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Tax Management and Tax Evasion

by Konrad Raczkowski (Volume editor) Lukasz Sulkowski (Volume editor)
Edited Collection VIII, 245 Pages

Summary

Tax management and tax evasion represent an intrinsic element of economic turnover, an area of interest both to the institutional and to the real spheres of national economy. These problems, beyond any doubt, should become the focus of interest for all states having a common market, e.g. the European Union, or the countries which have not introduced the universally binding and which are highly susceptible to abuses in VAT tax – such as the United States. With this in mind, the authors of this volume outline the issues of managing taxes and tax evasion, with a focus on the European Union in general and Poland in particular. The choice did not come by accident, since the latter was the only EU member state which in the waning years of the still continuing economic crisis never fell into negative economic growth.

Table Of Content

  • Cover
  • Title
  • Copyright
  • About the author(s)/editor(s)
  • About the book
  • This eBook can be cited
  • Table of Contents
  • Introduction
  • Taxes as challenge in globalized and open economy with intensified competition. Case study of Poland in the context of Transatlantic Trade and Investment Partnership
  • Introduction
  • Main assumptions
  • Characteristic of the Polish Economy and its tax system
  • General remarks on American and European tax systems
  • TTIP: what it can bring to the tax systems?
  • Conclusions for Poland
  • Bibliography
  • Strategic planning of services in performance budgeting of the public finance sector’s units
  • Introduction
  • Development strategies and strategic programmes in the public sector
  • Performance budgeting
  • Strategic approach to public services in performance budgeting of communes
  • Defining public services and the assignments within their range
  • Diagnosing the Commune’s status in particular services, compared to other entities, assessment of the possessed resources
  • Analysis of inhabitants’ needs and opinions with respect to services
  • Setting the main aim and detailed aims of the budget
  • Defining operational objectives in particular detailed aims
  • Defining and measuring the execution of the budget indicators on the level of aims and objectives
  • Defining the implementation and monitoring system, including the responsibility for the execution and results
  • Summary
  • Bibliography
  • Intellectual capital management in tax administrationand country’s economic growth determined by competitive taxation
  • Inroduction
  • Notion and Importance of Intellectual Capital in Tax Administration
  • Taxes and Their Impact On Economic Development
  • Conclusions
  • Bibliography
  • Transfer pricing as an instrument for tax optimisation
  • Introduction
  • Transfer pricing policy
  • Tax effects of the transfer pricing policy – example (subsidiary in EU)
  • Controls of transfer pricing in Poland – research results
  • Summary and concluding remarks
  • Bibliography
  • Is the concept of the Common Consolidated Corporate Tax Base an innovative measure in the context of economic and tax-related consequences?
  • Introduction
  • Entities entitled to use the CCCTB system
  • Tax-related consequences of the CCCTB concept
  • CCCTB = (revenue – deductible expenses) – other deductibles
  • International holding companies versus the concept of the CCCTB
  • Conclusions
  • Bibliography
  • Fiscal sustainability as a condition of economic security
  • Introduction
  • Instruments ensuring fiscal sustainability in France - Current situation of French public finances
  • Instruments concerning budgetary expenditures in France
  • Instruments concerning budgetary revenues in France
  • Instruments ensuring fiscal sustainability in Poland – Current situation of the Polish public finances
  • Instruments concerning budgetary expenditures in Poland
  • Instruments concerning budgetary revenues in Poland
  • Conclusion
  • Bibliography
  • Interpreting European Union tax law: Practice of Polish tax authorities
  • Introduction
  • Scope of the study and research method
  • Interpretation of EU tax law – general remarks
  • Disregard of European Union tax law
  • Contra legem interpretation of EU tax law
  • Extensive interpretation of the provisions of EU tax law
  • The seemingly correct interpretation of EU law
  • The fully correct interpretation of EU tax law
  • Does this situation evolve?
  • Conclusions
  • Bibliography
  • Tax management in small business entities – Poland case study
  • Introduction
  • Tax system and budget
  • Tax optimization in theory
  • The influence of tax liablities on activity of business entities
  • Tax management in different business entities
  • Conclusions
  • Bibliography
  • Use of systemic analysis in the managerial process of fiscal control bodies
  • Introduction
  • Significance of the system analysis in its role in the fiscal administration
  • Requirements for possibilities of using the system analysis within fiscal audit authorities
  • Functioning of the fiscal audit system and an impact of its particular subsystem of the analyses
  • Structure of organizational analytical units and competencies of analysts employed in fiscal audit units
  • IT resources as fundamental tool for executing systemic analyses while selecting entities to be controlled
  • Achieving satisfactory effects from the operations executed by the fiscal audit authorities in the aftermath of system analyses produced
  • Conclusions
  • Bibliography
  • Institutional perception of unofficial economy in Poland – Contribution to the reflections on its positive effects
  • Introduction
  • Perception of the essence of the “unofficial economy”
  • Areas and size of the “unofficial economy” in the Polish economy
  • Obscure and positive aspects of the “unofficial economy” in Poland
  • Conclusions
  • Bibliography
  • Struggle with the tax gap in Poland
  • Introduction
  • The concept of the tax gap
  • Occurrence of tax gaps in Poland
  • Income tax gap
  • Capital gains tax gap
  • Tax on goods and services gap
  • Shadow economy
  • Other tax gaps
  • Methods and manners for clamping down on tax gaps by relevant authorities
  • Guidelines and postulates for rectifying the ongoing situation
  • Conclusions
  • Bibilography
  • VAT tax fraud and its relation to the low efficiency of the Polish value added tax collection system
  • Introduction
  • Measurable effects of VAT avoidance and evasion
  • VAT avoidance and evasion indicators. Results for Poland
  • Selected regional Polish tax collection data
  • Conclusions
  • Bibliography
  • Legislation and case law to combat crime associated with the settlement of indirect taxes in Poland
  • Introduction
  • Taxes on goods and services
  • Excise duty
  • Conclusions
  • Bibliography

