Modern trends in corporate income taxation: perspectives of the withdrawn capital tax

Olesia V. Viietska

Abstract


The paper substantiated that under the conditions of the digital revolution, which makes it difficult to perform tax control over income flows and expenses of enterprises, especially over cross-border ones, it is time to look for better alternatives to the taxation of enterprise’s profits.It is shown that not only a reduction in the corporate income tax rate and the provision of various preferences for investment and innovation activities, but also a radical change in approaches to taxation of corporate income, such as the transition to distributed profit tax or destination-based business cash flow tax can act as instruments of competition.The foreign experience of applying the distributed profit tax on the example of Estonia, Macedonia, Georgia and Latvia has been studied. It is justified, that the introduction of distributed profit tax instead of corporate income tax did not become such a factor that negatively affected economic events in the analyzed countries. Moreover, there is a reason to believe, that such«castling» contributed to the improvement of the situation, at least in one of the countries (Estonia).The analysis of the destination-based business cash flow tax as an alternative to the corporate income tax and the distributed profit tax were made. Differences between these types of taxes are demonstrated, their advantages and disadvantages are highlighted.It is shown, that the discussion of destination-based business cash flow tax indicates that alternative approaches to profit taxation are in the agenda in the countries of the world. This is also confirmed by modern studies, based on economic and mathematical modeling of situations, in which the corporate income tax rate is significantly reduced or the tax is completely eliminated. It is proved, that, based on the analysis of theory, international experience and the current situation in Ukraine, the introduction of a withdrawn capital tax will be the best alternative to the existing corporate income tax, which currently does not fulfill a stimulating function, but promotes corruption and evasion from payment to the budget. The results of calculations of possible budget losses from the replacement of the corporate income tax by the withdrawn capital tax are demonstrated. Possible measures to compensate such losses in the first years of the newtax introduction have been formulated.The necessity of continuing and deepening the analysis of the experience of countries, that have already switched to the collection of the distributed profit tax, as well as assessing the impact of introducing a withdrawn capital tax on attracting external and domestic capital investments using methods of economic and mathematical modeling, is validated.


Keywords


corporate income tax; distributed profit tax; destination-based business cash flow tax; withdrawn capital tax

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References


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DOI: https://doi.org/10.15407/econindustry2018.02.024

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