Impact of Aggressive Tax Planning on Collection of Income Tax on Legal Entities

Abstract

Impact of Aggressive Tax Planning on Collection of Income Tax on Legal Entities 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.

Securing Orders as a Tool in the Fight against Tax Evasion: Czech Republic Case Study

“…They also have a major negative impact on the principle of voluntary payment of taxes by tax entities. One of the forms of tax evasion is also aggressive tax planning, which also causes a decline in the revenue side of the state budget [2]. Authors [3] dealt with the issue of motivating tax subjects to comply with tax regulations in his research.…”