Tax Law Research Articles

Passthrough Entity Tax Scandal

Three dozen states have enacted laws since 2018 that are designed to provide passthrough entity owners with an unlimited federal tax deduction for state and local business income taxes. These “passthrough entity tax” regimes respond to the December 2017 federal tax law, which imposed a $10,000 cap on the state and local tax deduction. The new state laws generally allow passthrough entities to opt into paying an entity-level state income tax in exchange for a dollar-for-dollar benefit on their owners’ state personal income tax returns. The optional tax has proven to be immensely popular among passthrough entity owners across the country. But there is a problem with the passthrough entity tax concept: under the plain text of the Internal Revenue Code, the workaround does not work. The December 2017 law clearly precludes passthrough entities and their owners from deducting state and local income taxes beyond the $10,000-per-individual cap. And the legislative history of the December 2017 law—read in context—aligns with the statutory text. Surprisingly, the IRS has chosen to permit passthrough entity owners to utilize the workaround anyway. The IRS has not provided a plausible legal rationale for its position, but no one has standing to challenge the IRS’s position in court. Meanwhile, the IRS’s decision to allow the workaround is likely to cost the federal government more than $50 billion by the end of 2025, with most of the federal tax benefits flowing to passthrough owners with incomes of $1 million or more. In effect, the IRS has created a special tax preference—unauthorized by Congress—for hedge fund managers, law firm partners and other passthrough entity owners. And the Biden administration, notwithstanding its professed commitment to tax fairness, has acquiesced in this massive giveaway to the rich. The Biden administration and the IRS should reverse course immediately and apply the $10,000 state and local tax deduction cap to passthrough entity owners. As long as they permit passthrough entity owners to take advantage of the workaround, the Biden administration and the IRS will be abdicating their duty to enforce the law.

Paradox of Taxing the Rich

America does not tax its richest citizens, such as Elon Musk or Jeff Bezos, at all. This Article argues that part of the reason is the paradox that under current income tax law and theory, taxing the rich would cost resources that could be made available to benefit the not-rich. The Article explores the paradox in theory and practice, then points to ways to move beyond it. Taxing the rich will mean accepting compelling justifications for doing so other than providing resources to the not-rich. We must either pay the price or reset the terms of the debate to move society forward by breaking up large concentrations of private wealth.

Shifting Economic Allegiance of Capital Gains

Technological advances and the digitalization of the global economy have created an economic environment beyond the imagination of the original designers of the international tax system. Much scholarly attention has been paid to the question of how these economic transformations should affect which country is able to tax a multinational company’s income. But which country should be able to tax capital gains income from the sale of that company’s shares is an important and overlooked question. This Article answers this question. It concludes that taxing authority over capital gains income must be reallocated to the countries in which companies conduct business. In our modern, digitalized economy, this reallocation is necessary to align international sourcing rules with international tax law’s underlying principles. While this Article is a primarily a proof of concept, it also seeks to begin a conversation about ways to implement this reallocation and describes one possible approach: an annual mark-to market tax at the company level on increases in company value apportioned amongst source countries based on a set formula.

Yusuf Al-Qaraḍāwī's Theory of Zakat and Taxes and Its Relevance to Zakat and Taxation Law in Indonesia

Yusuf Al-Qaraḍāwī's Theory of Zakat and Taxes and Its Relevance to Zakat and Taxation Law in Indonesia

The effect of ESG, inventory intensity and managerial ownership on tax avoidance

This study aims to determine the influence of ESG (Environment, Social, And Governance), Inventory Intesity, and Managerial Ownership on Tax Avoidance. Tax Avoidance is a dependent variable and ESG (Environment, Social, And Governance), Inventory Intesity and Managerial Ownership are independent variables This type of research is carried out using a quantitative method and the sampling technique is purposive sampling. The population in this study is all companies listed on the Kompas100 stock index and the Indonesia Stock Exchange during the 2018-2022 period. The number of companies used as a research sample is 10 companies. The analysis method uses multiple regression analysis, T test and F test using Eviews 12. The results showed that the influence of ESG (Environment, Social, And Governance) had no effect on Tax Avoidance, Inventory Intesity had an effect on Tax Avoidance and Managerial Ownership had an effect on Tax Avoidance. Meanwhile, ESG (Environment, Social, And Governance), Inventory Intesity, and Managerial Ownership have a simultaneous effect on Tax Avoidance. This research is useful in providing this information to help the Directorate General of Taxes increase corporate income tax collection by companies, as well as direct company policies to comply with tax laws and avoid irregularities. For the authors, this information adds insight into ESG, inventory intensity, and tax accounting to reduce tax avoidance practices.

