Investment Tax Research Articles

The Impact of Serious Violations of Environmental, Labor, and Food Laws on Investment Tax Credits

The Impact of Serious Violations of Environmental, Labor, and Food Laws on Investment Tax Credits

The Determinants of Tax-Based Incentives: An Empirical Analysis of State Governments

To determine why state governments often use tax-based incentives, this study focuses on five major tax-based incentives: job creation tax credits, investment tax credits, R&D credits, property tax abatements, and customized job training subsidies. The statistical results indicate that a state government’s prevailing political ideology influences the choice of economic development activities. Accordingly, a more liberal state is less likely to use property tax abatements and customized job-training subsidies, and more likely to use job creation tax credits and R&D tax credits. Further, competition does not operate to trigger tax-based incentives. State economic conditions are not significantly related to the use of incentives. This result could imply the prevalence of political factors in the use of incentives.

Comments: Global CCS Projects’ CO2 Capture Capacity Grows Nearly 50% in 2022

CCS projects “accelerated” in 2022 with the CO2 capture capacity of all CCS facilities under development growing 44% over the past 12 months, bringing the total capacity of those projects to 244 mtpa of CO2. In a report released in mid-October, the Global CCS Institute said 61 new facilities were added to the project pipeline in 2022 for a current tally of 30 projects in operation, 11 under construction, and 153 in development. The Americas, especially North America, lead the world in CCS deployment. Recent US and Canadian governmental incentives were cited by the Institute in a regional overview. The US Inflation Reduction Act of 2022 includes enhancements to Internal Revenue Service Section 45Q and $369 billion in funding for climate and energy. The legislation extends the start of construction timing to the end of 2032; lowers capture thresholds, including direct pay; and expands transferability. The US Infrastructure Investment and Jobs Act includes more than $12 billion to be spent on CCS over the next 5 years. Canada’s 2022 federal budget includes an investment tax credit: the credit rate is 60% for direct air capture projects, 50% for all other carbon capture projects, and 37.5% for transportation, storage, and use from 2022 to 2030. From 2031 to 2040, the tax rates drop to 30%, 25%, and 18.75%.The boost in activity is reflected in recent CCS‑related updates reported in JPT: - ExxonMobil joined CF Industries and EnLink in a blue ammonia project in Louisiana that could capture and store 2 million metric tons of CO2 starting in 2025. - Technip Energies signed a letter of intent to design and build a large-scale floating storage and injection hub offshore Australia. It would be the world’s first, since to date, offshore carbon capture and storage projects use pipelines to transport CO2 to injection sites. - Equinor and Wintershall Dea have agreed to develop a comprehensive CCS supply chain system connecting Germany with CSS storage on the Norwegian Continental Shelf. - Texas and Louisiana are stepping up efforts to assume regulatory authority for an emerging wave of CCS projects.- In October, Canada released draft guidelines on how new oil and gas projects should demonstrate “best-in-class” greenhouse gas emissions performance. SPE’s CO2 Storage Resources Committee, under the SPE Carbon Dioxide Capture, Utilization, and Storage Technical Section, published Storage Resources Management System (SRMS) Guidelines to support the commercialization of CO2 storage. Released in September, the guidelines include suggestions for the application of the SRMS with the intent of including details of the processes of quantification, categorization, and classification of storable quantities so that the subjective nature of subsurface assessments can be consistent between storage resource assessors. The role of petroleum engineers in achieving technically sound results in energy transition projects of all kinds was highlighted during a presentation at the SPE Annual Technical Conference and Exhibition by Josh Etkind, global upstream deepwater digital transformation manager for Shell, and Rita Esuru Okoroafor, assistant professor, Texas A&M University, Harold Vance Department of Petroleum Engineering. In their presentation in the SPE Pavilion, “Transferable Skills: Petroleum Engineering and Geoscience Skills Are Shaping the Low-Emission Energy Transition,” they shared a chart showing the core oil and gas-related technical skill sets required for low-emission energy technologies. Etkind and Okoroafor emphasized the opportunities offered by the technologies shown in the chart below for upstream petroleum engineers and young engineers entering the industry. Looking only at CCS, the Global CCS Institute’s call for the growth of global CO2 storage to “billions of tons per year to meet climate targets” from the current 40 mtpa also points to a growing need for the relevant skills and technical knowledge.

