Differences In Tax Rates Research Articles

Transport tax: analysis of calculation and collection mechanism, improvement trends on the regional level (on the materials of the Republic of Dagestan)

This article examines the peculiarities of taxation of vehicles, as well as the fiscal role of transport tax in the budget revenue of the constituent entities of the Russian Federation. Analysis is conducted on the overall dynamics of tax proceeds on transport tax into the budget system of the Russian Federation. Assessment is given to tax collection, as well as to the changes in structure of transport tax taxpayers on the federal level for the period from 2016 to 2019. Particular attention is turned to the role of tax rates and deductions on transport tax in formation of regional budget revenues. The author also analyzes tax proceeds, tax structure and tax base on transport tax on the regional level for the period from 2016 to 2019 (on the example of the Republic of Dagestan). Recommendations are made on the improvement of transport tax on the federal and regional level with regards to establishment of detailed differentiation of tax rates, application of reducing and increasing coefficients, as well as measures for improving the quality of tax administration of transport tax. The author also proposed measures aimed at full implementation of the principles of justice and proportionality of taxation in the context of calculation and collection of transport tax. The main results consists in the proposed recommendations on improvement of mechanism for calculation and collection of transport tax and enhancement of its current role in formation of regional budget revenues.

Tax Aggressiveness in Brazilian Companies with Foreign Capital Participation

This study explores the relationship between tax aggressiveness and foreign capital participation in Brazilian companies listed on the BM&F BOVESPA from 2010 to 2015, using the concept of tax aggressiveness as a reduction of taxable income through tax management and planning (Chen et al., 2010). Observing that previous studies show a significant relationship between tax aggressiveness and ownership structures, this research seeks to understand whether this relationship is significant if there is foreign capital participation in the company. The sample was composed of Brazilian companies listed on the BM&F BOVESPA. Two metrics of tax aggressiveness were used to investigate this relationship: effective tax rate (ETR) and book-tax difference (BTD). The use of these metrics was inspired in a review on tax research by Hanlon and Heitzman (2010), who concluded that ETR and BTD could capture the reduction of taxable income through tax planning. The results showed no significant relationship between foreign capital participation and tax aggressiveness, demonstrating that the origin of equity capital is not a factor of tax aggressiveness.

How taxes impact bank and trade financing for Multinational Firms

Tax and capital play critical roles in the business of multinational firms. This study investigates the optimal financing strategy between bank credit financing and trade credit financing when a multinational firm invests in a capital-constrained retailer located in a low-tax jurisdiction. We find that tax differences and varying dividend rates have significant effects on a multinational firm's decisions. In a basic model, we show a tax-related dividends rate that is less than one but can eliminate double marginalization in bank credit. In trade credit, we find that the optimal wholesale price changes with tax and dividend rate. When both bank and trade credits are viable, we find that the differences in dividends rates and tax rates are two critical factors in determining the optimal strategy, and we investigate the joint effect of these rates on the optimal financing strategy. When examining the impact of tax asymmetry on both retailers’ and multinational firms’ decisions, under bank credit, multinational firms will reduce the wholesale price to induce higher orders, but they will never offer trade credit. When both bank and trade credits are viable alternatives, the optimal financing strategy is bank credit when tax asymmetry exists. Lastly, the production cost threshold value that separates the unique financing equilibrium is lower due to the impact of taxes. Our findings can offer financing insights to both multinational firms and capital-constrained divisions.

How much profit shifting do European banks do?

This paper studies whether and to what extent the largest and systemically relevant European multinational banks engage in profit shifting to lower their tax burden. We exploit unique data on bank operations reported on a country-by-country basis since 2015 in compliance with European legislation. The dataset contains information on profits, turnover, taxes paid and employment of bank affiliates worldwide, including tax and regulatory havens. In our empirical model, profits shifting incentives are captured through a weighted average of international tax rate differences between all countries where the bank is active. We find that international tax differences trigger the geographical distribution of profits within multinational banks, and that low tax jurisdictions, notably tax havens, attract disproportionately high profits. Our results suggest that, overall, 21% of profits is shifted. Moreover, profits in tax havens are 51% higher than they would be without tax-motivated profit shifting, pointing to a significant reduction of tax bases in high-tax countries.

