H26 - Tax Evasion and AvoidanceNávrat zpět

In accord with international transfer pricing regulations, the borrower's creditworthiness is the main factor to be reflected in valuation of cross-border loan transactions between associated enterprises. However, trouble invariably arises for small and medium-sized enterprises that do not have an assigned credit rating. The aim of this paper is to determine the most reliable predictors of a company's credit rating for European entities facing missing rating coverage for the purpose of transfer pricing. Based on 2015-2019 data sourced from the Orbis database, the study examines key financial ratios and non-financial information that could be instrumental in reconstructing a long-term rating category of a company assigned by Moody's Investors Service. The results identify interest coverage as the most useful predictor. Therefore, a law-approved and tax-acceptable approach to pricing of financial transactions between unrated parties (i.e., without credit rating) should preferably exploit interest coverage as a link to the otherwise missing ratings.

The main objective of this paper is to analyse which factors have an impact on the allocation of Czech foreign direct investment (FDI) in EU countries. Multivariate panel regression with general macroeconomic variables and time dummy variables using Eurostat data for the period 2013-2019 was performed. Indicators of a tax system promoting and/or enabling aggressive tax planning, and other more general indicators were included in the model. This paper provides the opposite view by analysing the flow of FDI from a transition economy to more advanced economies. The results suggest that Czech FDI is placed in developed countries with lower statutory corporate income tax rates, and with which the Czech Republic has a larger volume of foreign trade. Furthermore, it is confirmed that the factors affecting allocation of Czech FDI in the EU are the distance between the capital cities and the existence of the so-called patent box regime.

Irresponsible behaviour practices of tax entities are becoming more sophisticated. In addition to repressive tools, the tax administrator may use a proactive approach to detect an entity’s illegal activity. The paper aims to identify the relevant factors and assess their impact on estimating the probability of irresponsible behaviour of companies towards the tax administrator in individual sectors of the economy. Based on data from financial statements, we monitored the characteristic features of tax-responsible and tax-irresponsible companies in the Slovak Republic in the period 2015–2018 in 15 sec-tors. We created predictive models of their irresponsible behaviour towards the tax administrator for each industry using logistic regression. The results show that an analysis of the quantitative features of companies makes it possible to identify factors that alert the tax administrator in advance to potentially illegal behaviour of tax entities.

This paper deals with the personal income tax gap in the Czech Republic and Slovakia. One of its sections specifically addresses the relation between the tax gap and various forms of tax evasion concerning the personal income tax, subsequently setting them in the context of its calculation. The key implication of this paper is the estimation and comparison of the personal income tax gap between the Czech Republic and Slovakia using the income method, broken down into specific types of tax evasion, namely (i) unreported income subject to payroll taxes, (ii) misreported tax base by self-employed individuals (i.e., sole proprietors of unincorporated businesses), and (iii) hidden employment. In line with the existing academic literature, a greater magnitude of the tax gap was found for income reported by self-employed persons (i.e., sole proprietors of unincorporated businesses) than for persons with income from dependent activities (i.e., employment and similar legal concepts).

In this paper, estimates of tax losses as a result of aggressive tax planning are presented using two different methodological approaches. While the International Monetary Fund (IMF) methodology addresses profit shifting and corresponding tax losses across the European Union, the United Nations Conference on Trade and Development (UNCTAD) methodology uses FDI data and a list of so-called offshore financial centres. According to the IMF methodology, the annual tax losses are about EUR 69-105 billion for the EU-28. According to our calculations, the Czech Republic achieves negative losses (tax revenues) of CZK 15 billion per year, probably due to the low effective tax rate (16.4%) and investment incentives. On the other hand, the UNCTAD methodology implies annual tax losses for a given EU member state of about EUR 18 billion. Because of limited data availability, we estimated the regression model for only 22 EU member states for the period 2013-2016.

Despite the tax coordination and harmonisation, as the tax burden convergence processes, the corporate taxation systems differ among EU Member States, which can affect the development of economies to various degrees. The main objective of the paper is to assess whether the EU-27 countries are competitive in the field of corporate taxation and to verify whether "new Member States" are considered more competitive than the "old Member States". Empirical research from 2004 to 2014 used traditional quantitative indicators and specific quantitative methods in the form of tax rate relations, cluster analysis and constant market shares method, the application of which in the tax field is one of the main benefits of the research. Empirical results have highlighted the significant and positive impact of tax competitiveness on growth of corporate earnings growth. It has also shown that tax competition among countries is not clearly associated with a decrease in tax rates and will persist unless harmonization efforts are successful.

