ESTIMATION OF INTERNATIONAL TAX PLANNING IMPACT ON CORPORATE TAX GAP IN THE CZECH REPUBLIC
The issue of base erosion and profit shifting (BEPS) caused by multinational companies is a potential important impediment to tax collections. Because tax planning schemes utilized gaps and mismatches in tax rules to artificially shift profits to low or no-tax jurisdiction where there is insufficient of no economic activity (Hines, 2014; OECD, 2017). The Organization for Economic Co-operation and Development (OECD) has estimated the general annual revenue loss of USD 100 to 240 billion due to the BEPS OECD (2017). Dharmapala and Riedel (2013) focused on tax motivated income shifting between parent companies and their affiliates. The parent companies have almost 60% affiliates established in low-tax jurisdictions. It resulted in profit shifting from the high-tax parent companies’ jurisdictions to the low-tax affiliates’ jurisdictions where the profit is taxed with the
lower tax rate.
Jméno a příjmení autora:
Lukáš Moravec, Jan Rohan, Jana Hinke
Avoidance, base erosion, profit shifting, revenue, tax, tax loss
DOI (& full text):
There are many studies focusing on VAT (value added tax) tax gap but very few relevant studies that deal with the corporate income tax loss. The studies vary particularly in their methodology,…více
There are many studies focusing on VAT (value added tax) tax gap but very few relevant studies that deal with the corporate income tax loss. The studies vary particularly in their methodology, databases and interpretation. In the case of the Czech Republic the studies resulted in a range between CZK 57 billion tax gap and CZK 12.5 billion corporate tax revenue gain caused by the tax planning. The main aim of the paper is to calculate the corporate income tax efficiency rate for the Czech Republic and compare it with other member states. The indicator of corporate income tax efficiency is important for the calculation of the tax revenue without profit shifting (RWS) indicator and then the subsequent corporate income tax gap estimation for 2013-2015, which is the second goal of the paper. The RWS indicator gives an overview of the Czech Republic´s amount of loses/gains relating to the corporate tax base erosion and corporate profit shifting. In the case when the actual corporate income tax revenue takes a higher value than the revenue without profit shifting indicator the jurisdiction benefits from the profit shifting operations. The opposite situation results in tax revenue losses caused by profit shifting to other “more attractive” tax jurisdictions. Authors’ study re-estimation results in approximately CZK 9.404 billion tax gap caused by base erosion and profit shifting instead of 12.5 billion CZK that shows EPRS’s study for period 2013. The third aim of the paper is to deal with the difference between input data from Eurostat database and official data from General Financial Directorate.