公司所得税竞争：合作还是战争？

CCCCORPORATE ORPORATE ORPORATE ORPORATE IIIINCOME NCOME NCOME NCOME TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION: A N: A N: A N: A NEED FOR EED FOR EED FOR EED FOR CCCCOOOO----ORDINATION OR ORDINATION OR ORDINATION OR ORDINATION OR WWWWINNABLE INNABLE INNABLE INNABLE WWWWARARARAR???? July 2003July 2003July 2003July 2003 1111 CASE STUDYCASE STUDYCASE STUDYCASE STUDY CCCCORPORATE ORPORATE ORPORATE ORPORATE IIIINCOME NCOME NCOME NCOME TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION:::: A NA NA NA NEED FOR EED FOR EED FOR EED FOR CCCCOOOO----ORDINATION OR ORDINATION OR ORDINATION OR ORDINATION OR WWWWINNABLE INNABLE INNABLE INNABLE WWWWARARARAR???? IIIINTRODUCTIONNTRODUCTIONNTRODUCTIONNTRODUCTION An increase in the mobility of capital and the effects of direct investments flows on the economic performance and the volume of tax base have become important issues of both economic reforms and academic discussions. In the time of globalisation, governments have been loosing their traditional tools of economic policy, such as trade policies, fiscal policy or traditional industrial policies and in some cases even the autonomy of monetary and exchange rate policies. One of the tools, used by governments to promote the long-term economic growth and the flows of capital, is the domain of tax burden on business, especially the corporate income tax. The flows of direct investments are generally connected with multiple positive impacts on economic performance and governments endeavour to influence the flows by tax policy, i.e. either by systems of special tax regimes (we discussed the issue of investment incentives in the Case Studies in January’s and February’s Country Reports) or by the reforms of overall company taxation (by the decline of statutory tax rates and in the same time by the tax base broadening). During last twenty years, the average statutory corporate tax rates in developed countries fell from 48% in 1980 to 35% in 2002. Either post- communist Central European countries have joined the competition. The rates declined from the average of 75% at the beginning of the 90’s to 40-45% in the half of the 90’s; and for example in Hungary even to 18%; Slovakia would decrease the rate to 19% and the Czech Republic and Poland are considering how quickly to cut the rates to the similar level. Competitive pressures to the decline of corporate taxation lead to the pressures to the decline of the volume of public services or to the pressures to increase the taxation of less mobile labour or the taxation of consumption. This raises a question whether the tax competition is harmful or not. Harmful in the sense of negative fiscal externalities and the pressures to decline of public services providing in high-tax countries or harmful in the sense of tax burden shift on labour with negative consequences on overall employment. The second issue is the real extent of tax competition, an issue how to compare company taxation burden taking into account different system of tax legislatives around the world and a question whether corporate tax is to vanish in small open economies as predicted some economists (see Gordon, 1986, or Rasin and Sadka, 1991). Supposed the tax competition really influences the flows of capital, economic activity and the volume of tax base there’s a question whether global or regional tax co-ordination or even harmonisation could be helpful (a kind of WTO in the domain of corporate taxes). TTTTHEORIES OF HEORIES OF HEORIES OF HEORIES OF TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION The literature on the topic of tax competition could be distinguished into two main ways. The first one, beginning by Tiebout (1956), assesses tax competition in positive way because it leads to more effective using of public funds and limits non-productive activities such as rent-seeking. The second one, beginning by Oates (1972), professes the tax competition as a harmful because the decline of tax revenues leads to the decrease of providing public services below optimal welfare level. Generally, the issue of tax competition amongst governments and its consequences could be interpreted as an issue of desired public sector size in the economy, the size of government levels or the extent of desired redistribution processes. Oates (1972) says that the result of tax competition could be a tendency to lower volume to and lower efficiency of public services providing. If governments decrease the taxes to attract mobile capital, public expenditures are CCCCORPORATE ORPORATE ORPORATE ORPORATE IIIINCOME NCOME NCOME NCOME TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION: A N: A N: A N: A NEED FOR EED FOR EED FOR EED FOR CCCCOOOO----ORDINATION OR ORDINATION OR ORDINATION OR ORDINATION OR WWWWINNABLE