Higher legal education in Ukraine: vectors of reforms

It is indicated that the armed aggression of the Russian Federation against Ukraine, which has been going on for the third year, and the progress of European integration processes taking place in our country, require overcoming challenges in the field of higher legal education. One of the important such challenges is the increase in demand from employers for qualified graduates of higher educational institutions who have modern theoretical and practical training in the fields of tax, administrative, contractual, economic and corporate law. At the same time, there is a high demand among employers for specialists who specialize in the field of corporate relations for legal support of the business activities of international corporations working in the agricultural and other sectors of the Ukrainian economy; participation in international and national arbitration and commercial courts in the consideration of corporate disputes in the interests of companies that do not fulfill their obligations in favor of counterparties that maintain relations with the aggressor state or sanctioned persons; judicial protection of corporate rights of foreign and domestic investors; protection in international arbitrations of the interests of Ukrainian business companies that supply material property for the Armed Forces of Ukraine in case of violation of their obligations to them by foreign companies; participation in legal proceedings regarding the recovery of funds and other assets from sanctioned persons in favor of Ukraine or its business entities, etc. The article examines ways of reforming higher legal education in the conditions of armed aggression of russian federation against Ukraine and its European integration into the European Union. The current requirements of employers for law graduates of higher educational institutions are analyzed. The proposed vectors of reforming the educational process, in particular, from the corporate law course, through the introduction of innovative educational programs that meet international world standards, including EU requirements in the field of higher legal education. The need to develop and use interdisciplinary educational programs for the training of lawyers is substantiated. It is recommended that a separate section in these programs provide for the teaching of a corporate law course. Suggested topics from this course include, in particular, corporate law under martial law; adaptation of Ukrainian corporate legislation to the legislation of the European Union - status and prospects; the accession of Ukraine to the European Union as a factor in its victory over russian aggressor country and other topics. A comparative analysis of EU directives and regulations and Ukrainian legislation regulating corporate relations was made.

Tratamiento tributario de las criptomonedas en el Perú

Cryptocurrencies are digital intangibles, whose use has become widespread and their value has increased exponentially in recent years. However, despite more than a decade having passed since its creation, there is little regulation around cryptocurrencies; and, in particular, with regard to tax law, it is practically nil.Now, although in Peru there are still no specific tax regulations on cryptocurrencies, it is possible that some taxes, due to their general nature, are levied on some types of operations carried out with cryptocurrencies. This article seeks to identify the nature of cryptocurrencies and, based on this, verify whether the operations carried out with these assets fit into the income tax and general sales tax regulations. , in order to determine if some cryptocurrency operations are taxed in Peru.

Good Lawyers, Good Sports?: The Professional Identity of Sports Lawyers Representing Not-For-Profit Entities

ABA accreditation standards require law schools to develop students’ professional identity, including by encouraging “an intentional exploration of” the legal profession’s “values [and] guiding principles.” This Essay invites legal academia as well as practitioners to explore issues of legal ethics, professionalism, and, especially, professional identity in the context of a new area of legal practice: sports lawyers’ representation of “NIL collectives,” which are not-forprofit entities that college boosters establish to enable college athletes to benefit financially from their name, image and likeness (“NIL”). The work of sports lawyers advising NIL collectives offers an interesting case study for considering how professional values might come into play when lawyers counsel clients and particularly when lawyers counsel not-for-profit entities. NIL collectives may be skirting the tax laws that require not-for-profit entities to serve a public, not private, purpose or circumventing the NCAA’s rules, which forbid its member universities from using NIL compensation to recruit athletes. Even if they are not breaking the law, the collectives may appear to be acting unfairly in how they use financial inducements to assemble winning teams. Lawyers advising NIL collectives might take different views of whether to prompt the client’s representatives to consider the rightness or fairness of the enterprise. Their decision whether and how to counsel their clients about “fair play” in this context will be informed by their sense of professionalism and their understanding of professional values, which are not fixed and uncontested. Among other things, this example illustrates that broadly accepted professional values are only a small subset of the values that shape individual lawyers’ professional identity, influencing how they conduct their work. Therefore, to a large extent, law schools’ role in developing future lawyers’ professional identity requires helping students ascertain their own professional values and how their values apply to particular work.

