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The purpose of this study is to explain the effect of a tax-free regime of socioeconomics in the social well-being function. This paper carries on the message that has been recognized in the economic theory and by many for a long time now. This is that the incidence of all forms of taxes – direct and indirect taxes – proves to cause inequitable distribution of wealth. The rich still comprises the top 1 per cent of the income earners despite the existence of heavy tax burden. This paper goes beyond this observation and its explanation to make the case that the tax regime also causes distortionary effects in the generalized system of social and economic relations.

In the midst of the generalized system of simulating the well-being function, subject to what is called the circular causation system of the endogenous variables is explained by the critical parameter of the epistemic nature in the unity of knowledge by complementarities between the variables signifying the good choices.

This paper also contrarily establishes and explains the nature of equitable production and distribution of income in society at large. The tax-free regime is explained to generate and sustain balanced inter-causality between the critical variables in the generalized system of equations for simulating the well-being function. Some of the special properties of the evolutionary learning kind of the well-being simulation problem in the tax-free regime are brought out.

Empirical work could follow.

Of special interest are the Arab Middle Eastern countries, most of which do not levy tax on households; with a small rate on businesses.

This paper goes beyond this observation and its explanation to make the case that the tax regime also causes distortionary effects in the generalized system of social and economic relations. Most importantly, the presence of tax regime disturbs the balanced forms of inter-causality between the critical variables of the social and economic type. The social well-being is thus eroded in the midst of a tax regime.

This paper is a rare one of its kind to bring out the question surrounding the tax-free regimes usually practiced in Islamic fiscal theory and today adopted by many Muslim countries in the Middle East.

We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the extent of minimum wage noncompliance, and the size of the informal workforce. Our approach allows us to examine (i) the distinction between determinants of firm-level reported wage distribution and actual wage distribution, (ii) the complementarity of tax and minimum wage enforcement, (iii) the impact that a minimum wage reform has on tax and minimum wage compliance, and (iv) the impact that a tax policy reform has on tax and minimum wage compliance. We conclude with the design of optimal minimum wage and tax policies (even in the complete absence of minimum wage enforcement). We do so based on two objectives derived from popular concerns associated with an unchecked expansion of informality: tax revenue maximization, and poverty alleviation among workers.

The purpose of this paper is to discuss tax and accounting issues related to the evolution of the intellectual property box in Portugal and present a preliminary view of its impact. In 2014, Portugal adopted an Intellectual Property (IP) box, exempting from corporate taxation half of the gross revenue obtained from selling IP rights. In 2016, the country adopted a new IP regime, in line with BEPS’ recommendations, with stricter rules for exempting income. The “modified nexus approach”, recommended by the OECD, was the cornerstone of legal changes. The research questions addressed in this paper are as follows: was the Portuguese IP box, set up in 2014, internationally competitive in terms of the scope of qualifying assets and the tax rate when compared to other EU countries? Could its legal design induce potential corporate tax avoidance? Does the new IP box framework reduce avoidance opportunities and does it increase tax and accounting complexity for companies and tax auditors?

The methodology used in this paper is based on the legal research method combined with a case study analysis of the IP box in Portugal. The economic motivation for legal changes, the interaction between the tax authorities and the policy makers in the wake of BEPS’ recommendations, and the economic crisis that Portugal faced, influenced legislative options. A multidisciplinary approach is required to analyse the IP box modifications, and the methodology follows this line of enquiry.

The author concludes that the 2014 IP box was not competitive in terms of the scope of qualifying assets and the tax rate. However, it could be a potential tool for tax avoidance, mainly linked to transfer pricing strategies. Legal changes, introduced in 2016, by enacting stricter rules for granting tax benefits, fit a worldwide trend of restraining profit shifting opportunities linked to intangibles. The new framework clearly impacts tax and accounting complexity, for companies and tax auditors. Preliminary data, for 2014 and 2015, show a negligible impact of the IP box on corporate taxation.

The “modified nexus approach” is not a definitive panacea for fighting tax avoidance. Multinationals may move resources (e.g. highly specialized persons) to entities that are developing IP, curtailing the restriction associated with acquiring services from related parties. Tax authorities may fight these schemes, but face a challenging task. The grandfathering option and new accounting choices related to expense allocation are delicate issues. Not all countries adopted BEPS’ recommendations at the same time, which may impact international profit shifting activities and increase tax authorities’ costs to control them. The paper also provides preliminary and exploratory evidence that IP boxes, per se, do not suddenly raise the R&D activity of firms.

The analysis highlights legal, accounting and economic issues in dealing with changes in investment incentives and can or may be a useful remainder for countries in the process of setting up, or amending, IP boxes.

The purpose of this article is to determine the influence of the tax system on the location of holding companies in Spain.

To achieve this purpose, we have used an analysis of cointegration in time series. The independent variable used was the number of holding companies under Régimen de Entidades de Tenencia de Valores Extranjeros Spanish regime. The dependent variables were divided into two groups: fiscal and non-fiscal variables. The dependent fiscal variables are effective tax rate and double taxation convention, whereas the non-fiscal dependent variables are government effectiveness and business freedom.

