Tax Sensitivity Research Articles

Analysis of the tax sensitivity of particular sectors of the economy

Analysis of the tax sensitivity of particular sectors of the economy

Life-cycle-based multi-objective optimal design and analysis of distributed multi-energy systems for data centers

The widespread deployment of data centers has contributed to a dramatic increase in energy consumption and carbon emissions. To solve this problem, this study proposes a distributed multi-energy system (DMES) driven by solar, wind, geothermal and natural gas and its life-cycle-based multi-objective optimization model considered energy, economy, and environment. Moreover, a novel operation strategy based on load characteristics is presented for energy flow allocation and a multi-objective grasshopper optimization algorithm is improved for model solving. Case studies are conducted on a practical data center in Qinghai, China. Based on the DMES capacity configuration and scheduling results, the cooling, heating and power supply can satisfy the demand of the data center while generating over 30% of the power from renewable sources. In addition, carbon tax is considered in the optimization model, which accounts for 4% of the life-cycle cost. Furthermore, the sensitivity of carbon tax, equipment lifespan and predicted mean vote is analyzed, obtaining that these factors have some influence on the performance of the system. Finally, the uncertainty impact on system planning is studied, concluding that the designed system exhibits high robustness levels when renewable energy forecast error is less than 20% or load forecast error is less than 10%.

AN EMPIRICAL ANALYSIS OF TAX REVENUE BUOYANCY IN JAMMU AND KASHMIR

Abstract
 Taxation is a powerful instrument to finance the deficits of a country. Buoyancy of Tax is a degree of the sensitivity of tax incomes to economic growth. tax is said to be buoyant when revenues increase by more than one percent for a one percent rise in outputor national income (Audi, M. et. al. 2021). This paper is an attempt to examine the buoyancy of Tax revenue of J&K. The data is of time series nature covering the period from 2000- 01 to 2019-20 entirely relies on the secondary sources. The Augmented Dickey-fuller test has been used to check the unit root of the data. Ordinary least square method of regression has been used to estimate the buoyancy of tax revenue in Jammu and Kashmir. The results show that the buoyancy of all the major taxes is less than 1 except for other taxes(other taxes include many taxes).The implication is that the tax system did yield a less than 1 percent change resulting from economic activity, for every 1 percent change in GDP.

The Effect of the Effective Corporate Tax Rate Toward Investment Decision in Indonesian Public Company

Purpose This research aimed to determine the effect of the effective tax rate in public company investment in Indonesia. Design/methodology/approach The research was conducted using firm data during 2008-2020 and considered the long-term investment concept. Meanwhile, the cross-section of 672 companies and the ordinary least square technique were used to get the estimation. Findings The estimation result showed that the effective tax rate has significant negative effect on fixed asset investment. If effective tax rate decrease, it can be because the company gets tax rate reduction incentives, conduct accelerated depreciation, fiscal reconciliation on the financial statement which can increase fixed asset investments. Moreover, the estimation also showed that the age of the company is able to strengthen the relationship between effective tax rate and company investment. The difference in domestic and foreign companies does not affect the elasticity ETR toward investment. Research limitations/implications Based on the estimation result mentioned, it is expected to provide guidance in implementing incentive tax, which can encourage public company investment. Originality/value There are many studies on the effect of income tax rates, but the results cannot be used specifically in Indonesia since the tax sensitivity may be different based on the development level of the country and the characteristics of the company.

Silencing of circ_002136 sensitizes gastric cancer to paclitaxel by targeting the miR-16-5p/HMGA1 axis.

The dysregulated expression of circRNA in gastric cancer (GC) induces paclitaxel (Tax) resistance of cancer cells, which in turn affects disease progression and prognosis. Here, we sought to investigate the role and mechanism of circ_002136 in Tax-resistant GC. In this study, we found the enriched circ_002136 level and the declined miR-16-5p level in Tax-resistant GC tissues and cells. Biologically, knockdown of circ_002136 elevated the Tax sensitivity of Tax-resistant GC cells, inhibited the cell motility properties, and simultaneously drove the apoptosis. Mechanically, circ_002136 promoted the HMGA1-mediated cellular Tax resistance and cell invasion by sponging miR-16-5p. Furthermore, circ_002136 silencing impeded the growth of Tax-resistant GC tumors in vivo. Overall, our study revealed a novel signaling pathway that could be used for future clinical applications, namely the circ_002136/miR-16-5p/HMGA1 axis to regulate the Tax resistance of GC cells.

CircPIM3 regulates taxol resistance in non-small cell lung cancer via miR-338-3p/TNFAIP8 axis.

