Codification of the Economic Substance Doctrine and the Gregory Case

Grappling with the Tax Me If You Cann Era: Configuring a Micro Level Objective Economic Substance Inquiry

Penalties: Unintended Consequences of the Economic Substance Penalty

Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm, and describe its application in two recent tax cases.

Do istotnych wyzwań współczesnego prawa podatkowego należy skuteczne przeciwdziałanie unikaniu opodatkowania. Jednym ze sposobów walki z tym negatywnym zjawiskiem jest poszukiwanie i badanie w działaniach podatników elementu treści ekonomicznej (ang. substance). Na szczególną uwagę zasługują tu zwłaszcza amerykańskie doktryny orzecznicze, a mianowicie doktryna economic substance oraz doktryna business purpose. Analiza tych doktryn wskazuje, że pojęcie treści ekonomicznej (substance) powinno być rozumiane w kontekście zmiany (poprawy) sytuacji ekonomicznej, finansowej, gospodarczej podatnika, wynikającej z czegoś więcej niż tylko z uzyskanej korzyści podatkowej. Owa zmiana (poprawa) może być przy tym analizowana z dwóch perspektyw – obiektywnej lub subiektywnej. Z perspektywy obiektywnej chodzi o rzeczywistą zmianę (poprawę), mającą odzwierciedlenie w zyskach generowanych przez podatnika. Natomiast z perspektywy subiektywnej chodzi o przekonanie podatnika, że podejmowane działania były nakierowane na realizację konkretnego zamierzenia gospodarczego (osiągnięcie zysku). Kryterium obiektywne, jako niewymagające dokonywania ocen motywów działania podatnika, wydaje się przy tym bardziej mierzalne, a tym samym łatwiejsze do zastosowania w praktyce.

Chapter 34 The Value Chain: A Study of the Durable Medical Equipment Industry

Globalization processes around the world affect the activities of economic entities, which in turn leads to changes in their accounting and taxation systems. The article is devoted to the study of the peculiarities of the application of the simplified system of accounting and taxation of agrarian businesses of small businesses in order to identify problematic aspects and areas of state support for their functioning in the context of European integration. A study of the main aspects of the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community and their Member States, on the other hand, in terms of accounting and taxation. It is determined that the implementation of domestic legislation to the regulations of the European Union (directives) is tangible for both businesses and individuals. Analytical data on the activities of small busi-nesses in Ukraine, including agricultural enterprises, are presented. The results of the analysis show a decrease in the number of small enterprises for the period 2015-2019. At the same time, the volumes of produced and sold products of small businesses and micro-enterprises are growing, which testifies to the importance of the activities of these businesses. It is determined that the conditions of production and economic activity of business entities are accompanied by constant changes in current legislation, which causes uncertainty in their position in the competitive environment, leads to the risk of transactions and increased tax burden, and as a result – business closure or withdrawal in the shadows. "The current systems of taxation of small businesses are studied and their advantages and disadvantages are identified. The main criteria for assigning business entities to the group of small businesses in the agricultural sector, taking into account the Tax and Commercial Codes of Ukraine, as well as the provisions of the Law of Ukraine "On Accounting and Financial Reporting in Ukraine". The system of taxation and accounting of small agricultural enterprises is studied. It was found that the current situation in agriculture indicates the shortcomings and lack of efficiency of the tax system, which requires scientific and methodological support for a consistent and stable tax policy for this category of taxpayers, the use of tax incentives for small businesses, improving the simplified taxation of small businesses . Examining the organization of accounting for small businesses in the context of European integration, the framework of the feasibility of changes in the accounting system. It is noted that a certain problem is the inconsistency of financial and tax accounting for the formation of a harmonized information product for different groups of users. The opinion is expressed that the fiscal orientation of accounting should be reoriented to the needs of the management system and high-quality information support of stakeholders, including foreign investors. It is noted that the legislation on ac-counting and taxation systems, opening and registration of small and micro enterprises needs to be changed. In order to properly support the development of small business, it is proposed to create favorable conditions for taxation and a clear accounting system: providing information and financial support for the process of business organization and the transition to international accounting standards; organization of the system of training of entrepreneurs and retraining of accountants; streamlining mechanisms to protect the rights of small businesses.

