Under a worldwide tax system, firms pay taxes on their domestic income and repatriated foreign income, whereas under a territorial tax system repatriated foreign income is exempt from taxation. We ...examine whether worldwide tax systems reduce the incentives of multinational corporations to engage in tax management in their foreign subsidiaries. Using two quasi-natural experiments, we show that multinationals lower the effective tax rates in their foreign subsidiaries after countries switch from a worldwide to a territorial tax system. Thus, multinationals subject to a worldwide tax system face competitive disadvantages compared to competitors from countries with a territorial tax system.
In an increasingly globalized world, the design of international tax systems in terms of the taxation of foreign corporate income has attracted much attention from policy makers and economists alike. ...In the past, Japan's worldwide tax system taxed foreign source income upon repatriation. However, to stimulate dividend repatriations from Japanese-owned foreign affiliates, the Japanese government introduced a foreign dividend exemption system in 2009 that exempted dividends remitted by Japanese-owned foreign affiliates to their parent firms from home-country taxation. This paper examines the effect of this dividend exemption system on profit repatriation by Japanese multinationals. We find that the response of Japanese-owned affiliates to the dividend exemption was heterogeneous. More particularly, foreign affiliates with a large stock of retained earnings were generally more responsive to the reform and significantly increased dividend payments to their parent firms in response to the enactment of the dividend exemption system. Dividend payments by these affiliates also became more sensitive to withholding tax rates on dividends levied by host countries under the new exemption system.
•Japan introduced a territorial tax system (dividend exemption system) in 2009.•We examine the impact of this tax reform on dividend repatriations.•Our affiliate-level data contain information on dividends paid to Japanese parents.•We find that affiliates with large retained earnings were responsive to the reform.•Their dividend payments became more sensitive to dividend withholding tax rates.
The aim of the paper is to determine to what extent the strengthening of the transparency of the Ukrainian economy and its incorporation in international tax competition affects the tax policy of the ...country and the peculiarities of its tax system. In the study, the logical analysis of the direct and inverse relationship of changes in taxation with such manifestations of globalization, as the movement of capital and labor resources from Ukraine and to the country, is combined with an empirical (regression) analysis of the relationship between globalization and the main characteristics of the Ukrainian tax system. It is proved that the increase of incorporation of Ukraine in globalization processes, despite the reduction of taxes on the main factors of production, is accompanied by an increase in the general level of tax burden on the economy (tax rate). The above mentioned is a consequence of increase of other taxes, including excise, caused both by internal needs of Ukraine (conducting the policy of fiscal consolidation caused by large public debt, and increasing defense expenditures) and its international obligations (EU Association Agreement). The tax system in Ukraine is much stronger (about 25%) influenced by the general index of globalization in comparison with its subindex characterizing the economic component of globalization. Obviously, this is owing to the greater influence on taxation in Ukraine of other components of globalization such as political and social one. The results show that the growth of the globalization index is accompanied by rather expected effects such as reduction of corporate profit tax rates and personal income tax, transferring the tax burden from capital to labor and, to a greater extent, on consumption, improving business conditions in the context of tax payments, and specific increase in the general level of tax burden on the economy, significant losses of the state that is not so much from the reduction of tax rates as from the erosion of the tax base on income, which is the result of a combination of negative effects of external and internal factors; the threat of escalating the policy of low tax rates. It is recommended to the Ukrainian Government to focus increasingly on the tax evolution trends in post-socialist EU countries to strengthen Ukraine`s position in tax competition with this group of countries.
To encourage the repatriation of foreign subsidiaries’ profits, Japan and the UK switched from a worldwide tax system to a territorial one in 2009. These home country tax reforms could cause the ...unintended result of allowing multinational corporations (MNCs) to invest more in low-tax countries due to the possibility of profit shifting. Using the dataset of South Korea and the synthetic control method, we find that the transition to a territorial tax system causes Japan, a country with a relatively high corporate tax, to increase its investment in South Korea.
