FAIR TAXATION UNDER THE GLOBAL ANTI-BASE EROSION RULES?

In 2021 the OECD launched the Global Minimum Company Tax to implement the Action 1 of the BEPS Project. This instrument has seen as a good mechanism to prevent company avoiding taxes at the global level and to stop existence of the harmful tax regimes worldwide, as well as a good mechanism to achieve fair taxation in the era of global digitalization. However, the broke-out of the COVID-19 pandemic and, consequently, the close of the national borders, then armed conflict between Russia and Ukraine, boost financial crisis and the crises in almost all social and industrial spheres at the global level. Such unwilling trend, between all, has influenced behavior of the companies and the initial optimism of the OECD and other international organizations that the global minimum company tax, at the very end, would end existence of the harmful tax regimes, tax avoidance and unfair taxation, dropped significantly. Therefore, at the very end of the 2022 and the beginning of the 2023, the OECD launched consultation document on tax certainty in the application of the Pillar Two of the global minimum tax known as a GloBE (Global Anti-Base Erosion) Model Rules. This paper deals with mentioned issue and actual problems that the application of the GLoBE rules is faced with.

Impact of Direct Taxation on Economic Growth: Empirical Evidence Based on Panel Data Regression Analysis at the Level of Eu Countries

Through fiscal policy, the government can influence businesses and individuals in order to regulate their behaviour. The research used panel data from all 27 EU countries covering the period 2008–2020 to investigate the impact of direct taxation on economic growth at the level of two main clusters of countries concerning fiscal efficiency. Therefore, the analysis employed cluster methods to classify the main EU countries in both groups of countries with a high level of fiscal efficiency and those with a rather limited level of fiscal efficiency. The study employs fixed effect models and dynamic GMM methods to investigate the effect of direct taxation components (personal and corporate income taxes) on economic growth. The analysis also considers the informal economy's role in relation to the official economy. The empirical results revealed that corporate income taxes significantly negatively impact economic growth for both clusters of high- and limited fiscal efficiency countries. Additionally, personal income tax was associated with lower economic growth for countries in the limited fiscal efficiency group. Thus, from the perspective of policymakers, lowering direct taxation can increase disposable income, stimulate consumption and economic growth, encourage investment leading to job creation, increase competitiveness, and reduce tax evasion and avoidance, thereby leading to a more efficient tax system.

Firm informality during the COVID-19 crisis in Argentina: perception of commercial entrepreneurs and public accountants

Este trabajo analiza el impacto de la crisis del COVID-19 en la informalidad de las micro, pequeñas y medianas empresas argentinas a partir de la percepción de empresarios comerciales y contadores públicos de la ciudad de Bahía Blanca (Argentina). Utilizando datos primarios recopilados a través de entrevistas semiestructuradas, se realizó un análisis de contenido cualitativo combinando codificación basada en teoría y basada en datos. A pesar del uso generalizado de pagos electrónicos, los hallazgos sugieren un aumento tanto en la subdeclaración de ingresos como en la cantidad de empresas no registradas, lo que respalda el comportamiento contracíclico del sector informal durante dicha crisis. El artículo contribuye a una mayor comprensión de la informalidad a través de un enfoque microeconómico-cualitativo e integrando la perspectiva de dos actores diferentes. Los resultados son relevantes para la formulación de políticas tendientes a la reducción de la informalidad empresarial.Alternate abstract:Este artigo analisa o impacto da crise do COVID-19 na informalidade das micro, pequenas e médias empresas argentinas com base na percepção de empresários comerciais e contadores públicos da cidade de Bahía Blanca (Argentina). Utilizando dados primários coletados por meio de entrevistas semiestruturadas, foi realizada uma análise de conteúdo qualitativa combinando codificação baseada em teoria e dados. Apesar do uso generalizado de pagamentos eletrônicos, os resultados sugerem um aumento tanto na subdeclaração de renda quanto no número de negócios não registrados, corroborando o comportamento anticíclico do setor informal durante a referida crise. O artigo contribui para uma melhor compreensão da informalidade por meio de uma abordagem microeconômica-qualitativa e integrando a perspectiva de dois atores distintos. Os resultados são relevantes para a formulação de políticas voltadas à redução da informalidade empresarial.Alternate abstract:This article analyzes the impact of the COVID-19 crisis on the informality of Argentinian micro-, small-, and medium-sized enterprises based on the perception of commercial entrepreneurs and public accountants from Bahía Blanca (Argentina). Using primary data collected through semi-structured interviews, a qualitative content analysis was performed combining theory-oriented and data-based coding. Despite the widespread use of electronic payments, the findings suggest an increase in income underreporting and the number of unregistered companies, thus supporting the countercyclical behavior of the informal sector during that crisis. The article contributes to a better understanding of informality through a microeconomic-qualitative approach by integrating the perspective of two different actors. Empirical findings are relevant for policymakers seeking to reduce the levels of informality during periods of crisis.