Functions of taxes and other public liabilities. Can thefiscal function be performed by remuneration received bycompanies with State Treasury participation on the basisof civil law relations?

The scope of the functions of taxes and the entire tax system has not been precisely defined by the Legislator.Both fiscal and non-fiscal goals/functions are implemented by the tax system. Ensuring budget revenues to fulfillthe redistributive function is the foundation of the tax law system. On the other hand, all tax law norms also fulfillmany other functions, including: stimulation, development, protection, social or political. However, the indicatedfunctions are implemented by general legal norms, in particular public law – tax law, through public finance ties and units. Constitutional guarantees regarding the manner and procedure of shaping tax law provisions ensurethe security of citizens/taxpayers with regard to public law obligations. The statutory exclusivity in shaping taxesand other public levies provides a guarantee for counteracting the authoritarian imposition of „universal financialobligations” on citizens (entities from the sphere of private l aw).The issue to be analyzed is to determine whether fiscal and non-fiscal functions can be entrusted by the State toentities from the sphere of private law – including: commercial law companies with State Treasury participation.The actual entrustment of such functions would take place outside parliamentary control and without regard tothe requirements and regulations applicable to public finance entities and units. Additionally, the takeover and,consequently, the implementation of non-fiscal functions (e.g. stimulating or political) by commercial law companieswould be in violation of the provisions regulating business activity and the standards regulating the functioningof commercial law companies.In practical terms, the way civil law relations are shaped by companies with State Treasury participation, whichactually implement State monopolies, may result in the imposition of general, additional, economically unjustifiedfinancial burdens on citizens and private entities.

Non-sanction sources of an effective fiscal system interms of tax compliance: tax morale and mentality, taxjustice, trust in the tax apparatus and its activities

The article presents the results of the author’s empirical social research on non-sanction sources of tax complianceof a natural person (an individual taxpayer). This concept is understood as conscious and intentional compliancewith tax law and meeting the requirements of tax law. The fundamental assumption is the discovery,proven by behavioral economics, that in a tax state under democratic conditions, people pay taxes not only becauseof state compulsion. A fiscal system that is effective in terms of tax compliance is a system in which as manytaxpayers as possible consciously and intentionally comply with tax law and meet the requirements of tax law.The article presents the level of tax compliance among adult Poles as well as the level of forced and voluntarycompliance determined in our own empirical research. Then, the following non-sanction determinants of a citizen’swillingness to make tax payments were presented: tax morale, lack of experience of unintentional tax error, attitudetowards tax compliance, religiosity, tax mentality, perception of the structure of taxes as fair, perception of thefunctioning of the tax apparatus for the common good, trust in the tax apparatus.

Tax system or a collection of random regulations?

The tax system is the total amount of taxes that occur in a given country at a given time. It should be built in accordancewith tax principles and the principles of proper legislation, reconciling the functions of taxes with theinterests of taxpayers. When building an optimal tax system, the legislator should take into account at least thebasic tax principles: tax neutrality, tax certainty, efficiency, mitigation of the tax burden, protection of sources oftaxation, and cheapness of assessment and collection. Tax law, due to its specificity and interference with theright of ownership, should be understandable to its addressees. The principle of statutory regulation of publiclevies should limit the frequency of changes, but this is not the case. In Poland, despite the postulates, we stillhave a set of random regulations instead of a tax system.