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Introduction

Tax management and tax evasion represent an intrinsic element of economic turnover, an area of interest both to the institutional and to the real spheres of national economy. It needs to be said openly that a specific kind of tax engineering flourishes now, in the days of all-pervasive globalisation, when tax burdens impact the overall productivity of production factors, but very often relate to only non-tangible and legal values. Such schemes are devised as a rule by large multinational corporations, which develop international tax strategies adapted to the profile of conducted economic activity; other enterprises follow suit with their strategies. The aim is, of course, such reduction of tax liabilities, using legal means, which will allow for retaining the largest possible profit in the overall profit & loss account, allowing for presentation of the best possible financial result. This way in many countries one meets with major firms, such as trade and service companies, hyperstore chains or all categories of single logo restaurant chains which, irrespective of mass scale presence in multiple locations in the given country, may be paying no taxes in that country, or the sum of such taxes will be disproportionately low in relation to the generated turnover. After all, in international relations it would be difficult to prove that an entity which differentiates costs as part of creative price manipulations in reality transfers profits so as to reduce tax liabilities.

In this context a fundamental question arises, asked above all by the tax authorities seeing such anomalies and webs of international entanglements: to what point is this really optimising of taxes within bounds of the law, and from when can one speak of wilful breaking of laws and tax evasion? How should they suppress the practice of mass scale extortion relating in particular to indirect taxes, and VAT above all else, from budgets of individual states? How to, from the perspective of an entrepreneur, secure oneself against being sucked into a tax carousel, attempts to shift responsibility by a buffer enterprise, and in consequence attempts at punishing in bad faith? How can a state support honest tax competition, as part of securing the economic turnover process with an appropriate, and in particular efficient system of managing taxes? These are fundamental questions, to which it is not only necessary to seek answers, but which in a fundamental way necessitate revisiting and altering given tax policies.