Numerous work has revealed the involvement of circular RNA (circRNA) in regulating chemotherapy resistance. Here, we investigate circPIM3 role in taxol (Tax) resistance in non-small cell lung cancer (NSCLC). CircPIM3, microRNA (miR)-338-3p and tumor necrosis factor-alpha-induced protein-8 (TNFAIP8) expression were detected via quantitative real-time PCR, western blot or immunohistochemistry assay. Tax resistance was evaluated using cell counting kit-8, cell proliferation was measured by colony formation assay, cell cycle and apoptosis were examined via flow cytometry. The interplay between miR-338-3p and circPIM3 or TNFAIP8 was confirmed by dual-luciferase reporter assay. Finally, the effect of circPIM3 on Tax resistance in NSCLC in vivo was investigated by xenograft models. CircPIM3 and TNFAIP8 were upregulated in Tax-resistant NSCLC tissue and cell samples. Reducing circPIM3 expression inhibited Tax resistance, proliferation and induced cycle arrest and apoptosis in Tax-resistant NSCLC cells. Mechanically, circPIM3 absence led to downregulation of TNFAIP8 via absorbing miR-338-3p. Additionally, circPIM3 depletion increased Tax sensitivity of NSCLC in vivo. Silencing of circPIM3 suppressed Tax resistance in Tax-resistant NSCLC cells through regulation of the miR-338-3p/TNFAIP8 axis.

LOCATION CHOICE AND TAX RESPONSIVENESS OF FOREIGN MULTINATIONALS: EVIDENCE FROM ASEAN COUNTRIES

This study uses a firm-level dataset to examine the impacts of taxation on multinationals’ decisions to set up new foreign subsidiaries in developing ASEAN countries. It finds that while taxes play a critical role in multinational enterprises’ location choice decision, there is an important heterogeneity in the tax responsiveness. First, the tax sensitivity for high-tech firms is significantly lower than that for low-tech firms. Second, having a prior presence in the respective host country is associated with substantially lower tax responsiveness. Finally, in accordance with international-tax-avoidance considerations, the tax responsiveness is significantly diminished for affiliates with a connection to tax-haven countries.

Profit‐tax relationship, business group affiliation, and external monitoring in china

AbstractThis study examines whether business group affiliation weakens the sensitivity of income tax expense to pretax income, while external monitoring mechanisms mitigate the effect of group affiliation. We find that this sensitivity is weaker for Chinese listed firms affiliated with a top 500 business group than for unaffiliated firms. Economically, our coefficient estimate implies that group affiliation weakens tax sensitivity to income by 5.2% in relative terms. However, we find that tax sensitivity improved in the post‐2008 period and with the presence of strong monitoring mechanisms by means of tax enforcement, analyst scrutiny, and long‐term institutional shareholding. To the extent that unexplained variation in current tax expense at a given income level is indicative of aggressive tax behavior, our results suggest that effective external monitoring can mitigate this behavior in group‐affiliated firms.

Merenje i ocenjivanje elastičnosti poreza u Republici Srbiji

The paper analyzes tax elasticity in the Republic of Serbia in terms of tax revenues, personal income tax, corporate income tax, value added tax, social security contributions and excises for the period 2005-2019. Tax elasticity manifest sensitivity of tax forms to a change in the gross domestic product, where results have shown that indirect taxes have higher coefficients of elasticity compared to direct taxes. Results of empirical analysis have manifested that tax revenues are elastic to a change in gross domestic product, where 1% increase in GDP makes to a change of tax revenues for 1.31%. Also, tax elasticity is the highest at corporate income tax, while revenues from value added tax and excises are also elastic in the observed period. On the other hand, personal income tax and social security contributions are inelastic to a change in the gross domestic product in the Republic of Serbia.

Inflexibility in Income Shifting: Implications, Detection and Remedies

This study develops theory and discusses implications of inflexibility in tax-motivated income shifting. We show that inflexibility to adjust income-shifting strategies within a tax year in response to losses implies that income-shifting incentives are based on the expected rather than the statutory tax rate differential. This has important implications for empirical research as our finding suggests that using the statutory tax rate differential risks underestimating the tax sensitivity of income shifting. We propose several empirical remedies to mitigate the estimation bias stemming from inflexibility, whenever a direct test is not feasible. The remedies vary in their data requirements, which allows future work on tax sensitivities of income to take into account inflexibility.

What Will the OECD BEPS Indicators Indicate?

