Tax competition
As tax competition is defined as the competition between different business locations in order to achieve location advantages by an attractive tax system.
- 2.1 Tax Competition in Germany
- 2.2 Tax Competition in Switzerland
International tax competition
Denotes the tax competition between sites in different countries or different countries altogether. Relevant are mainly income taxes here. International tax competition is competing among countries to reduce corporate taxes in order to improve the attractiveness of the location.
Emergence and manifestation
The tax rates on corporate profits are in all major industrial countries since the mid-eighties clearly and been continuously reduced, the unweighted average of 48 % in 1982 to 33% in 2003. This was accompanied by a broadening of the tax base by reducing benefits, limitations of loss compensation and the depreciation allowances, rules on shareholder debt financing or limited opportunities for education tax provisions effective. This ( while broadening the tax base reduction of the nominal tax rate ), referred to as tax -cut -cum -base- broadening strategy is an expression of increased tax competition.
However, a prerequisite for the continuation of this trend, that an international tax comparison is also carried out in the future just based on nominal tax rates. Methodologically, this approach is already very questionable, since the tax burden by multiplying the tax base results in the tax rate, tax rate and tax base, therefore, so are equally important factors. The tax -cut -base- broadening method is driving more and more colorful flowers. Currently, the Czech Republic has introduced a flat tax with a tax rate of 15 % and has thus apparently a lower income tax than the tax law Slovakia (Slovakia). However, tax base for the income tax is the " super-gross income " in the non-wage labor costs are added to the added gross income. With the same basis as in Slovakia, the tax rate would, however, be at least 20 % and would be higher than in Slovakia. Clarification:
Slovakia: base ( net income non-wage labor costs - allowance etc.) * 19%
Czech Republic: base ( net income non-wage labor costs labor costs - allowance etc. ) * 15%
Favoring of tax competition in the EU
Within the EU and the single market, tax competition is promoted mainly by the also to direct taxes, and thus also on the corporate taxes extending four European fundamental freedoms (which are the the movement of persons, services, right of establishment and the free movement of capital ), as these virtually exclude national defense measures to curb tax competition. Since its judgment of 28 January 1986 (Case C-270/83, ECR 1986, 273 - avoir fiscal ), the European Court of Justice ( ECJ ) claims with regard to the completion of the internal market is also a responsibility for direct taxation within the EU and has since influenced in more than 100 judgments, the right of direct taxation shall prevail. That case-law is said to have the tax competition within the EU allows only decided and since led to a significant reduction of the tax burden within the member countries. Member countries will be closed for the benefits arising from this Community bonds restrictions little room to escape the tax competition.
Objectives of tax competition
The reduction of tariff rates of corporate taxation is aimed at acquiring international investors, broadening the tax base to the security of the national tax revenue. Due to the increased attractiveness of such a tax policy can even be advantageous if cancel the offsetting effects of tax rate reductions and broadening the tax base relevant to the location-based service for the investment decisions business user cost of capital partially or even completely.
The lowering of the corporate tax is a measure of policy to attract companies looking for a ( new / additional ) location are (legal tax avoidance ). In addition, tax exemptions for a limited period may be granted by the policy. Fiscal competition in times of globalization and internationalization a big role as a location factor.
Scientific analysis of tax competition
Recent studies examining the effective tax burden of companies in the different countries of the European Union. The influence of tax competition is discussed in the final decision for a site.
Calculation of the effective average tax burden after the ZEW - method
In a study by the Centre for European Economic Research, which was published on 18 April 2006, the Effective Average Tax Rate ( EATR ), an effective average tax burden was calculated, which indicates the percentage reduction of the return of a model investment project through tax payments.
The ZEW calculated by percentage reduction of the return of a model investment project through tax payments is as follows:
Criticism
The study has been criticized by economists, it is not the taxes actually paid were recorded, but only a theoretical system based on nominal sets maximum. The income tax actually paid in Germany are following the calculation of tax experts Lorenz Jarass of the Fachhochschule Wiesbaden at significantly lower 12 and 15 percent. Stefan Bach by the German Institute for Economic Research, the simulation model of the ZEW does not consider empirically justified.
Alternative Method
A more accurate determination of the tax burden of companies is due to the (albeit more complex ) method of Lorenz Jarass. Jarass goes on a methodical basis so ago that he attracts more income before taxes and the taxes paid from the IFRS balance sheets of the DAX 30 companies. From these starting points, it then calculates the total effective Steuerbelstung. In this precise and easily verifiable approach may be seen that for the DAX 30 companies resulted in a tax rate of around 21 % in 2005. However, these 21% related to the total tax including property tax and other levies of calculating the tax burden on German DAX 30 companies from page 33 (PDF, 1.3 MB).
Comparison of international tax burden
For several years, the German Federal Ministry of Finance published a Rolling each investigation, the main taxes in an international comparison. The table it created on Company Taxation for the year 2008 is reproduced shortened below. Consideration is given to have taken place in recent years, reform of corporate taxation.
Country
National Tax Competition
Refers to the competition between different locations within a state in order to achieve location advantages by an attractive tax system.
Tax Competition in Germany
Intra- German tax competition arises mainly from the fact that the municipalities can set for the trade tax as a significant municipal tax an individual assessment rate. Frankfurt has an attractive business location a high collection rate of 490 %, while the Norderfriedrichskoog to 2003 rose a multiplier of 0% (from 2004: minimum rate of 200 %).
Tax competition in Switzerland
In Switzerland, both the tax for natural and legal persons were significantly reduced in the last 10 years in 18 measured from 28 locations. Due to the federal nature of the Swiss tax system, the tax burden differs massively depending on where you live. Be particularly favorable for natural persons the cantons of Obwalden, Schwyz and train apply. For legal entities, in particular the cantons of Nidwalden train and provide an attractive environment.
That the taxes in Switzerland are rather low compared to other countries, can be traced in part to the federal tax system and on the direct democratic instruments. This creates a significant tax competition between the different authorities. Both the cantons and the municipalities set their tax rates, tax bases, as well as various indirect taxes themselves. Here, depending on the canton, there are various participation rights. For a change of VAT rate, it needs a change of the federal constitution, which must be achieved in voting, both the national and the cantons. Furthermore, the tax systems of some cantons have special peculiarities. To apply for the cantonal taxes of the cantons of Obwalden and Schaffhausen a flat tax. The canton of Obwalden has chosen this system after it has forbidden the introduction of a graduated tax system, the Swiss Federal Court. Some cantons have also foreigners who engage in any gainful activity in Switzerland, the possibility of lump-sum taxation. Another peculiarity has the Canton train: Foreign income of Holdings and mixed enterprises are exempt from cantonal taxes.