The purpose of this paper is to empirically determine the effect of a change in a country's Value Added Tax (VAT) rate on its aggregate consumption and its economic growth. As for the effect on aggregate consumption, this paper removes the income effect and discusses only the substitution effect. Using panel data models on a sample covering up to 14 developed countries, including Japan, and quarter periods from the second quarter in 1980 (1980 Q2) to the third quarter in 2010 (2010 Q3) and picking up 53 cases of the change of the VAT rate, this paper shows empirically that aggregate consumption and economic growth display three kinds of trends when the VAT rate is changed. The first trend is that aggregate consumption and economic growth increases [or decreases] just before the rise [or reduction] of the VAT rate. The second trend is that they decrease [or increase] relatively dramatically as soon as the rise [or reduction] is implemented. The third trend is that after the dramatic decrease [or increase] they increase [or decrease] gradually.

The new carbon levy of $30 per tonne, announced in November 2015 as part of the report issued by the Alberta government’s Climate Leadership Panel, is a positive move in the direction of pricing carbon emissions. The levy is expected to generate $3 billion in net revenue by 2018, and possibly as much as $5 billion by 2030. While there is some discussion in the report of what should be done with the revenues generated by the carbon levy, it is somewhat vague on the details, leaving a number of options open to the government. The purpose of this briefing paper is to argue that the revenues from the carbon levy should be used to lower existing taxes – the carbon tax should be revenue neutral, generating no new net revenue for the government. The basic argument is that the carbon levy can be viewed through two lenses. The first lens is the imposition of a price on carbon emissions which (at least partly) reflects the social costs of emissions. Viewed through this price lens, the carbon levy plays an important role in incenting firms and individuals to change their behaviour and move towards less carbon intensive activities. The second lens is the role of a carbon tax as a part of the broad revenue system. Viewed through this tax lens, a carbon tax is not a very good, or efficient, way of generating revenue. The reason for this is somewhat nuanced, but the basic idea is that the carbon tax is applied to a narrower base than broader-based taxes. Broad based taxes generally impose lower costs on the economy than narrow based taxes. Moreover, carbon taxes interact with other taxes in the economy, exacerbating the economic costs associated with those taxes. And those costs are quite high – research shows that the total cost to the economy of raising an additional $1 in revenue through the corporate income tax in Alberta is $3.79; for the personal income tax the cost is $1.71. These taxes therefore impose higher costs on the economy than they raise in revenue. Swapping revenue from the carbon levy for these taxes in a revenue neutral manner would lower these costs, generating a substantial return to the provincial economy relative to other uses. If the government wants to fund other priority areas – be it public infrastructure, investment in complementary initiatives to reduce emissions, or even deficit reduction – it is better to finance these initiatives through more efficient and less costly taxes than a carbon tax. The basic approach advocated here is as follows: price emissions appropriately by way of a carbon levy, use the revenue to reduce existing taxes in a revenue-neutral manner, evaluate the benefits of spending money on other initiatives, and finance those initiatives using the least costly configuration of taxes possible (subject to equity considerations).

Concepts of capital accumulation in businesses require close examination from both sides of economics and accounting, since a business is an institutional accounting unit prescribed by a legal limited liability rather than an economic category. In order to establish capital accumulation as an economic category in the unit of a business, two inconsistent elements, that is, separation of accounting in economic realities from that in financial institution and also their relationship on a partial side irrespective of such separation, should be recognized. If, for example, disjunction of a corporate organization takes place, accounting data of the corporation do not include those of the spun-off subsidiary in spite of progress of capital accumulation in the corporation. Therefore, such data do not reflect the total image of capital accumulation. After all, measurement of capital accumulation in businesses is influenced by corporate reorganization such as merger and disjunction. In addition, the amount of capital accumulation confirmed by accounting information published by an individual enterprise depends on strategic judgment of the business group. This is caused mainly by means of replacement of profit through the price manipulation among enterprises belonging to the same capital affiliate. An important thing among these problems rests in recognition of differences between individual capital and individual enterprises. Capital accumulation sustained by economic substance is grasped on the basis of individual capital and it is an objective existence. However, an individual enterprise is an accounting unit in the financial institu-