INNABLE INNABLE INNABLE WWWWARARARAR???? July 2003July 2003July 2003July 2003 2222 below the level when the marginal benefits of these expenditures equal their marginal costs. The expenditures’ cuts concern especially on programmes, which don’t provide enough benefits to business environment. Oates’s conclusion, that such a governments’ behaviour is not effective, is based on the presumption that no government gets competitive advantage in the struggle (the prisoner’s dilemma principle). The result is a welfare decline in all communities or countries. Sinn (1997) emphasises the characteristics of services provided by public sector and not efficiently provided by private sector (market failure). Competition amongst government leads to a decline of providing such services. Depicted concept of harmful tax competition for investments was latter applied on labour and environmental standards, reduction of social security payments or competition in indirect taxes for cross-frontier buyers (see Wilson, 1999). Since the first Oates’s concept of harmful tax competition many specialised concepts and models have emerged which depicted the consequences of non-co-operative behaviour of governments. The success of one government in attracting tax base (inhabitants or business) means the erosion of tax base elsewhere (fiscal externalities), i.e. negative fiscal externalities display especially in the export of taxation (the taxation of non-residents), the shift of real economic activity to tax-friendly localities or the shift of income. Sinn (1997) adds that tax competition doesn’t have to lead to the under-dimension of public services but it has strong redistribution effects. According to him, welfare state ceases to be sustainable when mobility of labour increased too. Either Keen and Marchand (1997) manifested that tax competition presses governments not only to the changes in tax structures but also in increase in the share of public expenditures in favour of mobile capital. Contrary to Oates’s conclusions, there’s opinion stream, beginning by so-called the Tiebout theorem (1956), which says that competition for mobile households (or mobile companies) is welfare improving. Governments have to set taxes as low to attract capital but in the same time it must be able to provide enough public services (education, infrastructure). The literature concerns especially on the issue of economic efficiency but neglects the fact that increased capital mobility weakens the ability of governments to redistribute income from the rich to the poor people. Another stream of economic literature, which opposes notion about a harmful tax competition and a need for tax co-ordination, is the application of Public Choice. According to Brennan and Buchanan (1980), the tax competition is welfare-enhancing because it limits the excessive size of governments and attendant rent-seeking activities. Contrary to models of tax competition, which assumed that politicians and bureaucrats behave in the interest of the majority of residents and owners of production factors, public choice concepts are more realistic incorporating public officials own interests into their analysis. Tax co-operation could have bad consequences because an imperfection in political decision-making processes could lead to wasting of tax revenues and to above the optimal level of taxation. BOXBOXBOXBOX: The Impacts of Corporate Taxation on the Flows of Direc: The Impacts of Corporate Taxation on the Flows of Direc: The Impacts of Corporate Taxation on the Flows of Direc: The Impacts of Corporate Taxation on the Flows of Direct Investmentst Investmentst Investmentst Investments The localisation of national and multinational investments is influenced by a bulk of motives and factors, such as political and macroeconomic stability, characteristics of legislative and institutional environment, quality and costs of production factors, infrastructure etc. One of less important factors is corporate income taxation. Blomstrom and Kokko (2003) emphasise that in the time of globalisation sooner marginal localisation factors, such as corporate taxation and special tax regimes, have become more and more important. CCCCORPORATE ORPORATE ORPORATE ORPORATE IIIINCOME NCOME NCOME NCOME TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION: A N: A N: A N: A NEED FOR EED FOR EED FOR EED FOR CCCCOOOO----ORDINATION OR ORDINATION OR ORDINATION OR ORDINATION OR WWWWINNABLE INNABLE INNABLE INNABLE WWWWARARARAR???? July 2003July 2003July 2003July 2003 3333 It’s needed to consider the issue of harmful tax competition and the need of tax co-ordination or even harmonisation also with regard to economic size of countries. Baldwin and Krugman (2000), Bucovetsky (1991) and Wilson (1991) came with models where big countries