Unemployment - Corruption Relationship in OECD Countries: System GMM Approach

Corruption, abuse of public office for private gain, is mainly found to impact macroeconomic indicators adversely in the long run. In this vein, this paper investigates the impact of corruption on unemployment in Organization of Economic Cooperation and Development (OECD) countries between 1996-2020. Utilizing World Governance Indicators (WGI) corruption data and implementing the system generalized method of moments (GMM) methodology to overcome endogeneity and reverse causality issues, the results indicate that corruption increases unemployment in all models when various variables are controlled for. The robustness checks with alternative econometric estimations (i.e., difference GMM, fixed effect, and ordinary least squares (OLS) regressions) and corruption index (i.e., Corruption Perception Index (CPI)) verify the conclusion of system GMM that higher corruption leads to higher unemployment. However, the magnitude depends on the model and specification. The results reveal that specific policies should be implemented to eliminate corruption in political and bureaucratic spheres so that the unemployment rate can be maintained around the natural rate of each country.

The Pandemic - The Disease of the Underground Economy

In the current international pandemic context, the risks of the underground economy through its most perverse forms, corruption, undeclared work, tax evasion, etc., have been greatly exacerbated by urgently favouring the restriction of freedoms, the infusion of important resources into the economy and not least the interest of Pharma. The turbulent and unprepared international framework has created the premise that in this unfortunate period an activity in the underground economy that influences all its forms, namely corruption, will flourish. According to press reports, the sale of masks, medicines and anti-pandemic health products was a real El Dorado of Romania. Fabulous surcharge purchases made by UNIFARM are known, as well as worldwide, according to a World Bank report, due to the elimination of normal public procurement control filters. The pandemic generated by the SARS-CoV-2 virus, both globally and nationally, has had various influences on the underground economy, some favorable for the public sector but most unfavourable for the private sector.

THE ARM'S LENGTH PRINCIPLE: A PANACEA OR PROBLEM TO REGULATING TRANSFER PRICING TRANSACTIONS BY MNES IN DEVELOPING COUNTRIES

Transfer pricing manipulation by multinational enterprises is a big problem in developing countries, considering the increased levels of tax avoidance and evasion in these countries. The revenue lost through evasion and avoidance schemes as well as through aggressive tax planning robs developing countries of the much-needed domestic revenues to fund public expenditure. The repercussions of revenue inadequacies are evident in developing countries' governments to adequately invest in education, tax administration, health and security, infrastructural development, and economic development. Most developing countries having enacted transfer pricing regulation, with the arm's length principle are at the core of these regulations. This principle has been criticized in literature for its inefficiency and ineffectiveness in regulating transfer pricing in evolving economic times, while some researchers continue to maintain its relevance. In view of the conflicting views on the cogency of the arm's length principle in developing countries, this paper sought to unpack this debate through an evaluative review to show the areas of disagreement and agreement among scholars. The review was motivated by the continued concern and discussions of tax evasion and avoidance by multinational enterprises through aggressive transfer pricing in developing countries. Through a critical literature review, this article assesses the applicability and relevance of the principle in developing countries. Findings reveal controversies in the availability of comparable data, continued abuse of transfer pricing as well as the difficulty in applying the principle in digital transactions and intangibles.