Prospects of state regulation of venture entrepreneurship in Ukraine

Using general and special scientific methods and generalized statistical data, the article reveals the essence of venture entrepreneurship, identifies the features and influence of venture investments on the innovative development of the Ukrainian economy in conditions of limited state resources. It has demonstrated the need to develop a strategy to improve the investment climate and expand venture investment in Ukraine, the main measures of which should include: improvement of the legislative framework; development of the innovation ecosystem in accordance with major global trends; formation of a favorable investment climate and tax regime for investors; development and implementation of new organizational and legal forms of venture investment; creation of conditions for the development of infrastructure units of the entrepreneurship ecosystem; formation of conditions for the development of innovative entrepreneurship in the real sector of the economy, as well as in the scientific and technical sphere, etc. It concludes with recommendations on the need to increase the volume of venture capital investments in high-tech projects with an emphasis on the defense industrial complex, IT sphere and construction, among others.

Practical Applications of Option-Enhanced Tax-Smart Portfolio Value

Since the origination of the investment discipline, tax implications have always been secondary to investment decisions. Investment education resources and those for training investment professionals do not emphasize after-tax performance. Another idea favored by the investment community is that when investing, a more accurate measure of performance is not how much one makes but how much one keeps. These two ideas conflict since potential tax obligations from selling securities can significantly impact the actual value of investments. In <b><i>Option-Enhanced Tax-Smart Portfolio Value</i></b>, from the April 2022 issue of <b><i>The Journal of Portfolio Management</i></b> and other articles about the impact of taxes on investments, author <b>Andrew Kalotay</b> of <b>Kalotay Advisors</b> contends that there must be a change in how taxable securities are valued and how the performance of taxable investment portfolios is derived. “To discuss how you can improve after-tax performance intelligently, you must develop a way to measure it,” says Kalotay. This philosophical change in investment valuation would facilitate tax-loss harvesting decisions, enhance investment performance measurement, and provide a better way to compare the performance of fund managers and advisers. Kalotay believes that “there should be much more attention by academics and practitioners on the critical topic of after-tax performance.”

Antecedents and Consequences of Implementation Work From Home Policy At The Foreign Investment Tax Service Office One In South Jakarta

This research was motivated by the instructions to work, study and worship at home during the COVID-19 Pandemic. State Civil Administration (ASN) are instructed to work at home or later called Work From Home (WFH). The application of the WFH concept has a fairly high level of flexibility. The types of work for ASN that are excluded from carrying out the flexible concept are jobs that are directly related to service users, both the community and other stakeholders. WFH implementation does not always go well, the emergence of a cultural shock to the use of technology, the responsibility to manage household activities that can affect the stress level of employees, as well as disturbances from family members and other problems that occur at home lead to the inability of employees to concentrate while working at home which will effect on employee performance. The Foreign Investment Tax Service Office One (KPP PMA Satu) routinely performs periodic performance measurements. Performance measurement is carried out using the Balanced Scorecard (BSC) strategy. The Organizational Performance Value (NKO) of KPP PMA Satu in 2020 has decreased compared to 2019. Several factors that influenced the decline in NKO were the uncertain global economic conditions due to the pandemic and various online services. This research was conducted at KPP PMA Satu using 6 (six) variables with the aim of knowing the factors that influence the implementation of the WFH policy and the effect of the implementation of the WFH policy on the performance of KPP PMA Satu employees. The number of samples used are 111 employees who implement the WFH policy. The research method used is quantitative with a causal approach where the data obtained is processed using the Structural Equation Modeling (SEM) method. The results obtained are that work from home has a significant effect on employee performance.