•We estimate the effect of home country tax reform on FDI into South Korea.•We use the synthetic control method to construct a counterfactual.•We perform placebo tests to evaluate the credibility of the results.
We examine the role of carbon risk in dividend policy, and how its effect varies between imputation (paying franked dividends) and classical (paying unfranked dividends) tax environments in the ...unique experimental setting in Australia. We find that the probability of paying dividend and dividend payout ratio is lower for firms in the highest-emitting industries (polluters) relative to non-polluters, subsequent to ratification of the Kyoto Protocol. While the post-Kyoto reduction in the likelihood of paying dividend is not significantly different, the reduction in payout ratio is smaller in the imputation environment than classical tax system, highlighting the significance of imputation tax environment only on the impact of carbon risk on dividend payout rather than decision to pay. We further document that the post-Kyoto reduction in dividend payout of polluters is driven by their relative increase in earnings uncertainty. The evidence suggests a causal influence of carbon risk on firm dividend policy.
The rational functioning of the tax system is a significant problem for any state. Evaluation of the tax system performance is usually carried out considering interest only of one part – either ...government or business or related to the specific narrow parts of the tax system, like an analysis of a particular tax, thus not allowing to perform a full-fledged assessment. One of the problems that are crucial for the tax system’s vitality – is its reliability.The purpose of the article is to develop an approach of estimating and assessing the tax system reliability. Another two major criteria of the tax system functioning are equity and efficiency, which form the basis of the tax system optimization for finding their rational combination. The process of such multi-criteria optimization is usually associated with irreducible incomparability of the criteria.Methodology– as a tool proposed Weibull distribution, S-shaped curve, as well as a three-tiered scale for determining the level of the tax system reliability. Using Kendall’s Concordance Coefficient, the resulted data was processed and taxes and criteria on which concessions could be made were determined.Findings – the analysis has shown that the difference between the opinion of experts regarding the ranking of taxation criteria was related to their affiliation – state or business. To find a solution in this case method of successive concessions has to be applied, which requires a ranking of relative single indexes of taxation criteria, as well as taxes that are associated with them.Originality – for formalization of the process of dealing with incomparability of criteria, proposed concepts of business-oriented aspect of tax optimization, which is aimed at both business entities, as well as on individuals and state-oriented aspect of tax optimization.
The pandemic has accelerated the existing trends, of which digitalization particularly stood out, a growing number of persons and companies operating in the online environment, and has emphasized the ...issues related to the current taxation system of the companies. These trends have a major impact on existing tax bases and lead to the need to reflect on how to create an efficient, sustainable and fait new tax framework, based on the total mix of taxes.
Abstract Electronic tax documents represent an important advance in the process of digital transformation of tax administrations in Brazil. However, the current system still presents several ...challenges to be overcome. In the technological aspect, vulnerabilities and inconsistencies typical of a centralized model can be mentioned. In addition, from a functional perspective, the lack of control over taxes payments is a major concern. In this context, Blockchain technology emerges as a possibility to complement the current model, thanks to its characteristics, such as traceability, immutability, security and transparency, which are essential in the tax environment. This work proposes four application models based on Blockchain aimed at monitoring the payment of taxes, using different types of integration with existing systems. After the presentation and description of the models, they are discussed and compared, in order to reinforce their main characteristics, facilitating decision making in possible future applications.
In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits ...abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. The shifted profits originate largely in the UK headquarters and its domestic affiliates, not in other high-tax affiliates.
The tax system is a product of human thought, decision, and action because of the evolution of human society, created to meet financial objectives, to which are added the objectives of the economic ...and social system. The general objective of the research on the evolution of the tax system in Romania is to understand the transformations and changes that have taken place in the country's tax system over time. This research aims to analyze the legislative, economic, and social changes that have affected the tax system and impacted on revenue collection for the state. The research on the evolution of the tax system in Romania and the identification of strengths and weaknesses has the overall aim of understanding and improving the functioning of the tax system, contributing to a more efficient tax administration, and promoting a healthier economic climate.
PDF