Direct Digital Services Taxes in Africa and the Canons of Taxation

The unprecedented expansion of the digital economy has increased the intricacy of mobilising tax revenues from both domestic and international transactions. Tax evasion and avoidance are perpetuated by the invisible nature of digital transactions. To minimise the untapped revenues, countries all over the world are mapping policy strategies on how to collect revenue from this sector. African countries are not an exception. They have constructed digital tax policies to levy both direct and indirect taxes on digital transactions. This paper focuses on direct digital service taxes (DSTs). Direct digital service taxes have been an issue of debate among governments, policy makers, academics, tax bodies, and development organisations. Disagreements coalesce around their structure, their adherence to the canons of taxation, opportunities, and challenges as well as consequences of implementing them. Through a literature review, this paper assesses the legislative structure and administration of digital service taxes in relation to the canons of taxation. The findings of the review were conflicting. While certain aspects, motives, and possible outcomes of the taxes upheld the principles of taxation, some of these were conflicting with the principles. This could possibly be linked to variations in the economic, political, and social contexts in African countries and between developed and developing countries. The study recommends that while digital service taxes are an irrefutable necessity to tap tax revenues from the digital economy, African countries should ensure that equity, neutrality, economy, and efficiency among other principles are considered and balanced with the fundamental roles of tax policy.

Motives and Barriers to the Location of MNEs and the Role of the Informal Economy: The Case of Greece

Considering the significant decrease of investment and GDP in Greece, and the goal of achieving a V-shaped post-COVID-19 recovery, inward FDI could be regarded as a source of productive private investment. This study aims to indicate differences in the factors determining inward FDI in Greece before and after the great crisis and the role of the informal economy on Greece s inward FDI. This study explores the perceptions of multinational enterprises upper management regarding motives of and barriers to locating their activities in Greece, the role of the informal economy and how these perceptions changed before and after the great economic crisis of late 2000s. The results indicate that the relation between inward FDI and the informal economy depends on types of entry and that tax evasion opportunities can impact positively on the motives of foreign investors.

The Influence of Taxation on Income Inequality: Analysis of the Practice in the EU Countries

The growing economic inequality around the world is recognized as a global problem of mankind. At the same time, the key tool for reducing inequality and ensuring the achievement of sustainable development goals is the taxation system given its distributive function. That is why this paper puts forward and proves a scientific hypothesis according to which direct taxation has a significant impact on economic inequality, with its scale and sphere depending on the level of economic development and the specific architecture of the tax system adopted in a particular country. The study relies on data from 28 European Union countries, including the United Kingdom, whose tax systems are not identical but harmonized in accordance with European Union directives, the same as the legislation in other economic sectors. Accordingly, it can be concluded that similar institutional characteristics are present. We have used the method of two-stage cluster analysis, which is meant for identifying the natural splitting of the mass of data into groups, then carried out regression analysis and built some models. The contribution of the study is revealing a number of important regularities that are significant for characterizing the dependence of income inequality on direct taxation as well as formulation recommendations for improving the tax policies of European Union countries, with the potential of policy implications. The results obtained can play a significant role in the development and further harmonization of tax systems and resolving the global problem of increased inequality within and between countries.

