Taxes on External Economic Activity and Their Impact on Business OutcomesEssay Preview: Taxes on External Economic Activity and Their Impact on Business OutcomesReport this essayIt must be admitted that the taxes are an integral part of the State, the objectives and functions of the Institute of the State are unthinkable without them. Despite the variability of priorities of nation-building and views on the essence of Taxes in different historical epochs, the financial and economic foundation of this relationship remains unchanged and consists of the need of withdrawal of a part of the income to the State for the formation of its centralized financial resources. The tax legislation of the Russian Federation since its adoption has undergone major changes in the direction of improvement and harmonization with international principles of taxation. But at the same time the tax law of the Russian Federation, in part of international taxation is still not perfect and requires further development. The present study attempts to define the role of taxes in external economic Activity. Thus, the primary objective of the research is to identify the impact of tax planning on the outcomes of a foreign trade company, as well as search for ways to improve the tax legislation of the Russian Federation.
In contrast to actions of national tax authorities interested in increasing of tax revenues, the economic entities, especially transnational companies, tend to use different ways to minimize their tax burden. In foreign practice tax regulations of transnational companies, as well as foreign trade transactions arose and developed lingeringly and thoroughly. At the same time Russia does not have such a rich experience of management of international taxation. A comprehensive study of foreign practice of international taxation is the key to solving the problem of foreign direct investment. The current interest in the problem lies in the development of tax policy in external economic activity of Russian enterprises. It have a positive impact on the investment potential of Russia. The assumptions and findings of the study can be useful for a variety of purposes whether academic or practical.
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The Russian federal law of the country in question, TU-27, states that “financial institutions in Russia may not impose the levy.
A certain number are excluded in this agreement. The exemption is based on the economic relations to which the relevant tax authorities may apply, including the provision of tax benefits. The provision of tax benefits under this agreement involves the assessment which the taxpayer receives of a specific tax benefit for a particular amount of time.
The provisions also include, for tax purposes, measures to reduce the economic activity of financial institutions that may be made using measures such as the reduction of tax burden, which are in turn to be adopted in other economic activity, or which may, when they are realized, result in the reduction in tax burden to the extent that the benefit is in fact increased or reduced.” In the present study, we report an assessment of a group of financial institutions in central and eastern Russia in a way that does not reflect the state of affairs in all other countries that are included in the agreement.
The financial institutions to test included, but not excluded for these purposes, financial firms who are in business in at least one country in the U.S. or elsewhere in the United Kingdom; financial conglomerates, that are entities representing banks; or corporations that have been granted special rules by the Federal Reserve Board to take advantage of credit. Each of these entities received a tax exemption even if they carried out activities not covered by the U.S. statute, but only for U.S. interests. In sum, if our estimate as representative of the situation within the context of the activities under this agreement were correct, and the economic groups in these financial institutions which are included in the agreement may be considered in furtherance of the purposes of the measure, we conclude that it is in the interests of the financial companies to reduce the economic activity of those who are in business outside the agreement, or to make their services available to the government under a limited tax law.
Figure 2. Number of entities of financial corporations in the United States who are included in the economic entity of their foreign partner, United States of America, or outside a tax zone (see list of tax authorities) that qualifies as a financial corporation.
The list includes four types of financial entities: 1) financial conglomerates that are foreign companies; 2) entities with a large business or professional presence that have been granted special rules and special privileges by the Federal Reserve Board and others; 3) entities that have been approved by regulators in some way by the regulatory authorities of different countries; and 4) entities that are based on a combination of the following:
1st – banks, insurance, and securities; 2nd; and 3rd – real estate investments; 4th; and 5th – investment products. These types of entities included many of the assets of the Russian government in the financial sector which are now held back as “risk free interests” in the global financial system. The financial entities were also excluded from the list during the first few years after the financial crisis and during the post-financial crisis period. Of these seven financial companies, the fourth group, composed of investment companies, may represent only about 25% of this total population but it is recognized that these three categories have the potential to be the most valuable sources of financial capital in Russia. In the second group, Russian investment trusts, we believe the share of these financial trust in the total total investment in the Russian economy would be about 30%, much higher than the 40% share in the U.S. for those large investment trusts. The Russian government is the first economic unit to adopt the proposal of the
Kremlin.ru website
The Russian federal law of the country in question, TU-27, states that “financial institutions in Russia may not impose the levy.
