Take, for example, the case of Russia, which, with the purpose of attracting investments and capital in the period of transition to market economy, eventually struggled with the unjustified granting of tax incentives, which culminated in ongoing problems with fiscal deficits and the famous crisis. Other countries that underwent a transition also had to face the consequences of a misguided economic and fiscal policy, as in the case of Romania, which, besides granting tax incentives and direct subsidies to businesses in a non-transparent way, became known internationally for being tolerant towards tax delinquency, and this eventually also led to serious fiscal problems.
It was also shown that misguided policies eventually increased the fiscal problems of countries such as Bulgaria, Hungary, Poland and Slovenia. Thus, there is the possibility 69 of an increase in unemployment rates and social problems, as well as the creation of economic inefficiencies, such as the change in the allocation of financial resources only on the basis of tax considerations, leaving aside issues such as market size, political and economic structure of the states and manpower, among others.
Andreas Haufler presents three externalities resulting from the use of competition between countries: i the tax base externality; ii the tax exporting externality; and iii the terms of trade externality. Also according to Haufler, these non-coordinated fiscal policies lead to capital fluctuations and, with the reduction in taxes on profits, for example, negative externalities may be caused for neighboring countries, with the volatility of the tax base.
With respect to the terms of trade externality, the taxation of certain activities can be used as a mechanism to influence prices in the international market, such as the prices of commodities, in favor of some countries and at the expense of foreign economic agents. And as Haufler warns, "countries can impose domestic taxes on capital in order to influence the world rate of return, i. All the situations described and exemplified by Haufler are understood, by the legal-economic doctrine, as failures of the so-called market mechanisms, because they ultimately distort the proper allocation of resources and change the tax policy of countries involved in the process of market integration.
Every day, the literature, politicians and economists reiterate their concern over the constant migration of tax bases, because the states, in need of resources, have to maintain their revenues by levying taxes, more and more often, on less mobile bases, such as labor, wages, property and consumption.
Therefore, it becomes evident that international tax competition is one of the causes of the crisis under examination, because it prevents, in fact, the adoption of better criteria for inspection and taxation of interstate operations. If the capital moves more and more in a tax-free way, states are faced with the need to attract capital and, in order to maintain their financial structures after all, they are fiscal states , they have to tax other bases, such as wages and consumption, generating tax regressiveness and economic and social inequality, as a more pragmatic consequence.
The competition between companies increases by virtue of differences in the economic and fiscal structures of countries. And, if on the one hand, companies in developed countries benefit from globalization, on the other, they end up preferring to invest in countries with lower costs. Thus, the effects of globalization are highly asymmetrical. The most immediate consequence of the competition between countries is the shift in the tax bases in many of these countries. That is, there has been more and more tax on less mobile bases, such as consumption, property and labor and, on the other hand, there has been less and less tax on capital and international investment.
In the end, the ones that benefit are the large international taxpayers, who, without thinking twice, transfer their resources to the most favorable tax environment, creating an economic and financial imbalance for countries that need to provide public services and ensure the basic rights of their citizens.
Every day, countries around the world have to find ways to keep their tax revenues, the financial surplus and the share in the global market of their economic agents. On one hand, there has been an increase in the international economic movement headed by transnational corporations. On the other hand, there has been a considerable increase in social exclusion, since the impoverishment of states leads to a reduction in wealth distribution policies, making it difficult to solve scarcity problems that is why there is the allusion to social exclusion.
This process of increasing internationalization of companies and financial capital has forced states, including the most developed ones, to make tax reforms and to reduce public spending, in order to keep their territories attractive and competitive, by alleviating the taxation on investments. However, if these changes are poorly planned, they can lead to what experts call a fiscal degradation, with serious crises, as what happened in Russia, for example, with the impoverishment of countries and the regressiveness of taxation, which affects the economy and generates huge social distortions.
Based on everything that has been seen, it seems that, in addition to other equally important aspects method of international regulation, control mechanisms, lack of liquidity, etc. A consequence of globalization itself, the competition between countries to attract capital and investments eventually imposed obvious limitations on the sovereignty of countries, increasingly pushing supervision and taxation away from financial transactions, leading states, for the sake of survival, to levy higher taxes on less volatile economic bases, such as production, wages and domestic consumption.
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This ends up worsening the fiscal degradation of less developed countries, which, in an increasingly economically integrated world, become trapped in a real race to the bottom. This means that national states are and will increasingly be hostages to the global economic system, preventing them from providing, in the intended manner, public services and ensuring the welfare of their citizens. The lack of control over international financial businesses and the reduced regulation on international tax competition are also indisputable causes of the crisis, which, serving as the basis for changes at a global level, must lead to the imposition of greater control over capital mobility.
