scholarly journals An Estimable Model of Income Redistribution in a Federation: Musgrave Meets Oates

2019 ◽  
Vol 11 (1) ◽  
pp. 406-434 ◽  
Author(s):  
Kevin Milligan ◽  
Michael Smart
Keyword(s):  
Tax Avoidance ◽  
Tax Base ◽  
Tax Rate ◽  
Personal Taxes ◽  
Cross Border ◽  
State Tax ◽  
Decentralization Reform ◽  
National Tax ◽  
Optimal Taxes ◽  
Personal Taxation

We develop a theory of cross-border income shifting in response to subnational personal taxation in a federation and examine its implications for the excess burden of personal taxes. We show how a properly chosen federal tax rate can offset the fiscal externality between states and facilitate decentralization, even in a heterogeneous federation where unitary taxation is suboptimal. Optimal taxes depend on the elasticities of national tax avoidance and of cross-state tax base shifting. We estimate these elasticities around a tax decentralization reform in Canada, finding both to be empirically relevant. We discuss the implications for optimal federalism. (JEL D31, H21, H23, H24, H26, H71, H77)

scholarly journals The international Challenges and Finnish Corporate Taxation

2014 ◽  
Vol 2014 (2) ◽  
pp. 132-148
Author(s):  
Juha Lindgren
Keyword(s):  
Corporate Taxation ◽  
Corporate Tax ◽  
Tax Base ◽  
Tax Rate ◽  
Cross Border ◽  
Exchange Of Information ◽  
The Cross ◽  
National Tax

Abstract One of the main trends in Finnish corporate taxation during the last ten years has been the lowering of the corporate tax rate. The decision to lower the corporate tax rate to 20% from the beginning of 2014 also changed the approach in reforming the corporate taxation as it was decided to stay on the grounds of a broad tax base and not to make loopholes in it with targeted exceptions. The Finnish corporate taxation contains also some provisions that act as incentives for investment and the establishment of companies. However, the focus has been lately on the rules with purpose to protect the national tax base. Therefore, article handles both the specific anti avoidance rules and the application of the general anti avoidance rule on the cross-border transactions. Some particular challenges and the exchange of information are also taken into account before the conclusion with some ideas and aspects on future reforms.

scholarly journals CFC rules in the context of the proposed CCCTB directive

2011 ◽  
Vol 59 (7) ◽  
pp. 363-370
Author(s):  
Veronika Sobotková
Keyword(s):  
Tax Avoidance ◽  
The European Union ◽  
Corporate Tax ◽  
Tax Base ◽  
Tax Preference ◽  
Cross Border ◽  
Council Directive ◽  
Pros And Cons ◽  
Low Costs ◽  
Cfc Rules

In the proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) there have been introduced a specific anti-abuse provisions, CFC rules. These rules are aimed at tax evasions and tax avoidance. The basic principle is the protection of the tax base against erosion through practices of artificial income shifting. Generally, CFC rules prevent tax avoidance in a state of a shareholder by denying the deferred taxation of profits generated by its controlled company, which is a resident in a tax preference jurisdiction. Even thought the CCCTB directive would be aided easier and low-costs cross-border business as well as it would be restricted the harmful tax competition there are questions whether it is advisable to introduce these rules into such system of the CCCTB, whether these rules are compatible with the CCCTB and whether it is regulated properly. So, the focus of this paper rests on the interaction of the proposed CCCTB directive with existing CFC rules in the European Union. The paper deals with pros and cons, economic and legal perspectives these rules in the context of the proposed CCCTB directive.

The Relationship between Taxation, Accounting and Legal Forms

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Thomas Kollruss
Keyword(s):  
Tax Avoidance ◽  
Multinational Companies ◽  
Tax Planning ◽  
Tax Burden ◽  
Legal Form ◽  
Tax Rate ◽  
Eu Member States ◽  
Cross Border ◽  
Legal Forms ◽  
The Relationship

Abstract Legal frameworks have an enormous influence on the concrete choice of legal form, especially in (multinational) groups of companies. For example, tax regulations and accounting standards directly influence the legal enterprise’s structure, including the shareholding structures. However, the tax burden must not be understood as a static or a fixed quantity determined in advance. This is because the design or choice of companies’ legal form can also be used as a tool to gain competitive advantages and optimise the tax burden or after-tax profit. Accordingly, the tax-optimising choice of legal form can be used as an instrument for tax planning and internal financing (reduction of tax payments and optimisation of the group tax rate). Therefore, for groups of companies and multinationals, the question that arises is how and within what limits can they make effective use of the cross-border tax rate differential, particularly through structuring their legal form. However, using cross-border tax advantages may be prevented by the controlled foreign corporation (CFC) taxation, called the Anti Tax Avoidance Directive (ATAD), which was introduced in all EU member states from 1 January 2019 onwards due to European law: Art. 7, 8 of Directive 2016/1164 to combat tax avoidance practices. In multinational companies, there is a tension between the tax-optimising choice of legal form, including the structuring of shareholdings, and CFC taxation. It is important to identify the CFC taxation requirements according to ATAD or the respective member state of residence and to avoid these requirements when structuring individual circumstances or investments. An important finding here is that the factual prerequisites for CFC taxation under ATAD are not aligned with the accounting rules, especially controlling interest and control participation. Finally, from an overall perspective, tax-optimised corporate groups’ structure or the legal architecture is not a static variable but an evolving system composed of tax-optimised sub-systems or subgroup structures. This connection between the choice of legal form, shareholding structure and the legal system, tax planning, and tax optimisation in multinational companies is analysed and evaluated based on the Austrian CFC taxation (Sec. 10a CITA) and the German CFC taxation (Sec. 7 FTTA). Furthermore, the implications for companies and society, and the legislator, are highlighted. The article also deals with the relationship between law and tax planning.