ANALYSIS AND MEASUREMENT OF TAX EVASION FACTORS USING QUESTIONNAIRE-EXAMPLE FROM BOSNIA AND HERZEGOVINA

Analysis and measurement of tax evasion is a very important issue primarily for the tax administration. The purpose of this article is first to show how to analyze tax evasion via a questionnaire. In Bosnia and Herzegovina, as well as in the EU countries and adder countries in the region and the world, ensuring fighting tax evasion has never been important than it is today. Tax evasion can't observe in isolation from the rest of society. Maximising the revenue collected by promoting fighting tax evasion is the main responsibility of a tax administration. According to current knowledge, it is not possible to precisely quantify the range of individual factors on the very occurrence of tax evasion and the analysis and measurement of tax evasion factors does not have an easy path and is not an easy task. There are numerous studies on the influence of certain factors of tax evasion. This study highlighted the importance of factors that determine tax evasion. The objectives of this article are to give how to analyse and measure tax evasion. Due to the financial and economic crisis, the issue of tax evasion in order to improve the state of public finances. The answer to the question is very complex for several reasons. Factors of tax evasion change dynamically over time due to economic conditions, business innovation, e-commerce development, economic crisis and today COVID pandemic, political stability, resource availability, competitive situation, quality and capabilities of state institutions, tax legislation, etc. A survey of respondents' attitudes towards tax evasion was conducted in order to analyze and measure tax evasion factors. The primary research of the respondents has been conducted, in order to analyze and measure the factors of tax evasion. The study adopted a quantitative survey design, convenience sampling technique, and questionnaire as a data collection instrument. We found that the introduction of appropriate penalties can increase tax discipline and improve compliance with and enforcement of tax laws. Such solutions should achieve a preventive effect, and consequently a repressive one. In the end, it is necessary to raise the level of political security, because without raising and increasing political security within the state and fight against tax evasion is limited. A key point is that require legislative change to maximise the suggestions above. Starting from the presented in the paper, ie analysis and measurement of tax evasion factors, a general conclusion can be made that priority and special emphasis should be given to these factors mentioned in the research, through which measures and activities can improve the situation faster and more efficiently.Furthermore, in line accordance with economic trends, this paper can contribute to the literature by presenting the results and shows that the questionnaire can be used to recognize the observed phenomenon. Finally, it is worth recognising a need for new research questions regarding the analysis and measurement of tax evasion.

Does digitalization limit the proliferation of the shadow economy in African countries? An in-depth panel analysis

We investigate the relationship between digitalization and the shadow economy in 42 African countries using unbalanced panel data from 2003 to 2016. We begin by drawing on modernization theory to hypothesize that digitalization efforts in African economies represent an augmentation of public service delivery as well as a channel through which the size of the continent's informal economic activity might be reduced. We employ the fixed effects estimation technique as its baseline estimator while correcting for potential endogeneity concerns using an instrumental variable two-stage least squares technique. We show compelling evidence that digitalization is associated with a decrease in the size of the shadow economy in Africa. However, evidence of a larger influence is driven by the availability of telecommunications infrastructure and the expansion of government online services. These findings suggest that policymakers should invest more in digital technology to formalize Africa's hidden economic activity, particularly to fill the post-COVID-19 financing gap. © 2022 African Development Bank.

Ireland’s Multinationals-Dominated Economy in the Pandemic: Did Big Tech and Big Pharma Save the Day?

Similar to the Eurozone crisis, Ireland engineered a more successful bounce back from the COVID-19 shock than crisis-hit peers. This article argues that the Irish path is less of a product of a generalizable export-led growth strategy, but, rather, can be explained by a set of idiosyncratic features. Using a wide array of macroeconomic indicators, the analysis assesses the opportunities and risks associated with Ireland's distinct path. It shows how strong ties to the United States, and emergence as the European hub for the world’s fastest growing firms sets Ireland apart from European peers. The US is a reliable “spender of last resort,” countercyclically spending and borrowing, boosting growth prospects of trading partners. Irish sectoral specialization in pharmaceutical manufacturing and digital services was also a boon in this crisis. The pandemic created opportunities for health-related industries;reliance on digital technologies helped digital firms. The article also finds, however, that banking on tech and pharma giants has significant limitations. First, multinationals’ accounting tricks artificially inflate economic statistics, and these two sectors are most affected. Second, to the extent that there is job-sustaining activity, it is not straightforward how the success of these sectors is transmitted to the rest of the economy. In the aftermath of the Eurozone crisis, the hospitality industry played a significant role as a “‘transmission belt,” receiving spillovers from the high value-added export sector. Since lockdowns hit hospitality the most, the social insurance function of fiscal policy is of paramount importance to ensure a more broad-based recovery.

