Tax Competition in a Fiscal Union with Decentralized Leadership

Tax rulings are binging decisions that taxpayers may seek from tax authorities to determine in advance how certain transactions will be treated fiscally. However, tax rulings can have an “alternative use”: that of granting a particularly advantageous fiscal treatment to specific taxpayers, typically large multinational groups willing to invest and create jobs in the tax jurisdiction concerned, without extending it to other taxpayers and without triggering a tax war with other jurisdictions. This article focuses on the European Commission’s enforcement of State aids rules against certain EU Member States in respect of tax rulings issue to a number of multinational companies. After a brief account of the economic rationale for tax rulings and their potential relevance in the context of EU tax competition, the article provides an overview of the Commission’s individual and general measures designed to attract multinational investors in return for significant fiscal advantages. The central part of the article provides an analytical assessment of the Commission’s on-going and closed proceedings on tax ruling practices, having regard to the four constituent elements of the notion of State aid. Regard is then had to the peculiar challenges involved with recovery of State aids granted in the form of tax rulings and, finally, to the systemic implications of the Commission’s initiatives for the division of competences between the EU and its Member States and for the establishment of a fiscal union.

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Tax Competition and Federal Equalization Schemes with Decentralized Leadership

SSRN Electronic Journal ◽

10.2139/ssrn.2357111 ◽

2013 ◽

Author(s):

Emilson Silva

Keyword(s):

Tax Competition ◽

Decentralized Leadership

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Tax competition and the activity of the regional tax policy

Voprosy Ekonomiki ◽

10.32609/0042-8736-2020-10-5-27 ◽

2020 ◽

pp. 5-27

Author(s):

S. M. Drobyshevsky ◽

N. S. Kostrykina ◽

A. V. Korytin

Keyword(s):

Tax Competition ◽

Tax Policy ◽

Fiscal Federalism ◽

Policy Instruments ◽

Tax Incentives ◽

Fiscal Autonomy ◽

Tax Legislation ◽

Tax Exemptions ◽

Open Question ◽

Regional Budgets

The problem of efficiency of regional tax expenditures is an actual issue of the fiscal policy and fiscal federalism in Russia. A large fiscal autonomy allows federal subjects to realize a more active tax policy to attract new investments. One cannot claim current fiscal powers of the Russian regions to be wide. However, not all the regions use even existing tax policy instruments. Moreover, out of the regions that use them only few provide incentives to stimulate investment decisions. Others use regional tax measures to support businesses that already have strong positions in the region. And it is an open question whether such tax incentives are efficient. On the other hand, an aggressive tax competition for investors can also be wasteful for regional budgets. In this paper, we calculate indicators that characterize the depth and scope of tax exemptions provided at the regional level. The calculations are based on the open tax statistics. Through the analysis of the tax legislation as well as the economic structure of selected regions, we reveal the inducements of their higher activity: federal regional tax policy, tax competition or benefits for budget-forming companies of the region.

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