The study concludes that the fiscal variables are relevant to establish a holding company in Spain, but there are other variables such as government effectiveness and business freedom that show as well as influence on the location of holding companies.

In the year 2015, the article The influence of the tax system on the location of holding companies in Switzerland was published in the Competitiveness Review. In this article, the influence of taxation on the decision to locate a holding company in Switzerland was analyzed. Now that the Spanish holding regime is consolidated, thanks to more than twenty years of application in our tax legislation, we consider it important to carry out an analysis of the influence of taxation in the decision to locate a holding company in our country. As already mentioned in the article published in 2015, the study of the taxation of holding companies is a topic related more to law firms and/or tax advisors than to academic research, and it is for this reason that there are few empirical studies on this topic. Hence, the research developed in this paper is important.

In an attempt to reduce tax distortions and increase economic efficiency, in 2002 and 2003 Brazil promoted changes in the PIS/COFINS tax, the main federal tax on consumption. Thus, in addition to the old cumulative regime calculated on company revenues, the noncumulative regime was created with higher rates and the added value as a tax basis.

This paper analyzes the effects of the PIS/COFINS reform in a context of deindustrialization in the Brazilian economy, using a neoclassical model with two sectors.

The results suggest that after a small improvement in the aggregate economy in the short term, in the long term there was a worsening of the macroeconomic indicators. From the sector perspective, the PIS/COFINS reform may have contributed to the loss of industry participation in the Brazilian economy.

The study of the impact of the PIS/COFINS reform on industry through a neoclassical model is unprecedented in the national literature and contributes to the investigation of changes in the tax regime that occurred in the country.

The purpose of this paper is to find out the factors contributing to major shifts in the growth of tax revenue through the estimation of structural breaks and analysis of major tax regimes. Recent contributions to optimal tax theory and empirical literature on the Laffer curve effect, based on elasticity of taxable income, challenge the settled understanding on the rate-revenue relationship. In this backdrop, the objective of the paper is to find out the relative significance of changes in tax rate, tax base and administrative reforms in affecting the growth of tax revenue in India. The paper considers tax data spanning a period of six and half decades for five major components of direct and indirect taxes (corporation, personal income, customs, excise and service) of the central government of India.

Unknown break point(s) – single and multiple – in the tax structure are identified by using the Quandt-Andrews and Bai-Perron econometric tests. These tests were conducted for two models of growth of taxes (tax revenue and tax-NDP ratio) estimated using semi-log functions. A simulation exercise was conducted to find out the robustness of the results by varying the trimming parameter and number of breaks. An analytical framework is used to understand the factors associated with these breaks.

There is more than one break identified for every tax component as per the results of Bai–Perron test. The simulation exercise suggests that estimated breakpoints are mostly robust. Economic growth, structural changes in the economy, simplification and rationalization of tax structure, tax competition, policies such as liberalization have contributed to the changing tax regimes. Results of this study suggest that high tax rates have not been, in particular, detrimental to achieving growth in revenue and factors other than changes in tax rates have been more prominent in bringing about the shifts.

This is, perhaps, the first paper exploring the multiple structural breaks in the fiscal variables in India. It offers an understanding of the changing regimes of central government taxes and the underlying factors for the same.

This paper aims to articulate the complexities posed by tax havens and offshore financial centres (OFCs) in the global fight against financial crimes such as tax avoidance and money laundering. It suggests possible measures to mitigate the effect of tax avoidance on economic development of countries, especially less developed poor countries.

Data were evaluated using examples and case studies drawn from tax havens and OFCs in newspaper reports to demonstrate how illicit proceeds of crime are spirited out of countries for safe custody in tax haven jurisdictions around the globe. The author also carried out a scoping review of the literature to delineate the correlation between tax havens, OFCs and the growth in financial crimes such as tax avoidance and money laundering.

There is a close correlation that bank secrecy laws in OFCs fuel the growth of financial crimes such as tax avoidance and money laundering around the globe. The findings also suggest that while imposition of sanctions on countries which transgress international financial regulatory regimes is an essential component in the international efforts against financial crimes, they need to be enforced on all states so that they are not seen as politicized and subsequently undermined.

It is important that states work in tandem to initiate desired regimes to address financial crimes but enunciating regimes alone cannot generate a far reaching impact unless they are enforced against all transgressing states.

The paper has practical implications for states, people, governments, oversight institutions, markets and other stakeholders because it unravels varied issues relating to tax avoidance, money laundering and policies that need to be adopted to address these challenges.

The paper draws attention to the impact of asymmetric information and data generation capacity in some countries on tax avoidance and other financial crimes and the need for international harmonization of tax and AML regimes.

The issues explored in this paper help to highlight the challenges posed by tax havens and OFCs for economic development of countries. While the paper was undertaken by the review of primary and secondary data, it offers important contributions that could potentially enhance the fight against tax avoidance.

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.