Fiscal policy and tax evasion in the context of COVID-19 pandemic

The aim of this research study is to provide a comprehensive theoretical analysis on the phenomenon of tax evasion, but also fiscal policy measures in the context of COVID-19 pandemic. Fiscal policy highlights the path of government authorities on economic activity based on public revenues and expenditures. The phenomenon of tax evasion significantly affects the prospect of sustainable economic growth. In order to ensure economic stability, it is very important for government authorities to apply rigorous measures to prevent and combat tax evasion.

The 6th International Student Research Conference 2021 - Editors' Note

This Special Issue provides a platform for research-based learning and the valuable output of these approaches. Research-based learning is a learning / teaching format in higher education that is better suited than most other to prepare students for the challenges of our digital knowledge economy. The content of the issue confirms that the students are highly interested in recent economic policy issues, epecially regarding the pandemic, digitalization, and institutional developments. The selected papers tackle a wide range of topics including tax evasion and digitization, coporate strategies during the pandemic, the sharing economy, and moral develpment and corruption. With this publication we would like to point out that it is important to provide publication possibilities for student research in standard academic journals.

Tax Sustainability: Tax Transparency in Latin America and the Chilean Case

This study is based on a sample of the thirty Chilean companies with the highest stock presence and which demonstrate opacity problems in their tax sustainability related to the GRI 207 standard available since 2019 (which emphasizes the disclosure of tax strategies to stakeholders, especially as regards any links with their small and medium-sized enterprises (SMEs)). The study also explores the literature related to tax transparency and its evolution in Latin America. Significantly different performances were found among the tax sustainability reports. The reasons for these differences are related to the fact that some demand simple declarations of principles, while others require both reporting of evidence in front of the interest groups and revealing of the tax strategy. As a result, taxpayers seem to use their corporate social responsibility activities more to moderate reputation risk than to aim at tax transparency. At the same time, the findings reveal that the actions toward tax transparency which have defined the tributary administrations of Latin American countries since the 2018 Punta del Este Global Forum do not consider the possibility of public disclosure. In this sense, the evidence highlights the need for Latin American policymakers to introduce, at the normative level, integrated tax transparency cooperation mechanisms between state administrations and regulated companies.

EU Tax Strategy in the COVID-19 Pandemic

This article explores the EU's experience in finding tax revenues without compromising economic recovery. The EU's tax policy strategy envisages a stronger role for taxes in the development of a green, digital and inclusive Europe. It is recognized as fair to increase the tax burden on "polluters", digital and financial businesses, the largest corporations in the context of a single European economic space and fair tax competition of EU countries, excluding opportunities for tax base erosion. In 2021-2027 there are plans to increase the burden through the introduction of contributions on non-recycled plastic, border carbon adjustment mechanism, digital levy, financial transaction tax, revision of the CO2 emissions trading scheme. This could significantly complicate nonresident digital, financial and foreign economic activities in the EU as well as the EU's international relations. The reform is controversial and requires revision, taking into account international agreements and the national interests of partner countries. The set of tactical measures involves updating the norms of legislation to meet the requirements of the digital economy, increasing trust and transparency in tax relations, convenience and simplicity of tax payments, and expanding cooperation between tax authorities of EU countries. The experience and prospects of the EU tax policy are significant for Russia both in terms of implementation of the best practices and in terms of timely response to possible dangers and threats related to the ongoing tax reforms in the EU. © 2021 Institute of Europe Russian Academy of Sciences. All rights reserved.

DIGITALIZATION OF THE TAX SYSTEM - AN IMPORTANT STEP TOWARDS TAX EFFICIENCY

Against the background of a rapid technological evolution, the challenges currently facing the real economy and implicitly the fiscal system through its component the fiscal apparatus, are varied and in order to face them it is necessary to implement innovative solutions such as digitalization. The digital transformation of the fiscal apparatus both centrally and territorially, in a world where business activities mean anytime and anywhere requires innovation, robustness, security, optimized processes and immediate availability to meet the expectations of taxpayers, whether natural or legal persons or of the state itself. Thus, the component public institutions of the fiscal apparatus must be prepared to accept that digitalization is everywhere and represents a continuous challenge.

