JOURNAL OF TAX REFORM

Domestic revenue mobilisation has become a topical issue in developing countries, and their capacity to regulate multinational enterprises (MNE) transactions to minimise Base Erosion and Profit Shifting (BEPS) remains a formidable task. Faced with legislative deficiencies, implementation incapacities, and being at the nascent stages of adopting transfer pricing (TP) regulation, developing countries have remained at the mercy of MNEs’ BEPS practices. The complexity and intricacies of intragroup transactions have an impact on profit allocation, thus affecting the distribution of taxing rights across countries where these MNEs operate. This study explores the regulatory policies toward international transfer pricing in the context of developing
nations and the associated challenges. The paper proffers possible solutions to improve TP regulation and implementation. Specifically, the paper centres its attention on Zimbabwe, one of the developing nations that have implemented transfer pricing legislation in recent years. Mitigating the impact of BEPS through efforts, such as regulating and managing TP would avail potential substantial finance to shift developing countries from aid dependence to self-sustenance, yet these efforts face a lot of hurdles. Research that contributes to knowledge development in the area, evaluates the hurdles faced and contributes to policy and implementation improvements becomes vital. This study found that Zimbabwe is faced with challenges such as lack of legislative clarity, lack of comparability data, shortage of resources, lack of capacity and dysfunctional double taxation agreements in dealing with transfer pricing. The study recommends Zimbabwe should improve legislation, create TP databases, improve revenue authorities’ capacity, and increase stakeholder awareness of TP.

This study explores the dynamics of taxpayer compliance with motor vehicle taxes, shedding light on the intricacies of transport taxation. Focusing on the mediating role of taxpayer awareness, the research employs a quantitative approach with Likert scale measurements. Primary data is gathered from 300 respondents in Bekasi Regency, Indonesia, out of a population of 1,789,548 taxpayers, using accidental sampling. SEM-PLS analysis reveals that adherence to tax rules, system updates, understanding tax intricacies, higher incomes, and taxpayer awareness contribute significantly to enhanced tax compliance within the context of motor vehicle taxation. Notably, the study finds that public education about taxes does not significantly impact compliance in this specific domain. The factors influencing taxpayer awareness encompass tax rules, system upgrades, tax knowledge, public education, and income levels. While taxpayer awareness is linked to system upgrades, tax knowledge, public education, income levels, and compliance, it doesn’t connect with tax rules and compliance in the realm of motor vehicle taxation. The research implications provide valuable guidance specifically tailored to policymakers and tax authorities dealing with transport taxation. Emphasizing the significance of tax penalties, system modernization, and tailored taxpayer awareness programs can foster improved compliance in the motor vehicle taxation domain. Policymakers are urged to reassess the efficacy of tax socialization initiatives in the context of transport taxation, exploring alternative approaches for public tax education in this specific domain. Understanding the nuanced interplay among tax rules, system upgrades, tax knowledge, public education, income levels, taxpayer awareness, and compliance in the realm of motor vehicle taxation can inform targeted interventions for an overall enhancement of tax adherence in this specialized area.

The Indian government has recently transformed its indirect taxation system with the adoption of Goods and Service Tax (GST) in India. However, this taxation reform has a direct impact on the compliance behavior of the taxpayer as explicated by low GST revenue of the country. Since GST is a new taxation law in India, it become pertinent to explore the compliance behavior of GST taxpayers to proffer valuable suggestions and feedback to the concerned authorities for devising appropriate policies and strategies to comprehend and control the non-compliance behavior of the GST taxpayers. Therefore, the present study analyzed the compliance behavior
of GST taxpayers by synthesizing the theory of planned behavior by collecting the data from 503 GST taxpayers using snowball random sampling with the application of exploratory and confirmatory factor analysis. The collected data was analyzed using exploratory and confirmatory factor analysis to confirm the theory of planned behavior to comprehend the compliance behavior of the GST taxpayers. The findings of the study assert that the theory of planned behavior explain the 60.1% variance of the total compliance behavior of the GST taxpayers. Moreover, the findings posit that the attitude, subjective norms and perceived behavioral control have a positive impact on the compliance behavior of the GST taxpayers. The proposed instrumental scale may be applied in future research studies to comprehend the compliance behavior of GST taxpayers at national and international level and therefore, this study may have major implications for the government, academicians and policy makers for
improving the compliance behavior of the GST taxpayers.