The biggest impediment to the Ethiopian government’s ability to raise revenue by its means to the required level is the lack of taxpayers’ compliance behavior with the tax system. Therefore, this study examines the key determinants of taxpayers’ compliance behavior with the tax system in the Afar regional state. To this end, two purposively selected woredas (Awash and Aba’ala) and one city administration (Samara-logia) were used. Primary data were collected from 404 randomly selected respondents. The ordered logistic regression model was used to analyze the factors that determine tax compliance. Results show that tax knowledge, probability of detection, perception of government spending, organizational strength of the tax authority, fairness of the tax system, and simplicity of the tax system have positive effects on tax compliance, whereas tax rates have a negative effect on tax compliance in the Afar regional state. As a result, it is suggested that the tax authorities launch effective and brief awareness-development and tax education programs for the general public and taxpayers in particular. The tax system, notably the tax return, tax forms, and tax rules, should be simplified by the tax authorities so that they are readily understood by taxpayers. Furthermore, the tax authorities should be powerful enough to effectively and efficiently enforce the tax laws, and to ensure tax fairness, their tax liability must be determined by their ability to pay. Lastly, the government must maintain accountability and transparency in how tax revenue is dispensed, as well as deliver social services to the public efficiently and intelligently so that taxpayers have faith in and a favorable attitude toward the taxes they pay and the tax system.

The issue of tax avoidance has once again come to prominence in public debate (IMF, 2014). The change in government policies in the UK, in Europe and a host of other countries across the world has been leaning towards lowering of corporation tax in order to attract multinationals investment in their territories. The debate as to how this lowering of tax, or the new consciousness of the MNEs in their tax planning as a tool for strategic management and competitiveness can shape the future of the local economies, and whether the perceived benefits of inward FDI is still a reality that surpass the negative impacts that such investments may have on local economies and the development and growth of local SMEs are issues that this paper aim to cover. The methodology of this paper is mainly a desk based review of policies and theories of taxation and inward FDI. The literature on theories of taxation in general and corporate taxation in particular will focus on the history of corporate tax and its development, and offers a comparison of the corporation taxation systems in Europe and the US. The paper will then re-examine the perceived positive and negative externalities of the MNEs FDI on local economies against actual benefits confirmed by secondary evidence. The paper is structured in three sections. In the first section, a review of taxation as an economic concept is presented; the history of corporation tax in the UK is reviewed and evaluated; a change towards lowering of corporate tax and the arguments in favour of a lowered tax regime will be examined. This second section reviews the impact of inward FDI primarily from a conceptual point of view and then moves into a systematic review of the literature on the evidence of potential benefits of inward FDI as presented by local governments as justification for favourable policies to entice MNEs to choose their investment locations. The last section will offer a debate on government-multinational interaction and proposes a conceptual framework for assessing the local impacts of national policies by proposing testable hypotheses. It would not be within the scope of this paper to test these hypotheses but it is hoped that by offering such propositions a wider debate on the future role of taxation as a means for achieving welfare goals of sustainable societies.

ABSTRACTThis paper examines the relation between CEO inside debt holdings (pension benefits and deferred compensation) and corporate tax sheltering. Because inside debt holdings are generally unsecured and unfunded liabilities of the firm, CEOs are exposed to risk similar to that faced by outside creditors. As such, theory (Jensen and Meckling [1976]) suggests that inside debt holdings negatively impact CEO risk‐appetite. To the extent that corporate tax shelters are likely to result in high cash flow volatility in the future, we expect that inside debt holdings will curb CEOs from engaging in tax shelter transactions. Consistent with the prediction, we document a negative association between CEO inside debt holdings and tax sheltering. Additional analyses suggest that the effect of inside debt on tax sheltering is more (less) pronounced in the presence of high default risk and liquidity threats (cash‐out options in pension packages). Overall, our results highlight the importance of investigating the implication of CEO debt‐like compensation for corporate tax policies.

