H26 - Tax Evasion and AvoidanceReturn

The article focuses on the new rules for electronic commerce that came into force on 1 July 2021 in all EU Member States. The main goal is to explain these new rules of taxation of consignments of goods from abroad (both from the European Union and third countries) to non-taxable persons and subsequently to calculate the impact of these new rules on the tax revenues of public budgets of the Czech Republic. The assumption set in advance is that the changes in tax legislation will result in an increase in the Czech public budget revenues due to the boosted revenues from value-added tax collected on foreign shipments. Year-on-year, tax revenues from online purchases will undoubtedly increase also due to the growing popularity of online shopping, currently sustained by the ongoing pandemic situation of covid-19. The calculations of the additional value-added tax revenue are based mainly on the data sourced from the Czech Statistical Office and a study carried out for the European Commission. The additional value-added tax revenue is calculated using the three model situations that assess impacts on the tax revenue of public budgets in the Czech Republic. For 2019, these impacts were estimated at between CZK 3.1 and CZK 6.1 billion.

The research revolves around the topic of offshore destinations and role of tax in the decision where to locate TNCs’ investments or relocate employees. This paper exploits rich country-by-country reporting (CbCR) data that banking institutions operating in the EU with annual turnover over 750 million are obliged to provide publicly as of 2014 on a yearly basis. Database includes 47 banks over 5 years and 27,533 datapoints. I explore whether there is any connection between effective tax rate (ETR) and number of employees in respective subsidiaries of banking institutions. In consequent multiple regression analysis, I add more variables to the model: such as profitability, labour productivity, and other controlling variables. Conclusion is that there is no significant correlation between ETR and employee count and that TNCs tend to locate their employees on a different basis. This is a unique analysis of data that can be used by other tax avoidance researchers and policy makers.

The paper is focused on VAT evasion and especially carousel frauds. It describes the types of VAT evasion, methods of its estimation and measures taken by the European member state to fight it. The aim of the article is to develop a reasonable method for assessing the volume of carousel fraud in the Czech Republic. It uses ex-post calculation of the impact of a specific reverse-charge implemented in the Czech Republic on waste and scrap in 2011. The analysis employs trade balance data of the Czech Republic published by the Czech Statistical Office and a model of the carousel fraud to estimate the size of the carousel fraud existing prior to the implementation of the specific reverse charge in the CR. The volume of the supposed carousels in waste and scrap present in the period from 1 April 2010 to 31 March 2011 in the CR is according to the authors EUR 56 mil. (approx. CZK 1.4 bn.).

Small and medium sized enterprises account for over 99% of all companies in Eu-ropean Union and have very important position in the EU economy in the area of growth and employment. However, they face great deal of obstacles, such as com-pliance costs of taxation, 28 different tax systems in Europe, difficult transfer pric-ing rules and so on. Further, compliance costs of taxation are regressive with regard to firm size and significantly higher in case of enterprises with foreign branch or subsidiary in comparison with enterprises which are not internationalized. Moreo-ver, compliance costs are increasing through strict and difficult transfer pricing rules among European countries. Therefore, taxes and new obligations should be carefully designed so that they can address the disproportionately high tax compli-ance burdens faced by those enterprises. Unfortunately, there does not exist a study determining compliance costs of transfer pricing issue in the literature. Therefore, the aim of paper is to determine compliance costs of transfer pricing issues in case of SMEs. The results are based on the questionnaire distributed among Czech parent companies having subsidiaries in Europe and Czech subsidiaries having a parent company in Europe. Based on the results we can conclude that costs for managing of transfer pricing requirements can reach from EUR 6,430 to 7,704 per year, time needed for this issue between 27 and 35 working days and in case of comparison with corporate tax collection it represents between 3.90 % and 12.74 %.

In December 2014, OECD issued a Discussion Draft on Transfer Pricing aspects of cross-border commodity transactions through BEPS action 10, where the adoption of the sixth method in the form of the quoted commodity price and its adjustments were primarily driven as a starting point for transfer pricing purpose. In this paper the analysis of the proposed sixth method and the experience with the sixth method in Argentina were used for the consideration whether this method can be used as simplified measurement for SMEs. SMEs are facing tax obstacles mainly in the area of the international taxation which impede in cross border transactions and internationalization of SMEs. One of tax obstacles represent transfer pricing. Its costs can be disproportionately large for SMEs in comparison to LSEs. Moreover, SMEs are not able to bear the high administrative burden to comply with the transfer pricing rules as they do not posses the sufficient human and economic capital. Based on the results of the research, we can concluded, that there are a lot of questions related to the proposed sixth method, notwitstanding, it has a potential to be a new method for SMEs for they need to face lower tax administrative burden in the area of transfer pricing issues.

The article deals with the estimation of a tax gap incurred by devastation of a tax base and concentrates on undervaluation of incomes from an independent activity. The distortion rate was estimated by means of database data from national accounts; the database is internationally comparable. The authors built on indexes that monitor production and intermediate consumption in monitored economies and which are similar to the Czech Republic in some aspects - this concerns Slovakia, Sweden and Austria. Based on these calculations, real tax bases of people with incomes from an independent activity were set. The result of our paper is a total tax gap in the Czech Republic in 2011 and it is CZK 4,6bn - it is such a gross estimation of uncollected collection into public budgets for 2011.

As a result of the global economic crisis the governments of the states has been forced to present various proceedings especially in field of taxation to maintain or increase the tax revenues and to safe economy. Majority of the states decided to make changes inter alia in indirect taxation as the tool against the crisis. Some of the actions planned the short term effects and some of them are rather as the long term arrangement to fight against crisis. The states usually increased the VAT rates to maintain or increase the public revenues. However, states also launched the proceedings against the tax frauds especially in VAT area where the tax frauds are very frequent. Results of this research might be useful as the inspiration for other states in the global economy.