The empirical studies on the potential interconnection between tax and financial growth have gathered a great deal of attention from scholars and policymakers. However, the impact of regulatory capital on taxation performance has been ignored. In this context, the study aims to provide new discussion by assessing the linkage between capital adequacy and taxation revenues in the case of Brazil, Russia, India, China, and South Africa (BRICS) economies. We aim to find out the impact of capital adequacy ratios on the taxation performance of BRICS countries. We hypothesize that a stronger banking system is positively associated with higher taxation performance. A sound banking and financial system promotes economic development and growth, also resulting in the firms’ profitability and ultimately increasing the government’s tax revenues. Using the advanced quantile panel technique of the Methods of Moments Quantile
Method (MM-QR), the study showed that capital adequacy positively influences taxation sustainability in the BRICS economies. Besides, the findings illustrated that economic growth positively increases taxation revenues in the BRICS economies. The study suggests that regulatory capital policies can positively influence financial stability by mitigating bank risk-taking incentives and offering a buffer against losses. Hence, an increase in capital adequacy will promote financial stability, which in turn leads to increased taxation revenues. However, higher capital adequacy may increase the franchise value of core banks’ activities, which in turn allows banks to attract new investments and funds that can be used for investment in risky market-based activities. Based on the empirical analysis, the study concludes that policymakers should focus more on capital regulation and sustainable taxation revenues.

The current hottest issue in Indonesia is the small amount of Land and Building Tax (LBT) revenue at the national and local levels. This research aims to find a valuable model for increasing LBT revenue for the government by formulating ideal clauses and determining what policies should be implemented. This research aims to reveal the practice of tax avoidance and evasion on LBT tax objects, which causes LBT income to stagnate yearly, and find a solution by mapping actual conditions and forecasting the next ten years using a system dynamics model. The research question is why LBT makes a small contribution to total state revenue, even though the object and what are the solutions to increase LBT income in the future. The research methodology uses quantitative methods supported by qualitative analysis using dynamical system modeling. This modeling makes it possible to predict increases in tax revenues by considering several variables that cause LBT revenues to stagnate. The findings of this study show that LBT revenues will proliferate compared to revenues in the initial year of the simulation if intervention is carried out by reducing tax avoidance and tax evasion, increasing tax compliance, and the value of the income growth ratio per tax object. This study found nine actors essential in increasing property taxes in Indonesia: civil officials, tax officials, tax authorities, notaries, large companies, state and regional-owned enterprises, sellers, and buyers of property. In conclusion, the government needs to improve the tax collection system and implement various strategies, including increasing the role of notaries to prevent tax evasion in housing.

Tax incentives are commonly used to support various sectors and population, and this study delves into the realm of deductions for the personal income tax (known as NDFL in Russia). We explore differing perspectives on these deductions, considering them either as investments in human capital for future income growth or as a form of government-initiated financing for specific sectors. Focusing on deductions related to children’s education expenses in private schools, the research evaluates the effectiveness of budgetary investments in this sector. Using DEA analysis, the study assesses private schools based on factors like teacher-student ratios, classroom space per student, and access to computers and educational literature. The learning
outcomes were measured by the number of high performers in the Unified State Exam and the number of 9th-grade graduates with certificates of distinction. The evaluation of learning outcomes reveals that many private schools in Moscow prioritize comfort over educational standards and the majority of them perform below the average levels in terms of effectiveness. The findings prompt questions about the feasibility of including private school expenses in personal income tax deductions. The proposed approach recommends tying eligibility for these deductions to the effectiveness of private schools, ensuring a more targeted and impactful use of tax benefits.

The article examines recent trends in tax level and structure changes within developed and developing economies in relation to economic growth. The study’s significance stems from increasing geo-economic turbulence and emerging risks in the global economy, necessitating fiscal regulation. The analysis spans the period from 2009, post the Great Recession, to the present day.

We tested the hypothesis that discernible patterns could be identified through statistical analysis regarding the relationship between tax indicators (level and structure) and economic growth indicators. However, no such clear patterns were found. In essence, it cannot be definitively concluded that reduced tax levels and/or increased indirect tax shares do explicitly foster national economic growth. Tax impact on economic growth varies significantly across developed and developing economies, presenting a complex and nuanced picture. The nature and strength of this influence are largely shaped by the specific circumstances of each location and period. In order to identify their unique impact, counterfactual analysis is required.

In the course of further research, it is important to consider, firstly, the increased fiscal activism of the post-pandemic period: in this case, the research outcomes may be different from those obtained for the period already examined. Secondly, considering the ongoing processes of geo-economic fragmentation, it is recommended to reexamine the influence of taxes on economic processes. This investigation should adhere to the evolving framework of new macro-regions worldwide, rather than the conventional dichotomy of developed and developing economies. Participants within these macro-regions, interconnected through supply and value chains, will
need to work together to align their tax rules and policies for mutual benefits.

