Tax Purposes Research Articles

Irish Supreme Court rules pizza delivery drivers are employees for tax purposes: What's the takeaway for the gig economy in Europe?

In October 2023, Ireland's Supreme Court handed down its judgment in the case of The Revenue Commissioners v Karshan Midlands t/a Domino's Pizza. Following the CJEU ruling in Yodel, and that of the UK Supreme Court in Uber v Aslam, this decision is yet another addition to the debate around the employment status of gig workers that European courts have been grappling with, in common and civil law jurisdictions alike. In Karshan, the Irish Supreme Court ruled that Domino's pizza delivery drivers should indeed be treated as employees for the purposes of taxation. Importantly, however, the ruling was delivered based on a different set of facts than some of the other gig economy cases heard in Europe – notably, in Karshan there was no digital platform and, therefore, the link between the delivery drivers and Domino's was more pronounced than in cases involving a platform. The scope of comparison to Yodel is, thus, limited. Furthermore, the judgment is narrow in its scope and, disappointingly, appears to deliberately leave many questions unanswered, failing to seize the opportunity to provide more clarity for gig workers and employers alike. This is typical of the current state of affairs in employment law, which, while aware that traditional approaches are inadequate to the evolving world of work, has not yet come up with a comprehensive way of addressing these challenges. Despite these shortcomings, Karhsan offers some valuable insights into the discussion on the gig economy as the EU institutions are working to adopt the much-anticipated Platform Workers Directive.

United States: tax classification and treatment of non-U.S. private foundations

Abstract This article discusses a U.S. Court of Appeals decision from August 2022 regarding the proper classification of a Liechtenstein Stiftung foundation for U.S. federal tax purposes. It also discusses at a high level the implications of different classifications. Founders (including non-U.S. persons) and their advisers should consider these implications when establishing foundations, particularly when the foundations’ beneficiaries are U.S. persons or if the foundations hold U.S. situs assets.

Понятие территории с особым статусом для целей налогово-правового регулирования

The article aims to explore the concept of territories with special status for tax and legal regulation purposes, focusing on their definition, types, and common features. It examines the methodologies used to identify and classify these territories and provides insights into their role in achieving strategic state objectives. Currently, there is no legislatively fixed general concept for these territories, nor are there theoretical developments elucidating this topic through various types of territories with special status, including their taxation aspects, which would allow for a universal approach to legal regulation in this sphere. The aim of this article is to define the content and types of territories with special status applicable for tax and legal regulation purposes. The research methodology includes deductive, inductive, comparative, and formal-legal methods. The author formulates the definition of territories with special status by identifying the characteristics of territories possessing a special legal regime of operation most commonly associated with the examined concept by scientists. Additionally, various types of other territories fitting this definition are determined. The author comes to the conclusion that territories with special status are diverse, created for different directions of state policy. However, they also share many common features, allowing for the formulation of a universal definition of territories with special status, including for tax and legal regulation purposes, and subsequently identifying types of territories falling under this definition.

Conceptualizing the MNEs Transfer Pricing Behavior: Indonesian Tax Authority Perspective

Indonesian tax authorities currently encounter a lack of cooperative compliance among companies engaged in transfer pricing practices with their affiliated entities across borders. Transfer pricing is commonly associated with tax purposes, such as tax planning or avoidance, which is considered standard practice for business entities. Hence, there is a significant necessity to assess and evaluate the prevalence of tax planning or avoidance through transfer pricing in multinational enterprises operating in Indonesia. To gauge the extent of transfer pricing used for tax avoidance purposes, this study examines the perspective of tax authorities on companies' transfer pricing optimization behavior. Employing a qualitative approach, the study aims to comprehend the utilization of transfer pricing and its implications. The findings provide insights into transfer pricing behavior within companies over time. According to tax authorities, companies are motivated by the benefits of transfer pricing, including revenue optimization, corporate profit allocation, and cost optimization. However, these practices are influenced by various factors that facilitate or constrain transfer pricing activities. Multinational enterprises demonstrate limited awareness of normative beliefs regarding international and domestic transfer pricing regulations. Notably, companies affiliated with large multinational enterprises, possessing a strong understanding of transfer pricing, exhibit a high potential for tax planning or avoidance through transfer pricing arrangements with related parties. These findings contribute to the existing body of research on transfer pricing practices from the perspective of tax authorities as part of the Indonesian government.