FACTORS THAT DETERMINE THE FORMAL ENTREPRENEURSHIP OF YOUNG ENTREPRENEURS IN A DEVELOPING COUNTRY DURING A PANDEMIC: PERUVIAN CASE

According to a World Bank report, the informal sector represents around a third of GDP and more than 70% of employment (self-employment in more than 50%), with informal workers, mainly women and young people who have lost their jobs and/or They have no income due to the Covid-19 crisis. According to research based on the key elements according to Gartner (1985) are the external context, the person, the processes, and the company. Informal entrepreneurship develops due to the deficit of human, social and cultural capital, as well as discrimination, obstacles and barriers and exposure to precariousness (Heilbrunn, 2018;Wolfe et al., 2020);Factors that impact more among women entrepreneurs, due to social norms, time constraints, low entrepreneurial capacity and lack of financing (Oppedal & Garcia, 2020). [...]the following hypothesis emerges: HI Gender is significantly related to the formal entrepreneurship of young entrepreneurs in a developing country during a pandemic. Currently, entrepreneurs seek to generate income, and prefer to start in the informal sector because they think that this will bring them more benefits, to this is added, the influence of family experience on the perception of formality as something negative (Benites et al.., 2021;Amesquita et al., 2018). [...]despite the fact that formality allows the growth of companies (Oppedal & Garcia, 2020;Assenova & Sorenson, 2017), informal companies are seldom formalized, in addition, when starting a business, access to initial capital is It is limited, and although government programs offer significant initial funding for the development and growth of a formal enterprise, it is also necessary to strengthen support networks and follow-up mentoring to ensure the effectiveness of these programs (Barron, 2020).

Envelope wages as a new normal? An insight into a pool of prospective quasi-formal workers in the European Union (EU)

PurposeIn spite of millions of quasi-formal workers in the European Union (EU), there is still limited understanding of what motivates workers to participate in these detrimental employment schemes, and why certain groups of workers exhibit higher inclination towards it. This article takes a novel approach by putting prospective envelope wage earners in the centre of this analysis.Design/methodology/approachData from the 2019 Special Eurobarometer on undeclared work are used, and two-level random intercept cumulative logit modelling is applied.FindingsOne in seven fully declared EU workers would have nothing against receiving one part of their wages off-the-books. Manual workers and individuals whose job assumes travelling are the most willing to accept such kind of remuneration, and the same applies to workers with low tax morale and those who perceive the risk of being detected and persecuted as very small. On the other hand, women, older individuals, married persons and employees from large enterprises express the smallest inclination towards envelope wages. The environment in which an individual operates also plays a non-negligible role as the quality of the pension system and the strength of social contract were also identified as significant determinants of workers' readiness to accept envelope wages.Originality/valueThis article fills in the gap in the literature by analysing what workers think about wage under-reporting and what factors drive their willingness to accept envelope wages.

The effect of personality traits and tax morale on tax evasion intention

PurposeThis paper aims to explore the relationship among personality traits, tax morale and tax evasion intention of students. Using the five-factor model of personality ratings, this study hypothesizes that agreeableness, openness to experience, conscientiousness, extraversion and neuroticism are good predictors of both tax morale and tax evasion intentions of individuals. Further, this paper argues that tax morale correlates negatively with tax evasion intention.Design/methodology/approachA survey method was adopted and questionnaires were developed to elicit responses for the study. The study hypotheses were tested structurally using the partial least square-structural equation modelling technique.FindingsThe results of the study demonstrate the existence of a positive and statistically significant relationship between three dimensions of the personality traits (agreeableness, conscientiousness and openness to experience) and tax morale. Consistent with the expectation, the study also finds tax morale to be significant and negatively associated with tax evasion intention.Research limitations/implicationsThis study concludes from the findings that improving the tax morale of individuals could be an important way by which tax authorities can improve voluntary tax compliance and reduce the incidence of tax evasion by individuals.Originality/valueThe study uses all the dimensions of the five-factor model to examine the tax evasion intention of individuals. It also contributes to the theoretical literature by highlighting the mediating role of tax morale in the relationship between personality traits and tax evasion intention from an African perspective.