The information about tax changes’ effects on aggregate output is highly important for economic policy, especially in times of economic contractions. Russian economy underwent the series of tax changes during 2003–2020. For better tax policy design, it is necessary to understand and to evaluate the effects of this changes on aggregate output, which is the purpose of this study. To solve the problem of endogeneity we use two methods – “narrative approach” and “classical” approach. The first one uses data on exogenous, not driven by economic conditions, tax changes from official documents and forecasts. The second one uses cyclical component of the aggregate tax receipts as tax shocks indicator. Using both methods we estimated a VAR model of Russian economy for period 2003–2020. The implementation of “narrative approach” did not provide any significant effect possibly due to vulnerability towards the measurement error. Based on the classic approach we found that tax changes affect output with a 1-year lag and a 1 percentage point shock of aggregate tax receipts to GDP ratio lowers output growth by 0.7–0.88 percentage points. This result is robust to inclusion of additional factors in the model. The results are mostly consistent with existing research. Implementation of
“narrative approach” proved to be restricted in Russia. “Classical” approach allows to conclude that tax changes could serve as an appropriate tool of countercyclical policy in Russia. On the other hand, increasing tax burden in times of downturn could be highly harmful for recovery. These results should be interpreted taken into consideration the limitations of the VAR method used.

Technological developments have fostered cross-border e-Commerce transactions. This study aims to reconstruct the concept of the meaning of physical presence in the criteria for identifying foreign individuals and foreign entities as permanent establishments. Reconstruction uses the terminology of physical presence, which is adjusted to the presence of a new post-pandemic order, namely maintaining distance in certain situations. The term maintaining distance is translated as the distance between foreign individuals, foreign entities, and service users. This study proposes a reconstruction of the concepts of physical presence, the subject of permanent establishments, and the objects of permanent establishments. The concept of Significant Economic Presence is relevant to the fulfilment of three criteria: revenue, digital, and user. The reconstruction of permanent establishments involves determining the digital and user aspects. Reconstruction of permanent establishments involves determining the digital aspect of income. This study proves the hypothesis that the addition of Significant Economic Presence criteria to the determination of permanent establishments in e-commerce transactions increases the fairness of taxation rights in the source country. Therefore, it is necessary to review the determination of permanent establishments, especially e-commerce transactions, which are not limited to a physical presence with a wider scope through revenue, digital, and user criteria. This study makes a theoretical contribution to the significance of economic presence by replacing the meaning of the physical presence of a permanent establishment. Thus, the potential for permanent establishment taxation is not limited to the potential value-added tax but can also be on the potential income tax.

For countries focused on the extraction and processing of natural resources, including Russia, a crucial task is to ensure the rational extraction and distribution of natural rent. The tax model applied to natural rent should facilitate its optimal allocation to the budget without undermining the motivation of resource users to invest. This study seeks to gauge the extent of oil rent extraction into the Russian budget and suggest strategies to enhance the efficacy of redistributing oil rent to the state budget. Our hypothesis proposes that export customs duties, compared to the mineral extraction tax, prove more effective in achieving the desired redistribution from resource users to the budget. To assess the extent of oil rent extraction, we devised a methodology based on calculating the oil rent generated in Russia. This method
involves measuring the difference between the income generated by the oil industry and the total expenses incurred by oil sector companies. Our analysis reveals that, from 2005 to 2022, up to 87% of the oil rent generated in Russia was extracted through rent payments to the state budget. However, in recent years, the degree of oil rent extraction has decreased to 56%. This decline can be attributed to the tax maneuver initiated in Russia since 2015, entailing a reduction and eventual elimination of export customs duties, coupled with an increase in the mineral extraction tax rate. Our results indicate a diminishing effectiveness of rent-based taxation in Russia due to the reduced fiscal significance of rent payments. Furthermore, their regulatory function, designed to incentivize taxpayers for investment contributions, has weakened. These
findings offer valuable insights for shaping fiscal policies and lay the groundwork for further research in this domain.

The article deals with the evaluation of the impact of real estate tax reforms on their tax burden in the Czech Republic in the years 1993–2024. Real estate tax is one of the direct taxes, and in comparison, with income taxes, its importance lies mainly in providing income for local budgets. The unit type of tax rate specifically determines real estate rates. Facts, that tax reform in the area or real estate tax are minimal, the tax burden is often decreasing. As the tax burden decreases, so does the tax revenue. However, when tax reform occurs, this reform is often characterized by a significant increase in the tax burden. This is also evidenced by the last implemented tax reform in 2024 when rates increased by approximately 80%. The previous tax reform occurred in 2010 and increased rates by 100%. Despite this increase, the real tax burden decreased compared to the first analysed year 1993 and the last year 2024. The results of the regression analysis show that inflation is the factor that negatively affects tax revenue. To minimalize a decrease in tax revenue from 2024, a provision containing an inflation coefficient is implemented in the legislation as part of the 2024 reform. Conversely, a reduction in the tax burden was not found for real estate intended for permanent housing in small municipalities with up to 600 inhabitants. On the contrary, there was an increase in the tax burden. Scientific methods such as analysis and comparison, as well as regression and correlation analysis are used to achieve the paper’s goals.