Financial assets in the system of financial legal relations

The article examines financial assets in the system of financial legal relations from the point of view of current legislation and regulatory acts of the European Union. The object of the study is a set of social relations regarding financial assets. The purpose of the article is to develop scientifically based conclusions about financial legal relations related to the use of financial assets in economic turnover. The work uses dialectical, logical, systematic, analysis and synthesis, formal- legal, comparative-legal and other methods of scientific knowledge. It has been established that the financial assets of an enterprise, institution, organization are a separate group of assets provided in cash or other, mostly intangible goods, containing monetary claims, which have a monetary value and are capable of bringing economic benefits to the state in the process of formation, distribution and use of cash funds (state and non-state) aimed at solving social problems. A financial asset is a cross-industry category. From a material point of view, a financial asset is characterized as a fund of funds of a business entity, from a financial and legal point of view, a financial asset is a source of budget revenues, which in the process of taxation connects the fund of funds of a business entity with public monetary funds. Financial assets for the purposes of tax and legal regulation can be presented as property and property rights. Financial assets include cash and non-cash funds, documentary and non­documentary securities, digital currency, equity instruments, digital financial assets (including hybrid rights), claims arising from various grounds, receivables. It is indicated that business entities conducting business activities are entitled to independently carry out financial activities, after paying taxes and mandatory payments, to dispose of the remaining profit. Understanding the legal nature and content of financial assets allows systematizing approaches regarding the place in the system of financial legal relations and the use of these resources in economic activity.

Does Fair Value Taxation Affect Banks’ Investment Portfolios and Risk Taking?

ABSTRACT We analyze the implications of including fair value changes in taxable income on banks’ asset allocation and risk taking. Exploiting variation in fair value tax regimes and tax rates across 27 countries from 2010 to 2018, we find that fair value taxation is associated with banks’ investment portfolio choices and risk taking. On average, banks hold fewer fair-value taxed securities when fair value taxes increase. This effect is pronounced for savings and cooperative banks. Further, the effect is pronounced for banks that report under local GAAP for tax purposes. Our results also suggest that banks instead invest more in securities that are not taxed at fair value. Lastly, we provide evidence that the risk taking of savings and cooperative banks is positively associated with the tax rate when subject to fair value taxes. In addition, banks that report under local GAAP increase risk taking when subject to fair value taxes. Data Availability: Data are available from the sources cited in the text. JEL Classifications: G21; G28; H25; M41.

Regulations on Access to Financial Information to Improve Taxpayer Compliance with Law No. 9/2017 and its Implementation Rules

<p>The purpose of this research is to explore and analyze regulations for access to financial information for tax purposes to increase taxpayer compliance. The research approach in this study is qualitative normative based on literature and field studies in the form of collecting access data and following up on inbound and domestic AEOI based on access to information by tax administration. This study finds that for easy access to financial information for tax purposes both in the context of AEOI and the implementation of the tax laws, Law No. 9/2017 authorizes access to financial information to the Director General of Taxes (DGT) by setting aside the confidentiality of financial information in the Law of Tax Procedures and the Banking Law, access to banking financial information has positively increased tax compliance, but compulsory reporting of accounts with minimum balance of Rp1 billion have the potential to trigger rush of bank funds. On the other hand, it had reduced the effectiveness of Law No. 9/2017 to increase tax compliances for individuals who have accounts’ balance less than Rp1 billion at the end of the reporting calendar year. It can be suggested to amend the formulation of the provisions of Article 2 paragraph (3) of Law 9/2017 refers to the Common Reporting Standard (CRS) which must contain financial information, including NPWP with NIK (Resident Identification Number) for certainty and to eliminate doubts.</p>

Transfer Pricing State Audits on the Upswing

While the Internal Revenue Service has long scrutinized cross-border intercompany transactions, state tax authorities are increasingly focusing on state transfer pricing. This trend poses new challenges for company groups operating in multiple states. In states with separate tax reporting, each entity within an affiliated group is treated as a separate taxpayer for state income tax purposes, which can lead to profit shifting by manipulating transfer prices between affiliated entities in different states. In this regard, state tax authorities are taking a more proactive approach to examine and audit state transfer pricing positions. Recent significant state transfer pricing case law highlights the importance of preparing and maintaining adequate documentation to support intercompany transactions during state audits. Specifically, preparing an adequate transfer pricing study can be crucial for risk management by minimizing potential challenges from state tax authorities.