These problems, beyond any doubt, should become the focus of interest for all states having a common market, e.g. the European Union, or the countries which have not introduced the universally binding and highly susceptible to abuses ← vii | Viii → VAT tax – such as the United States. Such problems certainly fall within the range of interest of every state, since in the present day multinational capital does not ask whether things are well in a given country, but only whether it is possible to reap profits by doing business in that country.

With this in mind we present to you the present monograph, outlining the issues of managing taxes and tax evasion, mainly (though not exclusively) through focus on European Union, with Poland in particular. The choice did not come by accident, since the latter was the only EU member state which in the waning years of the still continuing economic crisis never fell into negative economic growth. Yet the growth was not matched by tax collections which, particularly in VAT, experienced a gigantic fall during 2012–2013, widening the tax gap due to unsatisfactory tax collections. This was exacerbated by the fact that in recent years there was an increase in the number of tax-related court litigations, reviewing complaints of taxpayers in dispute with tax authorities.

The monograph consists of twelve chapters, providing a systematic review of the issues signalled by its title. From presentation of the significance of taxes, their competitiveness, optimising and impact in a global environment plus strategic planning in public finance, all the way to issues connected with the unofficial economy, tax gap, tax fraud and legislation addressing indirect tax crimes.

We hope that the book which we present to you will become an incentive to linking in common the knowledge inherent in the worlds of science, business and politics, in the aim of achieving better understanding of the tax issues still not understandable to the majority, which constitute present day tax engineering. For that reason we have the ambition of starting and joining in extensive, international discussions of this issue, which should above all allow for designing constructive solutions and for their practical implementation in the organisational & legal order of individual states and economic turnover entities.

Konrad Raczkowski, Łukasz Sułkowski

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Katarzyna Żukrowska1

Taxes as challenge in globalized and open economy with intensified competition. Case study of Poland in the context of Transatlantic Trade and Investment Partnership

Introduction

Polish economy is in transition from a phase driven by effective use of production factors towards innovative use of them. This means the importance of sustainable growth being attractive for certain types of investments, and serve as deterrent to other types. This statement provokes some controversies, as some economists declare that in light of 12% unemployment rate the country should encourage all possible flows of investment and not concentrate only on part of them. Others express the opinion that concentration helps to accelerate the rate of growth of the economy and enables quicker build-up of wealth in the society (notion which replaces well known welfare state). Taxes can play an important role in this process, especially in the context of bilateral opening of the EU and US markets for more intensified trade and investment flows within Transatlantic Trade and Investment Partnership – TTIP. Decisions taken ex ante concerning levels and structure of taxes can have an important impact on the ability to compete and develop by Polish companies in the coming future.

The article will examine the theoretical impact of level and structure of taxes in the context of TTIP, showing the direction of possible changes which can either undermine the rate of growth of the economy or stimulate it. The hypothesis of this article is that improper level and structure of taxes can be considered as an element jeopardizing the area of economic security of the state.

Main assumptions

In this article it is assumed that taxes are considered by investors and management of companies as one of the costs and as such are taken into consideration ← 1 | 2 → in decisions to either stay in a particular market or move to another location. This context takes into account one of the features of current economic relations, which is the international movement of production factors on top of transfer of goods and services.

Policymakers, including those who decide about taxes, look at them mainly from the position of narrowly considered interest, defined within the context of national economy framework, limiting their role to source of national budget revenues. The observed trend in this area was strengthen by the 2008+ crisis, when growing budget deficits stimulated policy makers to raise the taxes, hoping for increases in the state’s budgetary revenues. Such revenues can increase, but only temporary and the increase is short lived. This was proven by, inter alia, the experience of countries which were preparing for EMU in the 1990’s and applied different policies in area of fiscal policy, where mainly 3 methods of budgetary consolidation were applied [Żukrowska, Orsi, Lavrac, 2004, p. 24–31]. First consolidation method was based on restructuring and at the same time lowering expenditures, and this was called expenditures-based consolidation. The second method used a different approach, focused on increase of revenues by higher taxes, something that is called revenue-based consolidation. Third method was a mix of the two, changing both the revenues and the expenditures and it is known as mixed consolidation strategies featuring one-off measures. The method applied in the US can be classified also in the last category; it was leading the American economy to a balanced budget and with time even to a budget surplus.