The Wage Response to a Reduction in Income Tax Rates: The Israeli Tax Reform

Abstract This study examines the effect of an income tax reform on wages. An Israeli reform implemented in 2003–2009 reduced individuals’ marginal income tax rate by 7–17 percentage points. We utilized the differential and non-monotonic marginal tax rate reduction, and used Israel Tax Authority panel data of wage earners, merged with Labor Force Surveys. We found that in the business sector, the elasticity of reported gross wages relative to the net-of-tax rate is about 0.1. The wage earners in the lowest wage quintile were not affected by the tax reform, those in the second and third quintiles did not respond to the tax cut, but elasticity increased with wage, reaching about 0.4 in the upper decile. We did not find statistically significant differences in elasticity by gender, ethnicity, or education.

The Effect of Share Ownership Concentration and Company Operation Complexity towards Transfer Pricing Decisions

This research aims to examine the effect of share ownership concentration and company operation complexity on transfer pricing decisions. The transfer pricing decision in this research is measured by the total indicators of related party transactions of the company. The population in this research are all companies listed on the Indonesia Stock Exchange from 2017 to 2018. The sample selection technique used is purposive sampling and hence, 116 companies have been obtained. The data used in this research were obtained from financial statement data. The data analysis method used in the research is the multiple linear regression analysis. The results showed that share ownership concentration did not affect transfer pricing decisions, whereas company operation complexity projected by multinationality had a significant positive effect on transfer pricing decisions. Research shows that multinational companies are considered to have more significant opportunities by taking advantage of the differences in tax rates.

Searching for similarities in EU corporate income taxes for their harmonization

The purpose of this paper is to answer the question whether, despite the differentiation of the corporate income tax in the European Union, there are similarity patterns allowing for the harmonization of the bases of this tax. The analysed CIT static data both quantitative and qualitative concerns the years 2018 and 2020. The method of hierarchical cluster analysis allowed a grouping of EU countries according to their similarities. It also indicated the greatest tax differences between EU member states. In turn the affinity analysis made it possible to distinguish groups of countries which are similar in terms of CIT with the simultaneous identification of a pattern. Results show that despite significant differences in tax rates some EU states show convergence in tax bases. The geographical criterion still plays an important role in determining CIT structure and tax incentives are one of the tools that may be used in the approximation of the bases.

Corporate Implicit Taxes and Tax Incidence: Causes and Measurement

We develop a model to investigate the relations among (1) corporate tax incidence, (2) tax capitalization, and (3) implicit corporate tax in a competitive equilibrium. The economic pretax return is independent of whether the incidence of the corporate tax is shifted from shareholders to non-shareholders, such as customers or workers. However, tax incidence does affect the pretax accounting return, because the denominator of the return measure reflects the historical cost of the firms' assets and is often measured using prior year book values. To the extent a tax rate change changes the fair values of corporate assets (i.e., tax capitalization), the corporate tax affects pretax economic returns but not pretax accounting returns. The implicit tax rate for corporations reflects differences in corporate tax rates but is independent of pretax accounting returns.

Immigrant Inventors and Local Income Taxes: Evidence from Swiss Municipalities

This paper studies the relationship between local personal income tax rates and the attractiveness of municipalities as residential locations for immigrant inventors in Switzerland. Exploiting sharp differences in top income tax rates across state borders, I find an elasticity of the probability that an inventor takes residence in a municipality with respect to the top net-of-tax rate of around 4. Additional evidence suggests that inventors’ residential location choices are consequential for the localization of entrepreneurial activity and local knowledge spillovers.

The Structure of Business Taxation in China

This paper documents facts about the structure of business taxation in China using administrative tax data from 2007 to 2011 from the State Taxation Administration. We first document the importance of different business taxes across industries. While corporate income taxes play an important role for manufacturing firms, these firms also remit a large share of their tax payments through the value-added tax system, through the excise tax system and through payroll taxes. Gross receipts taxes play an important role for firms in other industries, leading to spillovers that may affect the overall economy. Second, we evaluate whether the structure of China’s tax revenue matches its stage of development. A cross-country comparison of sources of government revenue shows that China collects a high share of tax revenue from taxes on goods and services and a high share of income tax on corporations. Finally, we study whether firm-level differences in effective tax rates can be an important source of allocative inefficiencies. Decomposing the variation in effective tax rates across firms, we find that government policies, including loss carry-forward provisions and preferential policies for regional, foreign, small, and high-tech firms, have significant explanatory power. Nonetheless, while effective tax rates vary along a number of dimensions, tax policy does not explain the large dispersion in the returns to factors of production across firms.