Effective Tax Rates and Firm Size under Turnover Tax: Evidence from a Natural Experiment on SMEs

Abstract Taking advantage of Romania’s compulsory and unique presumptive tax system (turnover tax) for the smallest of the small- and medium-sized enterprises (SMEs), which unequivocally allows grouping the companies into two subsamples according to their tax status (the smallest of the SMEs, i.e. micro-companies for tax purposes, subject to alternative turnover tax vs larger SMEs subject to regular profit tax), the papers compute and compare three versions of firm-specific effective tax rates and brings first-time empirical evidence on the effects of turnover taxation on corporate tax burden. The results show not only that in Romania, the turnover tax is now the prevailing tax system, massively displacing the profit tax, but also it is more burdensome in terms of taxes actually paid relative to the firm size. Moreover, turnover taxation means that taxes are due irrespective of the profitability of a company, making the share of companies who paid taxes despite having losses much higher for micro-companies than for larger SMEs, which translates into higher public finance receipts, at the cost of lower tax equity. Since the corporate tax burden triggered by turnover taxation remains under the radar of even the most qualified policy reports, the results offer relevant lessons for other jurisdictions and have valuable policy implications.

Theoretical analysis of non-deductible expenses: Implications for the design of compensation contracts

This study analyzes how a tax system, in which expenses associated with business activities are only partially deductible for tax purposes, affects corporate behavior, including the effort level and compensation contracts. Since these activities create firm value and benefit the agent due to the inherent characteristics of consumption goods, the principal faces a trade-off between letting agents work with high-powered incentives and the tax payments resulting from non-deductible expenses. Further, we consider a government's behavior to analyze the case in which the government can flexibly change the non-deductible ratio. We find that the impacts of the corporate tax rate and the agent's preference for activities that incur tax non-deductible expenses depend on whether the non-deductible ratio is flexible. This result partially explains why various countries apply different rules for non-deductible expenses.

Another twist in the taxation of non-monetary contributions of properties and mortgage debt for the purposes of Spanish transfer tax, capital duty and stamp duty: the projection of EU law onto domestic situations and the need for clarification of the Span

Another twist in the taxation of non-monetary contributions of properties and mortgage debt for the purposes of Spanish transfer tax, capital duty and stamp duty: the projection of EU law onto domestic situations and the need for clarification of the Span

Council

This overview highlights the Council’s removal of four countries from the EU list of non-cooperative jurisdictions for tax purposes.

Federal Court Hands Down First Decision on Embedded Royalties and Diverted Profits Tax

In PepsiCo, Inc v. Commissioner of Taxation, Moshinsky J has held that a portion of the payments made to PepsiCo by an unrelated bottler and distributor – for syrup concentrate for manufacturing a range of popular soft drinks – were “royalties” for Australian royalty withholding tax (RWHT) purposes. Moshinsky J also held that if the RWHT provisions did not apply, PepsiCo nevertheless obtained a “tax benefit” by not paying RWHT and was therefore liable to pay diverted profits tax (DPT). The decision is the first in Australia to consider the tax treatment of “embedded royalties” and the DPT rules (which were introduced in 2017).

Увеличение уставного капитала как дивиденды. Налоговый казус иранского банка

The article examines the issues of the validity of qualifying an increase in the authorized capital (in the absence of profit distribution) as income for tax purposes. According to the author, if the increase in the authorized capital is due to retained earnings (proportional increase in the nominal value of the participants' shares without changing the size of the shares) is not an element of a tax scheme, it is a common practice of investment behavior that does not generate income for participants or shareholders.

Возмещение расходов посредника на исполнение поручения: критерии издержек, анализ и идентификация налоговых рисков

The article makes an attempt at scientific systematization of criteria that expenses of an intermediary associated with execution of an order and recoverable in accordance with Clause 2, Art. 975, Art. 1001 of the Civil Code of the Russian Federation must meet for taxation purposes; the paper also attempts at singling out the related tax risks. In the opinion of the author of this article, meeting the proposed criteria will ensure legal certainty for economic entities taking part in intermediary relations and reduce the risk of potential disputes with the tax authority.

Вопросы обложения НДС при проведении эксперимента по совершению назначенным оператором почтовой связи таможенных операций в отношении товаров трансграничной электронной торговли

The article provides an analysis of unregulated issues from the point of view of tax legislation related to the value added tax (VAT) purposes when selling electronic commerce goods as part of an experiment with bonded warehouses for the performance of customs operations by a designated postal operator using the customs procedure of a customs warehouse in relation to goods imported into the Russian Federation in for the purpose of subsequent acquisition by individuals in the framework of crossborder (foreign) electronic commerce and sent by mail.