As part of its action plan against base erosion and profit shifting(BEPS), the OECD (2015) has proposed six indicators to measure profit shifting activity. These indicators add to past and ongoing efforts in academic tax research to empirically identify the scale and tax sensitivity of international profit shifting. In this paper, we discuss whether the proposed OECD indicators indeed represent methodological advances and critically assess their informative value. While a certain need for “easy-access” indicators to measure the relevance of the base erosion problem seems justified, our discussion reveals that the indicators come up with certain shortcomings, many of them acknowledged by the OECD (2015) itself, that pre-vent them from reliably tracing profit shifting activity in available international data. With one notable exception, the OECD's indicators lack consistent counterfactuals and comparison groups which are essential benchmarks for the observed data. Even the most promising approaches require representative and timely data that covers firms' global activity, including tax haven operations. With better access to such high-quality micro-level data, it will be more promising to empirically isolate the effects of profit shifting from relocations of real economic activity and value creation.

Heterogeneous tax sensitivity of firm-level investments

This paper introduces a stylized theoretical framework to identify five different firm types depending on their financial situation and their ownership structure. The model explains the heterogeneous tax sensitivity of firm-level investments. The empirical analysis uses a large firm database for 24 countries allowing for a quantification of the regime-specific investment responses to taxation and identifies the partly latent firm types using a threshold estimation approach. We find important differences in the tax sensitivity of investment across firm-types for dividend as well as for corporate taxation. The impact of corporate taxation is substantially higher for entrepreneurial firms than for managerial firms. In contrast, dividend taxation has a comparable negative effect for cash-constrained managerial firms and entrepreneurial firms but no significant impact on their unconstrained counterparts.

Employee protection and the tax sensitivity of wages: International evidence

This study examines whether employment protection legislation (EPL) affects the tax sensitivity of wages in an international setting. Using data on staggered corporate income tax changes across 18 OECD countries and a difference-in-differences approach, we find that tax hikes have a negative effect but tax cuts have no significant effect on changes in average employee wages. Stringent EPL can reduce the tax burden shifted to employees when the tax rate rises, especially in firms domiciled in countries with weaker investor protection. However, the effects of stringent EPL are insignificant when the tax rate falls. Further analyses show that EPL has more significant effects on the tax sensitivity of wages for more profitable and smaller firms. Our empirical results support the theoretical prediction that when tax-induced rents are distributed among shareholders and employees, the latter benefit from an improved bargaining position through stringent employee protection.

Tax havens compliance with international standards: A temporal perspective

AbstractThis paper contributes to the debate centering on the fight against aggressive tax avoidance practices through the release of international standards. We develop a model in which identical tax havens decide upon their compliance date while competing for onshore capital. The timing of these decisions depends on the effects of two opposing forces. One force is linked to the tax sensitivity of international capital and the other to the reaction of nearby potential capital. When the former force dominates, asynchronous compliance arises, which occurs even with identical tax havens and perfect information. However, when the latter force dominates, tax havens comply simultaneously. In any case, the loss of tax base within the onshore region is minimized when compliance is simultaneous and occurs at the earliest possible date. Surprisingly, compliance of just one tax haven is not necessarily better than no compliance at all.

Can European Banks’ Country-by-Country Reports Reveal Profit Shifting? An Analysis of the Information Content of EU Banks’ Disclosures

We create a novel database of hand-collected information from the country-by-country reports (CbCRs) of more than 100 multinational bank groups headquartered in the EU for 2014-2016. We compare this new dataset with information from Orbis and Bank Focus to assess in how far the new disclosure obligation increased transparency on banks’ tax avoidance behavior. Our descriptive analysis shows that CbCRs uncover a large fraction of worldwide profits and real activities in terms of employees of EU bank groups, especially in tax havens. We also document a striking disconnect between reported profits and real activity, noting considerable heterogeneity between different tax havens and bank groups from different headquarter countries. Regression analysis based on CbCR data and Bank Focus data leads us to expect a tax semi-elasticity of banks’ reported profits of about -4.6. In this regard, CbCRs are indicative of a more pronounced tax sensitivity than conventional databases suggest. However, the lack of important economic variables (total assets and staff cost) impedes an exact estimation of banks’ profit shifting based on CbCR data alone and with standard methods. These insights are especially relevant in the context of the ongoing political discussions whether to introduce a public CbCR for all large multinational firms in the EU.

Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy

We study the effect of state-level estate taxes on the geographical location of the Forbes 400 richest Americans and its implications for tax policy. We use a change in federal tax law to identify the tax sensitivity of the ultra-wealthy's locational choices. Before 2001, some states had an estate tax and others didn't, but the tax liability for the ultra-wealthy was independent of their domicile state due to a federal credit. In 2001, the credit was phased out and the estate tax liability for the ultra-wealthy suddenly became highly dependent on domicile state. We find the number of Forbes 400 individuals in estate tax states fell by 35% after 2001 compared to non-estate tax states. We also find that billionaire's sensitivity to the estate tax increases significantly with age. Overall, billionaires' geographical location appears to be highly sensitive to state estate taxes. We then estimate the effect of billionaire deaths on state tax revenues. We find a sharp increase in tax revenues in the three years after a Forbes billionaire death, totaling $165 million for the average billionaire. In the last part of the paper, we study the implications of our findings for state tax policy. We estimate the revenue costs and benefits for each state of having an estate tax. The benefit is the one-time tax revenue gain when a wealthy resident dies, while the cost is the foregone income tax revenues over the remaining lifetime of those who relocate. Surprisingly, despite the high estimated tax mobility, we find that the benefit exceeds the cost for the vast majority of states.