The aim of the paper is to estimate the total tax evasion in the Czech Republic in 2008-2015. For this purpose, an analysis of non-observed economy as an alternative method of tax evasion estimation is used. The presented method works as follows: the detailed segmentation of non-observed economy enables to match various types of hidden or concealed income with corresponding liable taxes and therefore to estimate the amount of tax due. The results show that tax evasion is increasing in the Czech Republic (with the exception of 2012) reaching 71 bn CZK in 2008 and more than 120 bn CZK in 2015. This approach also allows us to divide the total tax evasion between direct and indirect taxes. From this point of view, the higher share belongs to direct taxes in the Czech Republic. This, however, may be caused by the nature of non-observed economy which does not cover all types of tax fraud, namely carousel frauds. That is why the presented estimates should be regarded as a bottom level of the total tax evasion in the Czech Republic.

The paper deals with the estimation of the Value Added Tax Gap in the Czech Republic during the years 2009-2014. In the introduction, the term of Value Added Tax Gap and related terms are defined following available approaches and different methods of the Value Added Tax Gap estimation are presented. In the analytical part of the paper, the Czech Value Added Tax Gap is measured using three applicable methods - the decomposition of the gap on the VAT, the identification of transactions subject to VAT and the adjustment of GDP. In this part the exact procedure for possible replication of the research is declared and the comparsion of the results reached for the Czech Republic using different methods of Value Added Tax Gap estimation is carried out.

We contribute to the rare evidence of driving motives of establishing new onshore and offshore companies by analysing the situation in the Slovak Republic in 2014. We analyse financial and ownership data for the Slovak enterprises already included in onshore and offshore business, providing data by corporate service providers on the driving motives and their combination for the Slovak customers in 2014 and the available external data assessing the quality of the Slovak business environment. We present the empirical evidence that the motive of tax benefits is ranked as the most important, followed by the anonymity of the UBO, flexible arrangement of ownership relations, asset protection, asset management and trusteeship and special cases. In the second part of our research we provide empirical evidence on significant areas of the business environment affecting the number of newly established onshore and offshore companies by the Slovak enterprises between 2005 and 2014. The indicators assessing the quality of the Slovak business environment are divided into two groups - paying taxes plus doing business and the quality of the legal system in Slovakia. Our research shows that from the first group is insignificant only the indicator of time to comply with taxes. On the other side, the perception of corruption and the functionality of the state institutions are evaluated as significant from the second group.

The paper shows the fundamental problems in the area of investment funds in terms of tax burden with special regard to closed-end real estate funds. Based on the characteristics of administrative costs, the study shows that closed-end real estate funds do not behave as investment funds. The study proves that closed-end real estate funds behave more like businesses that are hiding behind investment funds. This conclusion is confirmed on the basis of extensive research, by collecting data from annual reports of independent auditors of all types of funds. More than 51 percent of closed-end real estate funds indicate very high administrative costs and profit reduction by more than half. More than 17 percent of funds decrease their taxable income through higher administrative costs, and thus reduce their tax base to zero or to an absolute minimum. The study points out that if there was a tax-neutral environment in the area of the investment funds in the Czech Republic and investment funds paid 19% tax on corporate income, tax revenues for the state budget would increase by CZK 784 million per year.

The issue of tax compliance represents one of the topics where laboratory experiments may provide important insights into human economic decision making. The empirical evidence on the topic is limited as the decision on tax evasion is purely private information of the taxpayer. The experiment presented in the paper focuses on two main topics. At first, we analyze potential influence of two factors - probability of being caught while cheating on taxes and penalty rate imposed on subject who evade. We conclude that behavior of the Czech subjects corresponds to foreign results. At the same time, there is a stronger effect when probability of being caught increases. The effect of increasing penalty rate is rather moderate. Second research question focuses on the terminology used during the experiment. We find that the rate of tax compliance is higher within experimental sessions where subjects face neutral language in the instructions compared to the group with loaded instruction (tax language). This behavior contradicts the results to date and indicates possible country effect which could be linked to specifics of posttransformational society.

There are currently held tough discussions among economists and policy makers on the most appropriate form of taxation that would be fair, simple, enough incentive to wage work and entrepreneurship and withal also providing sufficient revenue for the state to fund the services provided to citizens. In this debate two opposing views on the basic form of this system stand against each other, namely, whether it should tax the income in a progressive manner, as is the case with tax systems applied today in most countries, or in a proportional manner, which has been introduced in a limited extent in several countries, especially in Central and Eastern Europe. This article provides a brief description of the basic characteristics of both these approaches and summarizes the main arguments presented by their proponents and opponents. The next section describes the different variants of a proportional system, also known as a flat tax system, some of which currently exist only in the yet unrealized proposals, and in the end, then compare their pros and cons.

An easy and popular method for measuring the size of the underground economy is to use macro-data such as money demand or electricity demand to infer what the legitimate economy needs, and then to attribute the remaining consumption to the underground economy. Such inferences rely on the stability of parameters of the demand equations, or at very least on knowledge of how these parameters are changing. We show that the pace of change of these parameters (such as velocity) is too variable in transition economies for the above methods of estimating the size of the underground economy to be applicable.