Part II Economic Regulation, 7 Taxation

2021 ◽  
Author(s):  
Muchlinski Peter T
Keyword(s):  
Multinational Enterprises ◽  
Tax Avoidance ◽  
Economic Regulation ◽  
Profit Shifting ◽  
Tax Base ◽  
Digital Platforms ◽  
Alternative Approaches ◽  
National Tax ◽  
Integrated Operations ◽  
International Character

This chapter assesses how the integrated operations of multinational enterprises (MNEs) offer opportunities for tax avoidance not open to domestic firms, and how national tax authorities control this. The international character of the income-generating activities of MNEs, the national reach of individual tax administrations, increased international competition over attracting inward FDI and the need to obtain sufficient revenue from MNEs, many of which now operate as digital platforms without any physical nexus with the taxing jurisdiction, has led to calls for the reform of the international tax system. The need for greater international coordination of tax policies is clear. For now, however, national tax authorities remain the main regulators, still applying systems of taxation designed to deal with the international economy of the past, based on the arms-length principle and on the legal separation of companies in the MNE group. However, as the reality of national tax base erosion (base erosion and profit shifting, BEPS) becomes increasingly stark, alternative approaches are becoming politically acceptable, and both states and international organizations are beginning to grapple with the development of a new global model of international corporate taxation based on revised nexus and apportionment rules.

scholarly journals The Analysis of the Cross-border Corporate Profit’s Taxation

2019 ◽  
Vol 11 (2) ◽  
Author(s):  
Rita Koroseczné Pavlin ◽  
Diána Koponicsné Györke
Keyword(s):  
Special Focus ◽  
Corporate Tax ◽  
Tax Base ◽  
Member States ◽  
Tax Rate ◽  
Direct Taxation ◽  
Cross Border ◽  
The Common ◽  
The Given ◽  
A Company

Ensuring the same competition conditions for the companies in EU requires tax harmonization between Member States. In this paper, we review some elements of the harmonization efforts. We will discuss the OECD guidelines on direct taxation and the transfer price regulation as a way to regulate corporate tax optimization behaviour. Based on the Effective Average Tax Rate we introduce the differences in the taxation of profits between Member States. The Common Consolidated Corporate Tax Base is one of the key elements in the harmonization of cross-border corporate profit taxation, so our study has a special focus on the proposal. The undisputed advantage of the CCCTB would be the simplification of the taxation of transactions between Member States. However, it also raises the question of how it limits the ability of each Member State to attract capital and to what extent can assign the profit tax to the given country in proportion to the operation of a company and with this how to realize that the base of the corporate tax focuses on the place of activity.      

Local Sales Tax Competition and the Effect on County Governments' Tax Rates and Tax Bases

2004 ◽  
Vol 26 (1) ◽  
pp. 43-61 ◽  
Author(s):  
LeAnn Luna
Keyword(s):  
Local Governments ◽  
Predatory Behavior ◽  
Sales Tax ◽  
Tax Rates ◽  
Tax Base ◽  
County Governments ◽  
Tax Rate ◽  
Goods And Services ◽  
Cross Border ◽  
Long Run

Local governments can try to attract retail sales by keeping sales tax rates low and encouraging residents of other jurisdictions to cross-border shop. This predatory behavior must be balanced against the governments' desire to raise revenues. This study examines the extent to which local governments compete and attempt to limit cross-border shopping by changing sales tax rates. I estimate two equations, local sales tax rate and local sales tax base, in the short and long run. The local sales tax rate equation represents the county's tax policy choices and the sales tax base equation represents the demand function for the county businesses' taxable goods and services. The regression results show local governments do consider the sales tax rates of neighboring counties in setting their own rates in both the short and long run. The study also provides evidence that the sales tax rates of the home and competing counties will affect the sales tax base of the home county because shoppers will cross borders to take advantage of differences in tax rates between counties.