Implementation Evaluation Tax Holiday and Tax Allowance Policies on the Growth of Foreign Investment

This study investigates the impact of tax holidays and tax allowance policies on the development of foreign investment in the BKPMD South Sulawesi Province from 2017 to 2020. Documentation is used for data collection techniques that involve direct observation of the object of study. Descriptive statistical analysis, classical assumption tests (normalizes test, heteroskedasticity test, multicollinearity test), and testing of the entire hypothesis via partial testing, simultaneous testing, and determination coefficient test are employed for data analysis. This study demonstrates that applying tax holidays and tax allowances do not affect the growth of a foreign investment. Therefore, the government should streamline licensing and conditions and promote policy facilities, so investors are fully aware of them. This is because factors other than tax incentives determine investment, such as the size of the domestic market, wage levels and worker productivity, infrastructure availability, government spending growth, inflation rates, interest rates, and investment risks. Tax exemptions and tax credits are still inadequate for enthusiasts. This demonstrates that the tax holiday and tax credit cannot be considered effective and efficient regarding investor interests. We recommend that the government or relevant agencies immediately improve and review the licensing process at the central and regional levels so as not to diminish investor confidence in Indonesia's legal certainty; improving the investment climate through better regulations can positively impact the investment climate. The investment tax incentive policy must be widely publicized and promoted so that investors can be aware of it and benefit from it.

The Impact of Tax Policy on Investment Decisions: A Case Study in the Manufacturing Industry

This research delves into the intricate relationship between tax policy and investment decisions within the manufacturing industry. Through a comprehensive literature review, the study aims to elucidate the impact of tax incentives on investment behavior, particularly focusing on their effectiveness in stimulating innovation and competitiveness among manufacturing firms. Employing qualitative research methodology, the selection of literature involves identifying and analyzing scholarly articles, books, and reports that provide insights into the research topic. Data collection entails systematic gathering of information from selected sources, while data analysis involves identifying themes, patterns, and relationships within the literature. The findings underscore the pivotal role of tax incentives, such as investment tax credits, accelerated depreciation, and research and development (R&amp;D) deductions, in shaping investment decisions within the manufacturing sector. Moreover, the differential effects of tax policy reforms on firms of different sizes, the influence of global dynamics including international tax competition and trade liberalization, and the implications for future research are discussed. The study contributes to a deeper understanding of the mechanisms through which tax policy influences investment decisions, offering insights for policymakers and businesses to navigate the complexities of the global economy more effectively.

Investment tax benefits in China: special features of legal regulation and comparative analysis with Russian practices

The subject. The article discusses the legal regulation of investment tax incentives in China. The choice of the object of research is determined by the prospects of comparative legal studies of the experience of states bordering the territories of the Russian Far East, where numerous zones with special economic status have been created, within which preferential business regimes are applied.Purpose of the study. Despite the diversity of special economic zones in the Russian Federation and the constant creation of new zones, preferential regimes do not always prove their effectiveness. Based on the above, it seems very relevant to analyze the best international and national practices in order to develop criteria for the effectiveness and efficiency of preferential tax regimes for zones with special economic status.Thus, the specifics of the comparative legal method of research always consists in the fact that it is not necessary to borrow foreign experience, but it is also possible to find the best practices within domestic legislation. Therefore, it is necessary to look for ways to ensure that Russian tax legislation laying the foundation for supporting innovation in our country.Methodology. The research was carried out with the application of the formally legal interpretation of legal acts as well as the comparative analysis of international and Chinese legal literature. Structural and systemic methods are also the basis of the research.The main results. As China seeks to transform from a mass producer of inexpensive goods to a high-end producer, the national government is making significant efforts to encourage targeted investment in research and development (R&amp;D) and technological innovations. This has led to the fact that China has awarded the technology sector the title of strategic, and its state support has increased significantly.Сonclusions. On the base of the analysis of the main tax incentives in China, the author comes to the conclusion that a significant part of them is aimed at enterprises engaged in research and development, as well as technological innovations. Also, a significant part of tax benefits is provided to enterprises based on the choice of the geographical area of the company's establishment. The conclusion is made about the possibility of applying the Chinese experience in Russia in reforming preferential tax regimes.The support for companies in the technology sector in Russia is especially important due to the policy of recent years aimed at establishment of tax benefits for IT companies. Both Russia and China strive to promote the accelerated development of innovative industries, the implementation of priority investment projects, as well as the development of small business.