could maintain higher taxes due to agglomeration effects. Indeed, the agglomeration effects in big states create localisation specific rent. Small changes in tax burden and small differential don’t have significant impact on capital flows. Only high increase in taxation or high tax differential could induce a collapse of the agglomeration. Small countries must levy lower tax burden because they face higher elasticity of capital supply than big countries. The increase in capital mobility displays in higher tax cutting in small countries. The conclusion of these concepts could be that corporate taxation co-ordination, its impact on capital flows and economic activity would be in favour of big high-tax countries. However, small low-tax countries would lose. CCCCORPORATE ORPORATE ORPORATE ORPORATE TTTTAX AX AX AX CCCCOMPETITION AND OMPETITION AND OMPETITION AND OMPETITION AND CCCCORPORATE ORPORATE ORPORATE ORPORATE TTTTAXATION AXATION AXATION AXATION DDDDEVELOPMENT IN EVELOPMENT IN EVELOPMENT IN EVELOPMENT IN DDDDEVELOPED AND EVELOPED AND EVELOPED AND EVELOPED AND TTTTRANSITIVE RANSITIVE RANSITIVE RANSITIVE CCCCOUNTRIESOUNTRIESOUNTRIESOUNTRIES Considering different points of view on the tax competition and its consequences in economic literature let’s take a look on the corporate taxation development from the point of view of statutory tax rates, implicit (real) tax burden and effective tax rates. Statutory Rates of Corporate Income TaxesStatutory Rates of Corporate Income TaxesStatutory Rates of Corporate Income TaxesStatutory Rates of Corporate Income Taxes A phenomenon of tax competition could be easily considered by the statutory tax rates development. Though the comparison is most preferred for its simplicity and the availability of data, the rates definition doesn’t have to be so easy as it seems, i.e. due to the existence of temporal or stable surcharges or relieves and due to corporate tax is often levied by more levels of government. Hines (1999) considers the problems of econometric testing of taxation and capital flows dependency as companies are using a wide range of tax-planning methods. Moreover, high-tax countries often compensate high burden by a range of special regimes. It’s very difficult to distinguish the influence of single localisation factors and especially the factor of corporate income taxation. Except previously mentioned problems, there are these ones: many characteristics correlated with each other (e.g. tax policy and labour market regulation); it’s difficult to obtain relevant data and to distinguish between real investments and only financial transactions; it’s also difficult to express an appropriate indicator of company taxation (see below). Empirical literature about taxation and FDI localisation concerns mainly investments in the USA or American investments abroad. The main part of literature finds high tax differential as statistically significant localisation factor. Gropp and Kostial (2000) tested on data of FDI inflows and outflows and differential in average effective taxation dependency in the OECD and the EU countries. They confirmed the assumption of higher FDI inflow into low-tax countries (such as Ireland or Luxembourg) and they also confirmed the hypothesis of tax revenues erosion in high-tax countries (such as Germany or France). Devereux and Griffith (1998) used firm-level data of the US multinationals which invested in Europe (especially in the UK, Germany and France) and found out localisation choice was strongly influenced by tax differential. Either Friedman, Gerlowsky and Silberman (1992) confirmed that the localisation of new plants of Japanese and European multinationals in the USA was depend on state and local business taxation. CCCCORPORATE ORPORATE ORPORATE ORPORATE IIIINCOME NCOME NCOME NCOME TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION: A N: A N: A N: A NEED FOR EED FOR EED FOR EED FOR CCCCOOOO----ORDINATION OR ORDINATION OR ORDINATION OR ORDINATION OR WWWWINNABLE INNABLE INNABLE INNABLE WWWWARARARAR???? July 2003July 2003July 2003July 2003 4444 Statutory Corporate Income Tax Rates in Developed Countries in 1982Statutory Corporate Income Tax Rates in Developed Countries in 1982Statutory Corporate Income Tax Rates in Developed Countries in 1982Statutory Corporate Income Tax Rates in Developed Countries in 1982----2001 2001 2001 2001 (%) 30 35 40 45 50 55 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 Median Weighted Average 0 10 20 30 40 50 60 70 A us tri a B el gi um Ca na da Fi nl an d Fr an ce UK G er m an y G re ec e Ire la nd Ita ly Ja pa n N et he rla nd s P or tu ga l S pa in S w ed en U SA 1982 2001 Note: If countries have several rates, manufacturing industry is used. Moreover, local taxes and permanent surcharges are incorporated. The