Compliance Costs and the Tax Avoidance-Tax Evasion Decision

1988 ◽  
Vol 16 (1) ◽  
pp. 31-66 ◽  
Author(s):  
James Alm
Keyword(s):  
Tax Evasion ◽  
Tax Avoidance ◽  
Individual Choice ◽  
Tax Base ◽  
Tax Rate ◽  
Legal Method ◽  
Tax Reduction ◽  
Tax Complexity ◽  
Net Revenue ◽  
The Government

The analysis of the individual's choice of illegal tax evasion has typically ignored an alternative, legal method by which taxes can be reduced: tax avoidance. This article analyzes the joint individual choice of evasion and avoidance; it also examines optimal government policy in such a world. Its principal conclusion is that the existence of another channel for tax reduction alters many of the conclusions of the simpler evasion literature. Specifically, government policies that reduce evasion may not increase the tax base because avoidance may increase instead, and tax rate reductions may be a powerful tool for generating tax base increases because reductions make both evasion and avoidance less attractive. In addition, optimal government choices depend critically upon its objectives. The government selects larger values for its instruments when its goal is net revenue maximization or when those individuals who evade are not valued highly in its welfare function. It also appears that greater tax complexity generates more tax revenues.

scholarly journals Corporate taxation in Iceland and the international challenge

2014 ◽  
Vol 2014 (2) ◽  
pp. 149-172
Author(s):  
Fjóla Agnarsdóttir ◽  
Rakel Jensdóttir
Keyword(s):  
Tax Avoidance ◽  
Legal Framework ◽  
Corporate Taxation ◽  
Point Of View ◽  
General Description ◽  
Corporate Tax ◽  
Tax Base ◽  
Economic Point ◽  
Tax Rate ◽  
The Past

Abstract This article aims to describe the development in the field of corporate tax law in Iceland, from both legal and economic point of view, with a focus on measures taken to protect the tax base and in order to try to make Iceland an attractive place for investment and establishment companies. First, there will be a brief general description of the development of the corporate tax rate in Iceland since 2004 and an overview of new taxes that have been introduced for companies over the past ten years. Second, there will be an analysis of how the Icelandic legal framework provides for incentives for investment and establishment of companies in Iceland. Third, this discussion is to be followed by a section on the steps Iceland has taken in order to combat tax avoidance. Fourth, there is a general description of the economic development for the corporate taxation in Iceland since 1990 and fifth, there is brief discussion of the development of revenues from the corporate tax. Sixth, a short overview of the real investment in the Icelandic economy is given, and finally, the main conclusions of this article will be summed up with a short discussion on the main challenges Iceland is currently facing in the field of corporate taxation in today’s globalised economy.

scholarly journals The CCCTB initiative as a possible solution to the conflict between the internal market and national tax autonomy

2019 ◽  
Vol 13 (1) ◽  
Author(s):  
Juho Mäki-Lohiluoma
Keyword(s):  
Tax Avoidance ◽  
Internal Market ◽  
Corporate Tax ◽  
Tax Base ◽  
Current Form ◽  
Form Analysis ◽  
Formula Apportionment ◽  
Border Trade ◽  
Tax Autonomy ◽  
National Tax

In 2016, the European Commission re-launched the project for a common consolidated corporate tax base with a two-step approach of two interconnected proposals of Common Corporate Tax Base (CCTB) and Common Consolidated Corporate Tax Base (CCCTB). The proposals faced fierce opposition from several Member States, even if few oppose combatting tax avoidance and eliminating tax obstacles of cross-border trade in principle. This article examines the CCCTB proposal as a possible solution to the conflict between the internal market and national tax autonomy. When focusing strictly on the said proposals in their current form, analysis of their capabilities to solve the conflict seem dim. On the other hand, if the CC(C)TB is seen as a system of formula apportionment and as an evolving framework, which can be enacted in parts of the internal market through for example enhanced cooperation, the outcast looks more positive.

A Study of Perceived Ethicality of Low Corporate Effective Tax Rates

2017 ◽  
Vol 32 (1) ◽  
pp. 87-104 ◽  
Author(s):  
F. Todd DeZoort ◽  
Troy J. Pollard ◽  
Edward J. Schnee
Keyword(s):  
Mediation Analysis ◽  
General Public ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Perceived Fairness ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Policy Practice ◽  
Participant Group

SYNOPSIS U.S. corporations have the ability to avoid paying domestic taxes to achieve an effective tax rate that is much lower than the statutory federal tax rate. This study evaluates the extent that individuals differ in their attitudes about the ethicality of corporations avoiding domestic taxes to achieve low effective tax rates. We also examine the extent to which the specific tax avoidance method used by corporations to access a low effective tax rate affects perceived ethicality. Eighty-two members of the general public and 112 accountants participated in an experiment with two participant groups and three tax avoidance methods manipulated randomly between subjects. The results indicate a significant interaction between participant group and tax avoidance method, with the general public considering shifting profits out of the country to achieve a low effective tax rate to be highly unethical, while the accountants find tax avoidance from carrying forward prior operating losses to be highly ethical. Further, mediation analysis indicates that perceived fairness and legality mediate the effects of participant type on perceived ethicality. Mediation analysis also reveals that sense of fairness and legality mediate the link between tax avoidance method and perceived ethicality. We conclude by considering the study's policy, practice, and research implications.

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