Maximizing financial benefits of investment tax allowances in renewable energy portfolios

ABSTRACT Policy makers offer fiscal incentives to encourage companies to invest in renewable technologies. This work considers generation companies that take advantage of fiscal incentives to minimize income tax. Thus, a novel mixed-integer linear optimization model that minimizes total tax payments of a company owning a portfolio of energy projects is designed. The model strategically manages depreciation, tax loss carryforward, and tax incentive use for minimizing discounted income tax. A set of revenue scenarios was employed to analyze model results. The proposed model yields tax savings between 8.2% and 19.2% of the company’s taxes. Tax savings are significantly larger for companies with a large generation portfolio; which represents a clear advantage over small generation companies. The proposed model can also be employed by policy makers to adjust future ITA policies by taking advantage of the anticipative knowledge of the optimal tax strategies implemented by generation companies.

Dynamic effects of natural resource abundance, green financing, and government environmental concerns toward the sustainable environment in China

The factors affecting sustainable environmental performance have recently been a heated debate among policy experts. Therefore, this study investigates the role of natural resources, green financing, and environmental regulations in reducing carbon emissions in China from 2000 to 2019. The study employs an advanced econometric estimation entitled Bootstrap ARDL proposed by McNown et al. (2018). The stated method covers advanced cointegration features in the dynamic process. The long-run estimations of Bootstrap ARDL demonstrate that natural resource management, green investment, and environmental taxes abate environmental emissions. However, economic growth was a critical contribution to China's carbon emissions, suggesting greater potential for effective measures. Similarly, the short-run estimations confirm that natural resources, green investment, and environmental taxes are conducive to enhancing environmental sustainability. However, their marginal contribution is more substantial in the long run. Lastly, the Error Correction Term is significantly negative and implies a convergence toward steady-state equilibrium in the long run with a 23% quarterly convergence rate. Based on the findings, this study suggests that China could efficiently improve its environmental quality through effective natural resources management, green investment, and the implementation of carbon taxes.

Summaries of Papers In This Issue

Summaries of Papers In This Issue

The relationship between investor tax preferences and the payout methods of JSE listed companies

Background: Investor tax preference parameters have been included as an explanatory variable for changes in payout methods in developed countries. There is, however, a lack of research in this area in developing countries. Tax reform in South Africa – comprising a change in the tax regime and successive increases in tax rates – offers a unique setting to examine investor tax preference parameters as a contribution to literature.Aim: This study investigated the relationship between investor tax preference parameters (of individuals, corporates, and institutions) and payout methods (namely dividends, capital distributions, additional shares, and share repurchases).Setting: The study used data collected in respect of companies listed on the Johannesburg Stock Exchange (JSE) in South Africa for the financial reporting periods ranging from 2012 to 2019.Method: A regression analysis of panel data was employed to relate the changes in payout methods to changes in profits, investor tax preference parameters, the lagged levels of variables, and ownership concentration dummy variables.Findings: The empirical evidence of this study revealed that investor tax preferences affected dividends as a payout method. This accordingly suggests that the tax differential of dividends and capital gains affect the supply of dividends in South Africa.Conclusion: The study contributes empirical evidence in support of the taxes and tax clienteles theory from a developing country perspective. This could suggest that tax reform in a developing country, in this case, South Africa, has a more pronounced effect on payout methods than in developed countries.

The Nexus between Foreign Direct Investment, Open Commerce, ICT Taxation and Climate Change in a Developing Country

The study explores the relationship between foreign direct investment (FDI), information and communication technology (ICT) taxes, open commerce, and CO2 pollutants in Nigeria from 2010 to 2020 using Pearson Product Moment Correlation (PPMC). CO2 emissions figures are collected in Million Tonnes from the World Data Atlas. Data on ICT taxes and FDI are gathered from the Federal Inland Revenue Service and the OECD database respectively. Trade openness data are obtained from the World Economic Indicators. The findings show that FDI has a very strong negative link with CO2 emissions in Nigeria. Similarly, there is a clear negative association between ICT taxes and FDI. However, there is a significant positive correlation between ICT taxes and CO2 emissions. Open trade has an intangible negative relationship with CO2 and an intangible positive relationship with FDI and ICT taxes. Based on the findings, the study provides recommendations to strengthen government policies in the respective areas of concern.