average is weighted by GDP of countries in the US dollars. Source: Devereux, Griffith and Klemm (2002) Simple comparison of tax rates in developed countries shows a decline from average 50% level at the beginning of the 80s’ to 35% level in 2001. The rates decline has been continuous process during last twenty years especially visible in the late 80s’. Even stronger decline in rates occurred in Central European countries during the 90s’. Since 1993 the rates has lowered from 40-45% to nowadays’18% in Hungary, probability 19% next year in Slovakia, 19% next year in Poland and 26% in the Czech Republic in 2005 (the main opposition political party ODS proposes even 15%). Statutory Corporate Income Tax Rates in Central European Transitive Countries in 1993Statutory Corporate Income Tax Rates in Central European Transitive Countries in 1993Statutory Corporate Income Tax Rates in Central European Transitive Countries in 1993Statutory Corporate Income Tax Rates in Central European Transitive Countries in 1993----2003 2003 2003 2003 (%) 10 15 20 25 30 35 40 45 50 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 Czech Republic Slovakia Poland Hungary 0 10 20 30 40 50 C ze ch R ep ub lic Sl ov ak ia Po la nd H un ga ry 1993 2003 Source: NEWTON Holding Database Sorensen (2000) offers a similar picture comparing corporate tax rates from the point of view of different size of countries. The study confirms a hypothesis of agglomeration effects models that big countries due to localisation specific rents aren’t pressed to decrease the rates so much as small open economies. Whilst in the half of the 80s’ the average rates in the groups of small and big countries were almost equal (49%), at the end of the 90’s the average rate in small CCCCORPORATE ORPORATE ORPORATE ORPORATE IIIINCOME NCOME NCOME NCOME TTTTAX AX AX AX CCCCOMPETITIONOMPETITIONOMPETITIONOMPETITION: A N: A N: A N: A NEED FOR EED FOR EED FOR EED FOR CCCCOOOO----ORDINATION OR ORDINATION OR ORDINATION OR ORDINATION OR WWWWINNABLE INNABLE INNABLE INNABLE WWWWARARARAR???? July 2003July 2003July 2003July 2003 5555 countries lowered to 32% and in big countries only to 40%. Looking at the statistics of lowering statutory corporate tax rates we must keep in mind limited predicating ability of the indicator. A decrease in the rates doesn’t have to mean a (proportional) decline in tax payments because countries have changed (often broadened) the tax base together with the rates. Considering a real change in corporate tax burden it’s useful to use different concepts of implicit and effective tax rates. Implicit or effective tax rate is the rate, which takes into account not only the statutory tax rate but also other aspects of tax system, which determinates the volume of effectively paid tax. In the other words, it takes into account the extent of tax base and the way in which corporate and personal taxes are integrated. The influence of tax system on net return of investment depends on a range of way, e.g. pre-tax return, legal status of investing firm or the source of financing. If we need to get the effective average tax rate we have to do some simplification. Every way of the estimation of effective rate has its pros and cons. The methodology of the computation of implicit tax rate is two: backward-looking approach of tax revenues measured on real firm-level or on aggregate data or forward-looking approach of the calculation of the effective taxation of hypothetical investments based on tax legislative. Implicit Tax Rate Measured on Tax RevenuesImplicit Tax Rate Measured on Tax RevenuesImplicit Tax Rate Measured on Tax RevenuesImplicit Tax Rate Measured on Tax Revenues The first way to measure real corporate income tax burden is a measuring of real corporate tax revenues to public budgets. The measuring of average rate is typically defined as the ratio of tax payments on tax base using firm-level or aggregate data. Contrary to simple statutory tax rates observing we could evaluate real development of tax burden in the national economy or according to the regional or sectoral point of view. OECD Revenues Statistics offers the international comparison of real corporate tax payments ratio on GDP or on overall tax revenues. Ratio of Corporate Tax RevenueRatio of Corporate Tax RevenueRatio of Corporate Tax RevenueRatio of Corporate Tax Revenue on GDP in Developed Countries in 1965 on GDP in Developed Countries in 1965 on GDP in Developed Countries in 1965 on GDP in Developed Countries in 1965----2000 2000 2000 2000 (%) 0 0,5 1 1,5 2 2,5 3 3,5 4 19 65 19 69 19 73 19 77 19 81 19 85 19 89 19 93 19 97 Median Weighted Average 0 1 2 3 4 5 6 Au st ria Be lg iu m C an ad a Fi nl an d Fr an ce U K G er m an y G re ec e Ire la nd Ita ly Ja pa n N et he rla nd s Sp ai n Sw ed en U SA 1965 1982 2000 S