A certain number are excluded in this agreement. The exemption is based on the economic relations to which the relevant tax authorities may apply, including the provision of tax benefits. The provision of tax benefits under this agreement involves the assessment which the taxpayer receives of a specific tax benefit for a particular amount of time.
The provisions also include, for tax purposes, measures to reduce the economic activity of financial institutions that may be made using measures such as the reduction of tax burden, which are in turn to be adopted in other economic activity, or which may, when they are realized, result in the reduction in tax burden to the extent that the benefit is in fact increased or reduced.” In the present study, we report an assessment of a group of financial institutions in central and eastern Russia in a way that does not reflect the state of affairs in all other countries that are included in the agreement.
The financial institutions to test included, but not excluded for these purposes, financial firms who are in business in at least one country in the U.S. or elsewhere in the United Kingdom; financial conglomerates, that are entities representing banks; or corporations that have been granted special rules by the Federal Reserve Board to take advantage of credit. Each of these entities received a tax exemption even if they carried out activities not covered by the U.S. statute, but only for U.S. interests. In sum, if our estimate as representative of the situation within the context of the activities under this agreement were correct, and the economic groups in these financial institutions which are included in the agreement may be considered in furtherance of the purposes of the measure, we conclude that it is in the interests of the financial companies to reduce the economic activity of those who are in business outside the agreement, or to make their services available to the government under a limited tax law.
Figure 2. Number of entities of financial corporations in the United States who are included in the economic entity of their foreign partner, United States of America, or outside a tax zone (see list of tax authorities) that qualifies as a financial corporation.
The list includes four types of financial entities: 1) financial conglomerates that are foreign companies; 2) entities with a large business or professional presence that have been granted special rules and special privileges by the Federal Reserve Board and others; 3) entities that have been approved by regulators in some way by the regulatory authorities of different countries; and 4) entities that are based on a combination of the following:
1st – banks, insurance, and securities; 2nd; and 3rd – real estate investments; 4th; and 5th – investment products. These types of entities included many of the assets of the Russian government in the financial sector which are now held back as “risk free interests” in the global financial system. The financial entities were also excluded from the list during the first few years after the financial crisis and during the post-financial crisis period. Of these seven financial companies, the fourth group, composed of investment companies, may represent only about 25% of this total population but it is recognized that these three categories have the potential to be the most valuable sources of financial capital in Russia. In the second group, Russian investment trusts, we believe the share of these financial trust in the total total investment in the Russian economy would be about 30%, much higher than the 40% share in the U.S. for those large investment trusts. The Russian government is the first economic unit to adopt the proposal of the
The study of the issue of taxation of foreign trade company, as well as research of ways to improve the Russian tax legislation in part of taxation of foreign trade transactions, is based on two basic approaches. The first approach is based on the study of theoretical and methodological foundations of the modern tax planning in the field of foreign trade activities. Its basis became researches of domestic and foreign economists on issues of international economic relations and tax planning, as well as international legal acts and international arbitration practice. The study used techniques of logical and theoretical analysis of new aspects of the use of tax planning in organization of foreign trade and international investment transactions. The second approach is based on econometrics and statistics. It allows assessing levels of tax planning in the modern world economy, to compare and evaluate the competition between offshore zones, and also consider the degree of cooperation in the field of tax cooperation within the EU.
The role and impact of international tax planning on business outcomes are widely discussed in the scientific community. The view that the international tax planning has become an integral part of the global economy and it can not be refused without a major overhaul of the entire economic system prevails in domestic and foreign scientific literature. Also various aspects of taxation optimization schemes are considered and the results of implementation of these schemes are studied, as well as theoretical basis of tax planning. Many consulting agencies, for example, PricewaterhouseCoopers, conduct their own research of this field and publish their reports. The study reflects opinions of well-known Russian specialists in this subject such as Pogorletsky A.I., Polezharov L.V., Fomin O.A., as well as foreign authors, Frankel J., Qureshi A., Channels L., Davies D. and Spitz B. The research