Налоговые аспекты возмещения вреда окружающей среде

The article attempts to analyze the tax consequences in connection with the implementation of compensation for environmental damage. In 2021, changes were made to Chapter 25 of the Tax Code of the Russian Federation, which led to the elimination of the conflicting interpretation about the possibility of taking into account monetary compensation for environmental damage for income tax purposes, however, in relation to the natural form of compensation for harm, there is still no unambiguous approach, which does not corresponds to the constitutionally significant task of Russia as a guarantor of environmental well-being and a social state.

Accounting policy and its role in organizing accounting for accounting and taxation purposes for healthcare institutions

In such an important area as healthcare, more and more attention has been paid to the efficiency and effectiveness of accounting policies. Today’s healthcare industry is changing rapidly, adapting to new patient needs, updated technologies and treatments, and evolving payment models. Innovations in the accounting policies of budgetary institutions for 2024 reflect the general trend of changes in the accounting and tax areas in Russia. This article is devoted to current issues, as well as the most significant moments of changes for 2024 in the accounting policy for the purposes of accounting and tax accounting of budgetary institutions. The following methods were used in the research: analysis and synthesis, comparison, logical approach, systematic approach, method of analogies. As a result of the research, this article examined the features of budget accounting, accounting policies for both accounting and tax accounting purposes, and changes that occurred in budget legislation. It is concluded that the accounting policy of a budgetary institution is the product of extensive analytical work. However, despite this, it is practically difficult to take into account all the possible nuances of this policy. The research results will be of interest to a wide range of readers and practitioners in the field of accounting and tax accounting, as well as the scientific community involved in health research. Also, the results reflected in this article can be used in the educational process of higher educational institutions and in the practical work of accounting departments of all modern organizations (including healthcare).

Same-Sex Marriage Recognition and Taxes: New Evidence about the Impact of Household Taxation

Abstract The U.S. income tax code encourages marriage for some and discourages marriage for others, but same-sex couples were only recently exposed to these incentives. We estimate marriage responses by exploiting variation in the recognition of same-sex marriages for tax purposes versus earlier papers leveraging smaller changes. Using the American Community Survey, which reports cohabitation and marriage, we estimate a significant though very small marriage elasticity, with further analysis suggesting a higher (though still small) elasticity for low-earning households and in response to federal taxes specifically. Our estimates imply that the 2018 tax reform will increase marriage among high-earning cohabiting couples.

ПОДАТКОВИЙ І БУХГАЛТЕРСЬКИЙ ОБЛІК: СПІЛЬНІ РИСИ І ВІДМІННОСТІ

In the current economic environment, both in Ukraine and in foreign countries, the issue of tax accounting is becoming increasingly acute. This is primarily due to the growing requirements of tax administrations both to the quality of tax reporting and to the growing requirements for real-time control and business operations of enterprises. At the legislative level, the concept of tax accounting and its principles are not clearly defined. On the other hand, the requirements for the preparation of tax reporting are clearly regulated. At the moment, there is a debate and controversy among scientists regarding tax accounting, some scientists consider tax accounting as a part of bookkeeping, while others argue that tax accounting has enough characteristics and features to be independent and go hand in hand with bookkeeping. The article analyses approaches and interpretations to the concept of "tax accounting" by various scholars, summarises and offers an interpretation of tax accounting. The paper conducts a comparative analysis of tax accounting and bookkeeping, identifies common and distinctive features. In particular, the primary source of information in both accounting is primary documents, which are the main information base on which certain transactions are recorded and which underlies the preparation of both tax and financial statements. To record business transactions, double entry is used in bookkeeping and tax accounting, and appropriate accounts are allocated for tax payments in the chart of accounts. The result of bookkeeping and tax accounting is reporting, in the first case financial and in the second case tax. The requirements for financial and tax reporting are regulated by different regulatory documents, and there is a difference between bookkeeping and tax accounting in the treatment of certain business transactions, in particular, the date of the VAT liability. The main users of tax reporting as a result of tax accounting are the state tax administration authorities, but there is a tendency that company officials use tax reporting along with financial reporting for the purpose of effective tax planning as one of the elements of the overall planning of the company's development. The publication examines the basic principles of bookkeeping in the context of their applicability to tax accounting, where they are more applicable, except for the accrual basis. It summarises the importance of tax accounting as a subject that requires more detailed research.