The Influence of Trust in Tax Administration and Gender on Tax Compliance in Slovenia

The OECD urges governments to improve tax systems by studying taxpayers’ behavior to prevent tax non-compliance. This study focuses on individual Slovene taxpayers aiming to investigate the impact of trust in Tax Administration and gender on tax compliance. In the empirical part of the study, trust and tax compliance were the subject of descriptive statistical analysis, exploratory factor analysis and Spearman correlation coefficients. A Mann-Whitney U test and independent samples median test were performed to evaluate compliance gender differences in tax compliance. The findings unveil that trust in tax administration exhibits a statistically significant and positive correlation with tax compliance intentions in Slovenia while the differences in tax compliance between genders were not confirmed. Taxpayers' fairness perception to gain higher trust should be increased through sufficient information about tax laws and regulations.

Exploring the impact of tax divergence in financial reporting. A case of Albania (2022)

The interplay between tax divergence and financial reporting in Albania has assumed growing importance. This research, grounded in a post-positivist paradigm, seeks to elucidate the connection between these variables and discern which exerts the greater influence. The methodology is a qualitative dimension involved in the analysis of secondary data from businesses and the examination of tax laws and accounting standards. We elaborate the topic by taking on the one hand the main items of Accounting Standards and on the other hand the main items of the tax legislation in force. Furthermore, the research incorporates a quantitative component using a questionnaire to collect perceptions from professionals. This adds a descriptive or cross-sectional element to the research, but the primary emphasis remains on exploration and understanding, making it predominantly an exploratory research type, employing an ex-post-facto methodology. The study reveals that in the Albanian context, tax regulations wield a substantial impact on the practices of financial reporting. Variations in tax laws often prompt the application of creative accounting techniques, leading to information imbalances that can have ramifications for decision-making. Notable instances have illuminated how tax divergence can yield discrepancies in financial reporting, compelling the necessity for regulatory adaptations and elevated reporting standards. From this research, several pivotal recommendations have emerged. These emphasize the synchronization of legal and accounting frameworks through the reduction of permissible accounting and tax methods. This strategic alignment aims to enhance comparability while minimizing opportunities for divergence. Management is encouraged to acknowledge the significance of effective tax planning, institute a robustly supervised Code of Ethics, and actively endorse its observance. Tax authorities are urged to invest in expanded training, with an urgent imperative for streamlining tax legislation. This paper offers valuable insights for stakeholders such as investors, management, policymakers, regulators, to enhance financial transparency, benefit and compliance by addressing the impact of tax divergence on financial reporting in Albania.

Green taxes: Productivity effects of tax-based environmental regulations on heavily polluting firms

Environmental regulations, particularly tax-based measures, significantly impact firm productivity and corporate behavior. This study uses China's Environmental Protection Tax (EPT) law as a quasi-natural experiment to explore whether and how such tax-based environmental regulations influence the productivity of heavily polluting firms. Using a difference-in-differences approach, we find that the EPT law has positively impacted firm productivity by fostering higher research and development investments and encouraging the substitution of labor with capital. The productivity-enhancing effect is more pronounced for state-owned enterprises, large firms, firms with fewer financial constraints, firms receiving more government subsidies, and firms operating in less competitive sectors. These findings support the Porter hypothesis, suggesting that well-designed environmental regulations can stimulate innovation and improve competitiveness, ultimately enhancing productivity. This study underscores the importance of tax-based environmental regulations in promoting productivity and economic growth, providing valuable insights for policymakers aiming to balance environmental protection with economic development.

The Effect of Implementing PSAK 72 in Recognizing Business Income from Outsourcing Labor Provision Services and Reconciling Income Tax Returns and VAT (Case Study at PT XYZ)

The demands of globalization have led to increased cross-border transactions, necessitating the harmonization of financial reporting standards. PSAK 72, adopted from IFRS 15, was implemented in Indonesia on January 1, 2020, impacting various sectors, including the outsourced labor provision services sector. This study focuses on PT XYZ, examining the significant effects of PSAK 72 on income recognition and cost reporting, compared to the previous PSAK 23. The implementation of PSAK 72 resulted in a substantial increase in reported income and costs, despite minimal growth in customer numbers and contracts. The study also explores the fiscal adjustments required to reconcile income reporting between commercial financial reports and tax returns, highlighting the differences in income recognition principles between PSAK 72, the Income Tax Law, and VAT regulations. Through qualitative case study methods, including interviews, document analysis, and literature review, the research provides insights into the impact of PSAK 72 on financial reporting and tax compliance for entities in the outsourced labor services sector. The findings suggest the need for entities to adopt proper recording practices and for tax authorities to update regulations in line with evolving accounting standards to ensure legal certainty and minimize disputes.