Digital Transformation on Enterprise Green Innovation: Effect and Transmission Mechanism.

With the development of blockchain, big data, cloud computing and other new technologies, how to achieve innovative development and green sustainable development in digital transformation has become one of the key issues for enterprises to obtain and maintain core competitiveness. However, little of the literature has paid attention to the impact of digital transformation on enterprise green innovation. Using the data of Chinese A-share listed companies from 2010 to 2020, this paper empirically analyzes the impact of enterprise digital transformation on green innovation and its transmission mechanism, by constructing double fixed-effect models. The results show that digital transformation has remarkably promoted the green innovation of enterprises. R&D investment, government subsidies, and income tax burden have played a conductive role between digital transformation and enterprise green innovation. Furthermore, digital transformation can significantly promote the high-quality green innovation of enterprises and also plays a more significant role in promoting the green innovation of high-tech enterprises and state-owned enterprises. A robustness test is carried out by using the lag data and changing the measurement methods of the dependent variable and independent variables, and the research conclusions are still valid. Based on resource-based theory and dynamic capability theory, this paper reveals the impact path of digital transformation on enterprise green innovation, further expanding the research field of digital transformation and enriching the research on the influencing factors of enterprise green innovation. This paper provides policy suggestions for the government to improve the enterprise green innovation level by increasing government subsidies and providing tax incentives and also provides reference for digital transformation enterprises to accelerate green innovation by increasing R&D investment, obtaining government subsidies, and acquiring tax policy support.

Sizing Assessment of Islanded Microgrids Considering Total Investment Cost and Tax Benefits in Colombia

This paper deals with the optimal sizing of islanded microgrids (MGs), which use diesel generators to supply energy in off-grid areas. The MG under study integrates photovoltaic (PV) and diesel generation, a battery energy storage System (BESS), and an inverter for the connection between AC and DC voltage buses. Levelised cost of energy (LCOE) and annual system cost (ASC) are considered economic indicators, while the loss of power supply probability (LPSP) is used as a reliability indicator. Fiscal incentives such as the tax benefits and accelerated depreciation applied in Colombia are considered for the optimally sizing of each MG element. Solar measurements were taken at a weather station located in the main campus of Universidad de Antioquia in Medellin, Colombia at a latitude of 6.10 and longitude of −75.38. The objective function is the minimization of the total energy delivered from the power sources that successfully meets the load. The model was implemented in Python programming language considering several scenarios. Two cases were evaluated: the first one considered PV panels, a BESS and a diesel generator, while the second one only considered PV panels and a BESS. The option that does not include the diesel generator turned out to be the most expensive, since additional PV and BESS resources are required to meet the load profile. Furthermore, it was found that the LCOE was lower when tax benefits were taken into account.

Perilaku Koruptif Dalam Praktik Manajemen Laba: Sebuah Tinjauan Perspektif “Ati Mapaccing” dalam Falsafah Bugis