Recently most of the developed economies are facing the problem of budget deficits, rarely looking into the experience from the past, despite the fact that some lessons from that practice can be drawn and applied in the current conditions. The importance of that experience seems to increase in the context of effectiveness of applied methods and relative social burdens that they bring. Moreover, TTIP, brings us to the point in which some comparisons between methods applied in the EU states and US market have to be made. At this point both markets strive under budget deficits. EU has enforced its control over the state of budget deficits by providing additional tools to the Stabilization and Growth Pact (S&GP), which are following:

a) European Semester;

b) European Stability Mechanism (ESM)

c) European Financial Stabilization Mechanism (EFSM)

d) European Financial Stability Facility (EFSF)

e) Six new legal arrangements were approved, which are aimed to help in managing of the economy, known as the six-pack; ← 2 | 3 →

f) Euro Plus Pack was also established, which is striving to spur efforts enabling convergence of the EU member states national policies, something that is considered to be a measure helping to enhance competitiveness of the Union as a whole2.

Moreover, indebted economies are supported by financial and expertise aid from both the IMF and the European Commission. This was experienced by Greece, Ireland and Spain after the 2008+ crisis. Also the new regulations increase the external control over the policies applied in particular states in their consolidation policies.

The European Financial Stability Facility (EFSM) is furnished with €60 bln. This amount is a guarantee set up together by all EU states, which can be considered as a ceiling up to which the European Commission can collect capital on the money market, prior to such activity securing the approval for it from ECOFIN. Such a mechanism is backed by guarantees coming from the EU general budget. And as the EU general budget should not end up with a deficit (indicating that expenditures are higher than revenues) when a loan is drawn, than the there are at least consequences of such move. Firstly, it has a defined set ceiling, which cannot be surpassed, something that constrains the state’s appetites for money. Secondly, the EU member states take over financial responsibility to cover such a gap. The size of shares of each individual state in financing the gap is defined by its share in the Union’s GNP. Financial means available from the financial gap, defined in such way, are additionally supported by means coming from the EFSF and the ESM.

The European Financial Stability Facility, forms a consecutive element of the solutions recently created in the EU serving the purpose of stabilizing the European finances. Often all the mentioned solutions are presented as funds, which is not a proper approach, as the instruments are not created with use of financial means, which would be in disposal of the mentioned solutions, in the sense of money that are ready to be paid. Those instruments are constructed in such a way that they are able to offer defined amounts of money using the guarantees of the EMU member states. The ceiling for such guarantees is the amount of €780 bln. In practice this implies a crediting potential of €440 bln. The stabilization setup, as it was mentioned earlier, includes also the IMF. At the start the share of IMF was set at level of €250 bln. In December 2011, at the EU summit, a proposal was made to raise the share of the IMF by an additional €200 bln. ← 3 | 4 →

Details

Pages
VIII, 245
ISBN (PDF)
9783653046144
ISBN (ePUB)
9783653985740
ISBN (MOBI)
9783653985733
ISBN (Hardcover)
9783631651902
Language
English
Publication date
2014 (October)
Published
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2014. VIII, 245 pp., 27 tables, 22 graphs

Biographical notes

Konrad Raczkowski (Volume editor) Lukasz Sulkowski (Volume editor)

Konrad Raczkowski is Professor of Management and specializes in the unofficial economy, public finances and management in the economic system. He is Director of the Institute of Economics at the University of Social Sciences in Warsaw (Poland) and Head of the Department of Economic Security Management. Lukasz Sulkowski is Professor of Economics at the Jagiellonian University in Cracow (Poland), at Clark University (USA) and at the University of Social Sciences in Łódź (Poland). He has published numerous books and articles on cognitive and methodological problems of management and marketing, on the management of family enterprises, on organizational culture and human capital. He participated in several international research projects funded by the EU, the National Science Centre, the Committee for Scientific Research and the Ministry of Science.

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