EUROPEAN PRIORITIES FOR PERSONAL INCOME TAXATION

Introduction. In the current conditions of globalization of socio-economic development and formation of a new financial civilization, social aspects of tax policy take a important place. The system of taxation of income of citizens in Ukraine today is not fully coping with the performance of their functions. The experience of developed European countries on the formation of an effective mechanism of taxation of personal income will contribute to the establishment of the newest social and fiscal-oriented paradigm of taxation of citizens in Ukraine. The increased interest in the procedures for administering the personal income tax is also explained by the fact that this tax is one of the main sources of income to the budget of Ukraine. The purpose is to determine the peculiarities of taxation of personal income tax in Ukraine, to find out the common and different features tax system in Ukraine and European countries, to systematize recommendations on improving the mechanism of taxation of personal income. Results. The international typology of personal income tax systems is given. The general features of personal income taxation and mechanisms of application of personal income tax rates in some countries of the European Union are considered. It is argued that the implementation of the European tax experience will facilitate a faster transition to a new and effective system of personal income taxation in Ukraine. To improve personal income taxation in Ukraine, it is necessary to revise personal income tax rates, increase the amount of tax-free minimum incomes, ensure the full functioning of electronic declaration of personal incomes, optimize concessional policies, increase tax literacy and tax culture. Prospects. Further research will focus on the social aspects of taxing citizens' income in terms of differentiation of tax rates, the logic of using preferences in taxing personal income, the introduction of an effective threshold of the non-taxable minimum income, promoting the right to tax rebates, etc.

Conceptualizing the effects of corporate tax rate differentials on transfer pricing activities of FDI enterprises in Vietnam

Conceptualizing the effects of corporate tax rate differentials on transfer pricing activities of FDI enterprises in Vietnam

Loss Expectation and Income Shifting

This study examines the effects of expected losses on income shifting from various perspectives. Using a set of worldwide multinational corporation (MNC) affiliates, this study first finds empirical evidence of ex ante adjustments of income-shifting strategies by affiliates, supporting the existence of limited flexibility introduced in Hopland et al. (2018, 2019). The study next identifies that loss-expecting affiliates with limited loss carry-forward periods have greater reverse incentives for income shifting than those with unlimited periods because the former must utilize potential losses within a limited period of time. Lastly, according to measurements of the magnitude of income shifting based on expected tax rate differences using the full sample of both profitable and loss affiliates, the methodology applied in traditional studies is found to overestimate the magnitude of income shifting.

Tax Competition and Employment

We examine the effects of tax competition on domestic employment. We find that increases in corporate statutory tax rate differentials between domestic and foreign firms reduce domestic employment through the distinct channels of import competition and competition from foreign-owned domestic firms. These effects are stronger for domestic firms located in countries with less labor organization, non-service firms, firms with fewer intangible assets, and standalone firms. Tax competition appears to primarily affect domestic employment via changes in within-firm employment at smaller firms. Our results suggest that tax competition can affect domestic employment even when domestic capital or income is immobile.