Earnings management emerged in the field of financial accounting as a consequence of the efforts of managers or financial statement preparers to regulate the earnings cycle for personal and/or corporate interests or benefits. This study aims to gain an understanding of the opinions and behavior of informants including management accountants, public accountants, investment advisors, tax examiners and Bugis cultural observers on earnings management practices carried out by managers and viewed from the perspective of Classical Bugis philosophy. This type of research is a qualitative research with a hermeneutic approach, or more specifically an interpretive approach. Sources of data in this study are primary data and secondary data. Data collection techniques used in this research are interviews, documentation, literature study, internet searching. The data analysis technique was carried out through four paths, namely data reduction, data presentation, data validity test and conclusion drawing.The results show that in the perspective of management accountants and public accountants, earnings management practices cannot be viewed as earnings manipulation as long as these practices are carried out within the framework of accounting standards. They also argue that earnings management is not said to be corrupt behavior, unless the practice is not carried out in accordance with accounting standards. While the views of investment advisors and tax inspectors, the practice of accounting standards carried out with any pattern and strategy is a reflection of corrupt behavior because of a corrupted mind. They argue that earnings management practices are always carried out systematically based on certain motivations and interests. Earnings management is a practice that is of no value to the company's stakeholders so this practice should be avoided. Viewed from the perspective of ati mapping that earnings management can be seen from the good or bad intentions of a manager in carrying out his practice, motivation or interests that are detrimental to other parties, it can be said that the practice of earnings management is an act of fraud that can be categorized as a corrupted line of thought.

A Cross-Tabulation to Know the Relationship between Financial Performance and Leverage on a Company’s Tax Reporting and Tax Compliance

Purpose: Classify the characteristics of taxpayers in paying tax compliance based on financial performance, leverage, and tax reporting and analyze the relationship between financial performance and leverage on tax reporting and tax compliance companies. Design/method: This research was conducted at the Office of the Foreign Investment Tax Service in the Six Regional Offices of the DJP Jakarta, especially the Directorate General of Taxes (KPP PMA ENAM). The population in this study were corporate taxpayers registered at KPP PMA ENAM 2015–2018, namely 750 taxpayers. Sampling using the purposive method obtained as many as 660 companies. Cluster analysis and cross-tabulation were used as analysis methods in this study. Findings: In particular, corporate tax reporting depends on financial performance, but only on high-level corporate clusters that depend on leverage as well. While in the low company cluster (Cluster 1) tax compliance is influenced by these three variables, in the medium cluster (Cluster 2) tax compliance does not depend on these three variables, while in the high cluster (Cluster 3) tax compliance is only influenced by leverage. Originality: The cluster analysis method and the cross-tabulation method are used to analyze the effect of the financial performance and leverage variables on the tax reporting and tax compliance variables.

Influence of Green Investment, Environmental Tax and Sustainable Environment: Evidence from ASEAN Countries

Currently, sustainable environment has become a global requirement due to the uncertainty of the environmental conditions and require researchers' and policymakers' attention. Therefore, the present research examines the role of green investment and environmental taxes on the sustainable environment in ASEAN countries. The researchers have also used economic growth (EG) and population growth as the control variables. The present article has used secondary sources of data collection such as the Organization for Economic Co-operation and Development (OECD) and world development indicators (WDI) and extracted secondary data from 1981 to 2020. The current research has applied the Augmented Dickey-Fuller (ADF) test to examine the stationarity and applied the panel pooled mean group (PMG) model to test the association between the constructs. The results revealed that green investment and environmental taxes have a negative linkage with carbon (CO2) emission that shows a positive linkage with the sustainable environment in ASEAN countries. The results also exposed that EG and population growth have a positive linkage with CO2 emission that shows a negative linkage with the sustainable environment in ASEAN countries. The present article has provided the guidelines to the policymakers while establishing new regulations regarding sustainable environment through green investment and environmental taxes.

Investment Promotion, Tax Competition, and Industrial Land Price in China—Evidence from the Corporate Tax Collection Reform

Fiscal arrangements have significant influences on the use of land in China. The tax collection reform in 2002 stipulates that firms establish after the reform are levied by the state tax bureau while those established before the reform continue to be levied by local tax bureaus. The reform divided similar firms into two groups by the date of establishment and created a discontinuity in the tax enforcement for those firms established around the date of the reform. Based on the land transaction data on a parcel basis, we used the regression discontinuity design to study the impact of reform on industrial land prices. We found that the reform has resulted in significant discontinuities in land prices. The firms levied by the state tax authority receive lower land prices relative to the same type of firms that are levied by local tax authorities. The intuition is that tax collection reform has brought an exogenous constraint on local governments’ ability to engage in tax competition. As a countermeasure, local governments use low-cost land as another way to attract investment.