Otherwise, it will be increasingly difficult for states to provide public services to ordinary people, with the "search for social rights" being driven away from material reality. The granting of tax incentives and direct subsidies, instead of something harmful to countries, ends up being one of the only ways to keep them in the path of world investments.
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If there is no effective global control, either by a body to be created or by theWTO itself, countries concerned with the growth of their economies should continue granting such incentives, otherwise, these countries may be left out of the global economic process. However, such governmental incentives must not be granted without legitimacy criteria, such as equality i.
Rio de Janeiro: Elsevier, ; Jeffry A. Rio de Janeiro: Jorge Zahar, Rio de Janeiro: Forense, Taxation in a Integrating World. Washington: The Brookings Institution, , pp. Harmful Tax Competition in the European Union. Foreign Direct Investment and Tax Competition. Washington: Institute for International Economics, , p.
Hague: Kluwer Law International, , pp. Harmful Tax Competition in the European Union , cit. Oregon: Hart Publishing, , pp. Taxation in na Integrating World , cit. Musgrave; Richard A. Fiscal Coordination and Competition in an International Setting. Discussion Paper n. Manheim: Centre for European Economic Research, , p.
Rethinking International Tax Law
Tax Competition and EU Law. Washington: The Urban Institute Press, , p. In Defense of Globalization. NewYork: Oxford University Press, , p. The Economic Psychology of Tax Behaviour. NewYork: Cambridge University Press, , p. Madrid: Difusa, , pp. Tax Competition, tax arbitrage, and the future of the international tax regime.
In: International Tax as International Law. Country C can only tax the MNE if it has a permanent establishment therein, and in the age of electronic commerce, that may be possible to avoid. Country B typically does not tax the MNE because it is a 'production tax haven', that is, a country that refrains from taxing production activities by MNEs while imposing a general corporate tax on domestic corporations.
Country A also typically would not tax the resident MNE on a current basis because it is afraid that MNE headquarters will migrate to other countries either by inverstion-type transactions or by takeover by foreign MNEs and of new MNEs being incorporated elsewhere. As a result, an MNE such as Intel ends up paying no tax at all on its foreign-source income and if it can deduct stock options, also on its U.
Tax Competition, tax arbitrage, and the future of the international tax regime , cit.
SunValley: Alary Press, , pp. Taxes, Spending, and the U. Government's March Toward Bankruptcy. Belo Horizonte: Del Rey, , p. Coimbra: Almedina, , p. Tax Competition and EU Law , cit. Fiscal Coordination and Competition in an International Setting , cit. No original: "How can this Smithian model be translated into the realm of fiscal competition in the international setting?
It cannot. Merits and Demerits of Fiscal Competition. In: Tax Policy in the Global Economy, cit. Theories of Tax Competition. In: Foundations of International Income Taxation. Editor: Michael J. NewYork: Foundation Press, , p. International Tax Competition. Fifth Edition. Harmonization through Competition? In: Global Debates about Taxation. Organizadores: Holger Nehring; Florian Schui.
National Report Austria. In: Tax Competition in Europe, cit. Foreign Direct Investment and Tax Competition , cit. See Leonard Schneidman. Taxation of Foreign Portfolio Investors. Boulder, USA, , pp. Edited by Raijv Biswas. London: Marborough House, , p. Transition, Taxation and the State.
René Schöb - KPMG Romania
Aldershot: Athenaeum Press, , p. Transition, Taxation and the State , cit. Fiscal Coordination and Competition in na International Setting , cit. Taxation in a Global Economy , cit. Taxation in a Global Economy. Baden-Baden, Germany: Nomos Verlagsgesellschaft, In: U. International Taxation - cases and materials. Second Edition. New York: Foundation Press, Globalization: The Human Consequences.
New York: Columbia University Press, New York: Oxford University Press, Washington: The Urban Institute Press, El Estado regulador - Hacia un nuevo modelo de Estado. Buenos Aires: Abaco, In: Incentivos Fiscais. The Netherlands: Kluwer Law International, Belo Horizonte: Del Rey, London: Marborough House, Taxation of Foreign Direct Investment.
An Introduction. London: Kluwer Law International, State Aid and the Primarolo List. It formalises regular discussions on the design and implementation of standards for international tax matters, strengthens their ability to provide capacity-building support to developing countries, and helps them deliver jointly developed guidance. Latest developments in the implementation of the internationally agreed tax standard. Tax on corporate profits Latest data on tax on corporate profits, which is defined as taxes levied on the net profits gross income minus allowable tax reliefs of enterprises.
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