The ECJ doctrine links the justification of tax avoidance to the balanced allocation of tax powers and the arm’s length standard. This link poses a number of new issues, among other, these three questions: what notion of “arm’s length standard” is the ECJ dealing with; can there be a permanent link between the “arm’s length standard” and tax avoidance; and: is the balanced allocation of tax powers not a previous issue? Furthermore, old issues remain to a certain extent unresolved: (i) Is there one anti–avoidance doctrine?; (ii) what is that doctrine based on? Is it based on (a) the notion of artificiality (not just sham transactions) and economic substance?; (b) is there an asymmetric application of the doctrine depending on whether or not the area to which it intends to be applied has been harmonized; (c) is it based or departs from a given allocation of tax powers. Finally (iii) what consequences on the internal law of Member States does the case law have?, especially considering different scenarios: (a) when there is no anti–avoidance rule ; (b) when there is a General anti–avoidance rule or judicial doctrine; (c) when there is a Targeted anti–avoidance rule and (d) whether such a rule is independent, harmonized, or based on a DTC.

The increase in the Value Added Tax (VAT) rate to 12% planned for 2025 is part of the tax reform efforts outlined in the Harmonization of Tax Regulations Law (UU HPP). This policy aims to increase state revenue, support national development, and create a fairer tax system. In addition, the increase in VAT rates is expected to strengthen the government's fiscal resilience in facing global economic challenges, including economic uncertainty and the need for financing for strategic infrastructure projects. This reform also aims to align domestic tax policies with international standards to enhance Indonesia's economic competitiveness and attract more foreign investment. PMK 131 of 2024 states that the increase in the Value Added Tax (VAT) rate to 12% will not be applied universally, but only to luxury goods. The government maintains the principle of fairness by providing different tax treatments for various types of goods and services. For luxury goods, VAT is calculated at the full rate of 12% of the selling price or import value, with a transition period until January 31, 2025, during which the effective rate remains 11% through another value mechanism of 11/12 of the selling price. Meanwhile, for goods other than luxury goods, services, and intangible goods, VAT is imposed at a rate of 12%, but calculated using the DPP value of 11/12 of the import value, selling price, or replacement value, so the effective rate remains 11%. In addition, there are exceptions for certain Taxable Goods (BKP) and Taxable Services (JKP) that are subject to VAT with a different DPP value or specific amounts, such as 3 kg LPG, gold jewelry, and used motor vehicles, which will continue to follow the previous regulations and are not affected by this policy. This change also impacts the tax administration system, including the use of tax invoice serial number codes from 010 to 040 for transactions with different taxable base values. With this policy, the government is striving to balance the need to increase state revenue with maintaining the purchasing power of the public and the continuity of businesses. The transition period for luxury goods shows the government's efforts to provide adaptation before the full implementation of the 12% VAT rate

The purpose of the study was to assess the level of tax enforcement as it is exerted by Rwanda Revenue Authority (RRA) among SMEs in Kigali city. The indicators under consideration are Tax system, Training on tax, Tax Audit, Tax rewards and Tax penalties. Administered questionnaire was used to collect data. Finding showed that generally, tax system was appreciated at a moderate level (Mean=2.67). The average level of RRA trainings is low (Mean=2.31). The General level of tax audit practice is high level (Mean=3.72). Generally, the level of Tax Rewarding is Moderate (Mean=3.37). Generally, the level of appreciation on Tax Penalties was Moderate (Mean=2.53). As recommendations, RRA should change its tax system. This is because level of appreciation of the taxpayer to the system is moderate with a mean of 2.67. The are to improve include helping taxpayers to pay only when they have made profits. Facilitating the taxpayer to increase the capacity to pay their tax liabilities, making tax law friendly user by SMEs taxpayers. RRA should increase training for SMEs taxpayers. This is because the level of this indicator is low. The low level has been found in all areas of training assessed. RRA should increase the rewords to the best taxpayers so that this practice is recognized by all taxpayers. It should also avail them the standards of selection and to the public. This will increase trust and competition in complying to the tax laws.RRA should modify the penalties given to taxpayers who have broken the tax laws. This is because the taxpayers said that the tax penalties discourage many SMEs. The tax penalties should be reduced and increase other methods of enforcement such as education, rewords and audit. Taxpayers should inform themselves from different sources about the tax system as applicable in Rwanda. This will help them to comply with the law and avoid penalties