterion. Legislative progress toward the establishment of a framework for digital tax collection is necessary to mitigate the possible income loss of states in this area, which could result from the rapid advancement of information technology. The OECD consensus is still in the process of drafting an international tax reform that will require adjustments from national tax reform. Therefore, it is imperative that the Indonesian government establish a thorough framework for tax regulation that can ensure robustness, economic efficiency, fairness, against motivation compatibility, administrative ease, and avoidance.

Machine learning models in mass appraisal for property tax purposes: a systematic mapping study

The use of machine learning models in mass appraisal of properties for tax purposes has been extensively investigated, generating a growing volume of primary research. This study aims to provide an overview of the machine learning techniques used in this context and analyze their accuracy. We conducted a systematic mapping study to collect studies published in the last seven years that address machine learning methods in the mass appraisal of properties. The search protocols returned 332 studies, of which 22 were selected, highlighting the frequent use of Random Forest and Gradient Boosting models in the last three years. These models, especially Random Forest, have shown predictive superiority over traditional appraisal methods. The measurement of model performance varied among the studies, making it difficult to compare results. However, it was observed that the use of machine learning techniques improves accuracy in mass property appraisals. This article advances the field by summarizing the state of the art in the use of machine learning models for mass appraisal of properties for tax purposes, describing the main models applied, providing a map that classifies, compares, and evaluates the research, and suggesting a research agenda that identifies gaps and directs future studies.

Domino Dancing: Mutuality of Obligation and Determining Employment Status in Ireland

ABSTRACT It has taken a while, but what has been described as the first ‘gig economy’ case has been decided by the Irish Supreme Court. Although the case did not involve the use of a platform to organise work, it did require the Supreme Court to rule on the question of the employment status of pizza delivery drivers, all of whom were labelled as ‘independent contractors’ in the contracts between the company and the drivers. The case was taken by Revenue, which contended that the drivers, in fact, should have been classified as employees for tax purposes. The Supreme Court took the opportunity to present a long and detailed judgment on the correct approach to determining employment status, and, in particular, on the role of ‘mutuality of obligations’ in this consideration, with an extensive review of case law from the UK. This analysis discusses the case, with a particular emphasis on the view taken by the Court on mutuality of obligations in the context of ‘casual work’.

WAYS OF IMPROVING THE METHODOLOGICAL FRAMEWORK OF MASSIVE EVALUATION OF REAL ESTATE IN THE REPUBLIC OF MOLDOVA

This article focuses on researching the methodological development of real estate assessment in the Republic of Moldova, addressing the significant financial losses incurred by local public administrations due to the absence of an updated, appropriate, and transparent assessment system for taxation purposes. The fundamental hypothesis posits that enhancing the methodological and institutional framework of mass appraisal will lead to a progressive evolution of the real estate market relations and the stable development of efficient and equitable tax systems in Moldova. The study aims to identify and propose solutions to current issues in the national mass appraisal system, primarily related to the unavailability of market data and the use of outdated methodologies. Employing scientific techniques such as analysis, deduction, induction, grouping, comparison, analogy, scientific abstraction, synthesis, and statistical methods, the author assess the effectiveness of proposed methodological developments by comparing quality indicators of old assessment models with those developed based on the proposed methodologies. The results obtained support the idea of creating, implementing, and sustaining a mass appraisal system as a foundational element for a fair real estate taxation system, fostering regional development, and supporting economic activities related to the real estate market in the Republic of Moldova.

Agreement on customs value determination as an instrument of customs regulation

The article considers the tools of customs and tax regulation in the Russian Federation, in particular in the sphere of pricing for taxation purposes and control over the customs value of goods imported into the customs territory of the Eurasian Economic Union. Given the complexity of the process of reviewing draft pricing agreements, as well as the frequency of movement of different goods across the customs border by one supplier or the identity of the transported goods of several suppliers, it is assumed that one of the tools of customs regulation is a customs value agreement. Such agreements can simplify the procedure of moving goods across the customs border of bona fide participants of foreign economic relations. The topic under study requires further development and analysis of the current national legislation in order to form theoretical and legal approaches to such an instrument of customs regulation, including in the aspect of establishing, regulating and determining the procedure for exercising the powers of customs authorities when concluding agreements with participants in foreign economic activity. According to the author’s position, the development of draft agreements selected for the study and their basic conditions can condition the emergence of other tools of customs regulation, ensuring the penetration of some concepts and tools of private law in public-law relations.

Redemption of Shares or Stocks and Their Influence on Tax Obligation in Value Added Tax

The article presents the problem of taxation of value added tax and the remuneration in kind paid to a shareholder as a result of the redemption of shares. Settlements made between a company and a former shareholder may be considered a taxable transaction. Two opposing concepts found in the case law are to treat for tax purposes the redemption of shares with remuneration as a single transaction, or to separate only the phase of payment of remuneration for the redeemed shares and consider it a supply of goods for consideration. The practical importance of the issues raised is evidenced by the fact that these settlements often result in significant property flows. The purpose of the article is to try to demonstrate which of the existing concepts corresponds to the provisions of the law and the structural principles of the value added tax more closely.