Tax Avoidance and Fiscal Limits: Optimization of Tax Bur-den on Economy with «Non-observed» Sector

The article deal with problem to optimization of the level of tax burden on economy with «non-observed» sector. The methodology of this study is the concept of the Laffer curve. The main method of investigation is the graphical method.The article presents different variants of graphical interpretation of the Laffer curve under conditions of «shadowing» the economy, revealing the main regularities, highlighting the «non- observed» sector, as well as reflecting the sensitivity of tax revenues to crisis phenomena.Authors draw the following main conclusions. First, if the economy is on ascending branch of Laffer curve and at the same time the government doesn’t take into account the presence of «non-observed» sector, then an increase in tax rates leads to significantly overstated expected values of tax revenues. Second, if the economy is on descending branch of Laffer curve, then an increase in the tax burden has a deterrent effect on tax revenues - economic effects of tax policy would create an incentive to drop employment and production in the official sector, increase tax evasion. Thirdly, the economy without tax compliance problems is much more sensitive to economic crises than the economy with the illegal sector.Thus, underestimation of «non-observed» sector of economy and neglect of the effects of income from tax avoidance call into the question the correctness of current fiscal policy.The obtained results can be used to model the dependence of tax revenues and output on tax burden in economy with «non-observed» sector and to develop a sound fiscal policy.

Measuring Tax Sensitivity of University Students

Tax compliance has become the main issue for all taxation authorities. Tax sensitivity, tax consciousness and tax awareness plays very important role in increasing tax revenues by increasing the level of tax compliance. Understanding and measuring of those factors is very important to generate more tax revenue and serving more public services. Tax sensitivity and tax consciousness of citizens are not only related to external variables such as tax rate, income and probability of audits and severity of fines, but also related to internal variables, such as citizens' knowledge of tax law, their attitudes towards the government and taxation, personal norms, perceived social norms. This study aimed to understand the perspective of university students for tax sensitivity. For this purpose, tax sensitivity levels of senior students of Gaziosmanpaşa University Faculty of Economics and Administrative Sciences were investigated. A total of 290 students’ tax sensitivity level was surveyed using questionnaire survey. Factor analysis, One-way ANOVA and independent sample t tests were used in the study.

Implications of Flexibility in Income Shifting under Losses

This study develops theory and discusses implications of inflexibility in tax-motivated income shifting. We show that inflexibility to adjust income-shifting strategies within a tax year in response to losses implies that income-shifting incentives are based on the expected rather than the statutory tax rate differential. This has important implications for empirical research as our finding suggests that using the statutory tax rate differential risks underestimating the tax sensitivity of income shifting. We propose several empirical remedies to mitigate the estimation bias stemming from inflexibility, whenever a direct test is not feasible. The remedies vary in their data requirements, which allows future work on tax sensitivities of income to take into account inflexibility.

Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy

We study the effect of state-level estate taxes on the geographical location of the Forbes 400 richest Americans and its implications for tax policy. We use a change in federal tax law to identify the tax sensitivity of the ultra-wealthy?s locational choices. Before 2001, some states had an estate tax and others didn?t, but the tax liability for the ultra-wealthy was independent of their domicile state due to a federal credit. In 2001, the credit was phased out and the estate tax liability for the ultra-wealthy suddenly became highly dependent on domicile state. We find the number of Forbes 400 individuals in estate tax states fell by 35% after 2001 compared to non-estate tax states. We also find that billionaires? sensitivity to the estate tax increases significantly with age. Overall, billionaires? geographical location appears to be highly sensitive to state estate taxes. We then estimate the effect of billionaire deaths on state tax revenues. We find a sharp increase in tax revenues in the three years after a Forbes billionaire death, totaling $165 million for the average billionaire. In the last part of the paper, we study the implications of our findings for state tax policy. We estimate the revenue costs and benefits for each state of having an estate tax. The benefit is the one-time tax revenue gain when a wealthy resident dies, while the cost is the foregone income tax revenues over the remaining lifetime of those who relocate. Surprisingly, despite the high estimated tax mobility, we find that the benefit exceeds the cost for the vast majority of states.