Identification of hard-to-recover reserves of Ugra oil

More than 70 % of the reserves of Yugra oil fields, which are in development and at various stages of study, are classified as hard-to-recover (HTR). Active involvement in the development of HTR will prevent the decline and stabilize production in the most important oil-producing region. Compliance with state economic interests and stimulation of subsoil users require a clear and adequate formulation of the criteria for attributing deposits to an HTR, involving preferences and tax incentives. The geological-field analysis of the balance of hydrocarbon reserves and of the licensing agreements for the subsoil use of Yugra was carried out in the context of the criteria for identification of deposits with the HTR, recommended by the Central Commission of the Rosnedra of the Russian Federation (2005), also in the context of the Federal Law of the RF and the Tax Code of the RF (2013―2014), defining the criteria and objects of the HTR, differentiation of mineral extraction tax rates. The analysis has shown that at present some objects of the category of HTR do not require tax incentives, and for other objects that have not been previously classified as HTR, tax incentives should be introduced. The complex of criteria for identification of deposits of the HTR «RAC RUS named after V. I. Shpilman», compiled on the basis of criteria approved by the Central Commission for Reserves of the Russian Federation, which takes into account the geological and technological parameters of deposits given in the state balance, and the current Classification of oil reserves of the Russian Federation became the result of the analysis. According to the results of the analysis, it was suggested: to exclude from the category of HTR the terrigenous deposits of the «anomalous cut» of the Bazhenov Formation and the uncomplicated Neocom deposit; to include in the category of HTR deposits of the Achimov Formation and the Pre-Jurassic Complex. The deposits of the Achimov Clinoform and the Pre-Jurassic Complex of particular interest were described in more detail. The deposits of the Achimov Clinoform and the Pre-Jurassic Complex of particular interest were described in more detail.

The Governance of Tax Audit Enforcement: Indicators on Automation Incentive, Tax Avoidance and Firm Characteristics

The intense development in the Fourth Industrial Revolution (IR 4.0) demands tight governance of tax audit enforcement by the Inland Revenue Board Malaysia (IRBM) on firms claiming automation incentive. Through tax audit enforcement, IRBM provides a monitoring mechanism for corporate governance. However, due to data confidentiality, little has been established on what indicators that caused tax authority to carry out tax audits. In this research, we employed tax return and historical audit data of corporate taxpayers consisting of profitable and loss firms which consistently claim the Reinvestment Allowance (RA) to examine the indicators applied by the tax authority in executing the role of governance. Employing Binary logistic regression, firm characteristic of firms experiencing tax audit was observable, but tax avoidance and incentive utilization indicators were not apparent. Tax avoidance indicators such as effective tax rate and book-tax difference, loss firms, and incentive utilization receive less attention when it comes to tax audit enforcement. Examining firms that experienced tax audit enforcement has enriched our understanding of indicators that draw the interest of tax authorities when it comes to tax audits. Overall, this research could be the first in Malaysia that has used actual historical tax audit record, which has revealed new evidence on the indicators preferred by the IRBM in conducting a tax audit. The slight fine-tuning of the responses, especially on tax avoidance and incentive utilization indicators for tax enforcement might produce comprehensive tax audit coverage and yield a greater mechanism for governance.

Tax System and Rates in the Republic Of Kosovo and Their Comparison with the Balkan Countries

In order to understand the functioning of the tax system and tax rates, we have elaborated the issue and the importance of the state budget revenues creation. During the research, we have noticed that changes in tax rates, expansion of the taxable base, and creation of conditions for economic development which have been constantly changing in Kosovo and Balkan countries. Although the tax system in Kosovo is new, it is competitive not only in the region but even beyond it. In the new fiscal package of 2015, tax rates had changed. Personal Income Taxes have reduced some of the revenues, corporate taxation up to 10%, insurance companies 7% to 5%, VAT is applied with two tax rates 18% and 8%. Balkan states have significant differences in tax rates, but not in tax systems. In some taxes, high rates have already been set, while in some countries there are lower rates. It is characteristic and interesting that the tax systems of these countries have been constantly reformed, reducing tax rates and redefining the tax base.

THE ROLE OF CORPORATE DIVERSIFICATION IN TAX AVOIDANCE IN COMPANIES LISTED IN THE TEHRAN STOCK EXCHANGE

Purpose of the Study: Tax avoidance means the use of gaps in tax laws for non-payment or late payment of taxes for companies, which is affected by different factors. The present study investigates the impact of diversification on tax avoidance in companies. To this end, the financial information of 384 firms during the period of 2011- 2016 in the Tehran Stock Exchange was examined.
 Methodology: In this research, the required financial information was summarized, classified, and calculated in Excel software and the data were analyzed by using E-views software. The dependent variables were effective tax rate and book-tax difference, while the independent variable was corporate diversification, which shows how to divide the market between business sectors (units) in a company. Control variables include size, financial leverage, company’s loss-making, ROA, capital expenditures, R&D, market to book value, CEO ownership, and management of ownership.
 Conclusions/Results: The findings obtained from this study demonstrate that at a 95% confidence level, there is no significant relationship between diversification and effective tax rates in companies listed in the Tehran Stock Exchange. However, at a 90% confidence level, diversification reduces the effective tax rate. Furthermore, no reliable evidence was found regarding the effect of diversification on book-tax difference at a 95% confidence level.
 Novelty: Tax is a charge imposed by the government on all organizational profits. Various enterprises have complex operations due to their institutional structure, which makes it possible to increase tax avoidance in these companies. The production or sale of a variety of products (diversification) is bigger and has more complex organizational structures that increase the cost of management and non-management decisions, making it difficult for companies to coordinate their policies.
 Thematic classification: G10, M41