Designing China's environmental tax schemes from the perspective of differential tax rates

The Environmental Protection Tax Law of the People's Republic of China was promulgated in 2018. However, it is uncertain whether the tax rates defined under the law are reasonable. Environmental tax reform would help the government improve the law's emission reduction effect. This paper aims to design tax schemes from the perspective of differential tax rates and propose environmental tax reform strategies. To support this goal, we adopted a directional distance function, meta-frontier analysis, and an exponential attenuation model to construct a differential tax rate model. Next, starting with the current differential provincial tax rates (scheme B), we proposed three-level differential tax rates, in which the adjusted provincial tax rates (scheme P), differential sector tax rates (scheme S), and differential province–sector tax rates (scheme P–S). Then, we analyzed three new tax schemes and proposed two step-by-step reform strategies. We selected SO2, NOx, and CO2 for empirical analysis. We found that in the short term, the government should prioritize scheme P and set more effective tax rates for SO2 and NOx. In the long term, the government should implement scheme P–S to consider both regional heterogeneity and industrial heterogeneity within a province. Specific measures should set a high tax rate for the light industry category and a low tax rate for energy production and heavy industry category. In addition, we propose that China should include a carbon tax in the scope of its environmental taxes. Our research provides valuable guidance for China's future environmental tax reform.

Research on Legal Issues of Tax Collection and Administration for Online Live Streaming Rewards

With the tide of the digital economy, an increasing number of individuals are showcasing their talents through online live streaming and earning reward income. However, compared to other income sources of the streamers, the nature of live streaming rewards presents a significant challenge to tax authorities due to its concealed characteristics. Based on the current legislative status in our country, this paper deeply analyzes the connotation and classification of live streaming reward income, revealing numerous issues faced in the field of tax collection and administration. These issues include but are not limited to the ambiguity of the taxpayer, unclear tax categories and rates, imperfect tax reporting systems, underdeveloped tax information sharing mechanisms, and an incomplete tax credit system. To effectively address these challenges, this paper constructs an overall framework around the elements of taxation and, in conjunction with existing tax laws and regulations, proposes practical and feasible suggestions for improvement.

Visualizing Humans Contributions to Tax Complience Research: A Bibliometric Analysis

Understanding the factors influencing taxpayer compliance with tax laws continues to be a focal point for many researchers. This study presents a bibliometric and visual analysis of tax compliance, particularly focusing on the research clusters related to tax compliance, covering studies published between 1977 and 2024 and indexed in the Dimensions database. The analysis aims to provide insights and guidance for future research in the field of tax compliance. A total of 500 studies on Tax Compliance were identified in the Dimensions database, with the majority being articles published in international journals. Australia, Austria, Canada, Italy, and the United States emerged as the most productive countries in terms of Tax Compliance publications. Additionally, a notable trend is the increasing number of multidisciplinary studies conducted by authors from various countries, particularly concerning human factors. This study recommends exploring multiple databases and refining future research through several clusters identified from these findings. Thus, researchers can gain a more comprehensive understanding of the complexity of Tax Compliance and the various clusters influencing it. The bibliometric mapping and visualization of Tax Compliance provide a foundation for advancing knowledge and promoting informed investigations in the field of human behavior regarding tax compliance

The Gulf Cooperation Council Legal Order, Institutions and Taxation

Tax scholars worldwide are understandably unfamiliar with the GCC legal framework and the GCC’s role in taxation. This is because the GCC’s main agreements and the organization itself do not classify legal acts into primary and secondary acts, define the scope of supremacy of GCC legal acts over GCC domestic laws, or illuminate the direct application or direct effects of GCC acts. Consequently, the classification and nature of the GCC’s tax laws and sources are unclear. This work is the first scholarly attempt to fill this gap. It also describes the main institutions of the GCC and the role played by each institution when enacting a tax act. This work briefly refers to the European Union and the United States when analysing the GCC legal framework in order to complement the European and American readers’ understanding.

The role of tax law in the national economy

The role of tax law in the national economy