Assessing impact of base erosion and profit shifting on performance of subsidiaries of multinational corporations in Baltic countries

Research background: The problem of base erosion and profit shifting by multi-national corporations has been debated from different perspectives because of its multiple impact on the key actors in the economy. Studies refer to its positive impact on companies via corporate taxes saved, but its negative impact on governments via reduced tax collection. A number of empirical studies conducted in different countries support the substantial BEPS impact on company performance, but report differences in its magnitude. Other authors claim that, despite a wide range of tax avoidance opportunities available, tax avoidance is limited due to institutional measures imposed (tax audits, penalties for non-compliance) and high implementation costs. A majority of the previous empirical research covered large countries (USA, Germany) or regions (e.g. Europe), but there is a gap in the re-search assessing the BEPS impact on multinational corporations? subsidiaries? performance in countries with lower corporate income tax rates such as the Baltic countries.
 Purpose of the article: To assess the impact of base erosion and profit shifting on multinational corporations? subsidiaries? performance in the Baltic countries.
 Methods: Empirical research is conducted based on the framework employed by Hines and Rice (1994) to measure BEPS impact on company performance. Regression analysis with fixed effects was applied to a sample of 3,422 Latvian, Lithuanian and Estonian subsidiaries of multinational corporations, which are characterized by low corporate tax rates. The data for the period of 2007?2015 was retrieved from the Amadeus database.
 Findings & Value added: The research revealed that Baltic countries? tax differentials between multinational corporations? parent and subsidiary countries might have a significant impact on the subsidiary?s financial performance. When the tax rate differences between Baltic and the foreign countries decrease by 1%, reported profits in Baltic countries increase by 2.3%, indicating profit-shifting behaviour. This is in line with the empirical literature and practices applied by multinational corporations. It is also in favour of anti-tax avoidance measures introduced by the EC to be adopted by Baltic and other EU countries.

EXPLORING THE NEXUS BETWEEN TAX REVENUE TRENDS AND SOCIAL CONTRIBUTIONS DEVELOPMENT IN EUROPEAN UNION COUNTRIES

The purpose of the research: to analyze the main tendencies of the tax revenue and social contributions in EU countries, to study the hypothesis concerning convergence of the annual growth rates of the total tax revenue (including social contributions) to the GDP in European Union countries during the last decade and to build the predicted values for the total tax revenue (including social contributions) as GDP percentage in EU countries. The research was conducted based on the time serious analysis) and forecasting method to predict data values of the total revenue to the GDP. The analysis presented in the research has shown that tax revenues in the main tax categories displayed a corresponding pattern, with a differing fiscal lag for direct taxes, indirect taxes and social contributions. Correlation analysis has shown that many countries of EU essentially correlate ratio of the total tax revenues to the GDP. Using the presented models for the time series of the total revenue to the GDP in Eiropenean Union counties, the predicted values were obtained. The research has shown that some countries have common characters of the total revenue, and some gruop of countries has varies. Regardless of the declaration of the common economic policy in EU, as well as levy system in EU, the research has noticed some differences in the total revenues concerning the GDP trends. The impact of possible convergence in tax burden policy in EU countries explains these differences.In order to harmonize tax policy and to increase the fiscal role of taxation in the EU countries, such measures are proposed: application of unified procedures and conditions of administration of taxes and other budget revenues; differentiation of tax rates and establishment of the upper limit of their size; introduction of a unified tax base; differentiation of objects of taxation with the purpose of increase of tax revenues to the budget and avoiding increase of tax burden for population and others.