H21 - Taxation and Subsidies: Efficiency; Optimal TaxationReturn

The Czech Republic has implemented the Directive on the common system of parent and subsidiary companies taxation as amended by Council Directive 2006/98/EC. Based on this, the profits paid to parent companies are exempt from withholding tax. All EU Member States are required to implement this Directive. However, a number of states have supplemented their legislation with rules designed to prevent tax evasion. On the contrary, since 2014, the Czech Republic has simplified the rules on commercial law for the payment of equity and has extended the possibilities for payment of dividends since 2018. The empirical research was focused on the exploration of the largest Czech companies and their profits paid out, i.e. on how much of the generated profits are paid to parent companies abroad. The selected sample included 56 companies from the CZECH TOP 100 ranking, 31 joint- stock companies (55%) and 25 limited liability companies. All these companies paid dividends in the years 2013 to 2015. Banks and financial institutions were not in the survey. It was found that 16 out of 31 joint-stock companies paid dividends each year at the amount close to the entire reported profit for the prior period. The same policy was followed by 9 out of 21 limited liability companies. More than 99% of the earnings paid was exempt from withholding tax on the basis of the implementation of the favorable tax regime of the EU Directive in the Czech Income Tax Act.

Since the Miller and Modigliani (1958, 1963) theory of capital structure the literature struggles to include cost of financial distress in the cash flow theories of capital structure. Besides that most of the recent models are static. Let us just remind the contributions by Cooper, and Nyborg (2006), Farber, Gillet, and Szafarz (2006), Qi, Liu and Johnson (2012) or Fernández's (2004, 2007) analysis of their predecessors' work. This paper brings dynamic, and risk consistent (in the meaning of return being purely growing function of risk), although regarding the quantification of financial distress cost somewhat simplified model. His advantage is simplicity and observability of all its exogenous (input) variables. However, the clarification of relationship between face and market value of debt, and empirical test of model are needed.

The paper examines the principle of special procedure of a travel agent (travel services) with regard to both the Czech VAT Act and the VAT-Directive, where is a visible discrepancy in the definition of "customer". Based on the model examples the advantages and disadvantages of both procedures are evaluated and consequently the amendments of the VAT-Directive are recommended. Based on the comparison and processing differences found by using standard scientific methods is possible to formulate the proposal of amendments of the VAT-Directive. The aim is to determine the impact on tax base of taxpayer providing travel agent in the case of applying the normal or special procedure. Consequently, to propose the amendments of the VAT-Directive, by which would be achieved the adaptation of the rules with regard to the specific nature of business of the travel agent providers, in order for them the rules were simpler and more over the administrative burden was reduced. The amendments of VAT-Directive are proposed both for outgoing and for incoming travel agent, where on the base of results received different advantages of individual taxation procedures were determined for them.

The Czech Republic is currently setting up so called single collection point. The aim of this project is to merge collection of taxes, duties and contributions on public insurances. The main goal of the merged administration is simplification, efficiency and rationalization of tax, duties and obligatory contribution administration. We analyze up to now course in setting up the single collection point in the Czech Republic and discuss opportunities and related risks concentrating on merger of tax and insurance contributions administrations. We briefly state also the experiences of other states with similar projects and emphasize similarities with single collection point in the Czech Republic.

The objective of this paper is to examine the use of effective tax rates on different types of capital assets and sources of financing and to assess on the base of calculation of the tax wedges the degree to which taxation affects the incentive to undertake investment. The methodology used to calculate effective tax rates on investments is based on an approach developed by the King and Fullerton methodology (1984), which has become the most widely accepted method adopted to calculating effective tax rates (tax wedges). The tax wedge will vary according to the type of asset: machinery, buildings, inventory and the type of finance sources: new equity, debt, retained earnings. Effective tax rates take into account not only the statutory corporate tax rate, but also other aspects of the tax system which determine the amount of tax paid and profitability of investment, a consideration of personal taxes. The tax system that seeks to raise revenue in ways that avoid distortion effects is considered neutral tax system. The aim of this article has been to assess on the base of calculation of the tax wedges the degree to which taxation affects the incentive to undertake investment in the Czech Republic (comparison in years 2000 and 2010).

The paper is based on general function of tax reforms. It evaluates VAT from the perspective of the taxpayer in the planned change of VAT rates in Czech Republic. The main aim is to analyze the impact of the changes on individual households deciles. The methodology is based on the database Czech Statistical Office. Then simulation analysis on family accounts is made. The data obtained are discussed in terms of tax equity. The result is that VAT has already regressive impact and the planned unification of the VAT rates increases regression.

The article is based on evaluation of government's tax revenue forecasting in Czech Republic between years 2004 and 2007. For evaluation of government forecasting are used ex-post and ex-ante methods. Within the scope of ex-ante method are described methods of regression analysis and time-lines decomposition. Next part is aimed on most frequent errors in statistic forecasting and creation of evaluations. In the part of Ex-post forecasting are described microsimulation measured on Czech tax system between years 2004 and 2007. Government forecasts are evaluated by quality and realized errors are pinpointed.

The overview article provides information on the status of the theory of optimal taxation. The aim was to provide an overview of the latest research in particular in the field of optimal taxation, to allow the survey to provide inspiration to the creation and application of models for the purpose of tax reform in the Czech Republic. Finding the optimal tax is balancing between tax efficiency and tax equity. The starting point for the current theory are the classical models of Ramsey (1927), Mirrlees (1971), Diamond and Mirrlees (1971), possibly a newer contribution of Atkinson and Stiglitz (1987). Current models of optimal taxation extend knowledge about the inclusion of variables such as administrative costs, tax evasion, externalities, intergenerational distribution, public debt, market imperfections. Some are also more disaggregated on different income groups of households or households with different earning capacity, different markets, etc. However, the one aspect of the matter is the tax theory and the second is the practical implementation of tax reforms. The reform is based on certain state tax system, and establish an entirely new state is politically unrealistic. Another problem is lack of information on key parameters (such as elasticity of demand, elasticity of substitution between goods, etc.).

We review some relevant literature in the field of tax evasion avoidance proposals. Unfortunately legislative a political conditions (double taxation treaties, tax competition) prevent some of the most useful designs proposed in the scholar literature, to be widely used in Europe. Then we concentrated on properties of transfer pricing rules proposed by OECD guidelines - Cost+ method, comparable resale price method (CRP), profit split method (PSM), comparable uncontrolled price method. We used neoclassical microeconomic model of firm a simulation tools (random cost a income functions). We found that some of these methods (PSM, CRP with fixed discount) cause quite large distortions in the optimal quantity of final good (a therefore also intermediate product) produced. PSM also falls short on the instability of profitability between related industries in time. The most inconvenient property of Cost+ a CRP, which do not distort quantity produced by MNE if percentage markup (discount) is used, is that they are very sensitive to quality of database revenue authority uses, to stability of prices within industry a to profit margin. VAT or turnover taxes are naturally less sensitive, so emphasis on VAT might be a partial solution of multinationals' pricing problem.

The paper deals with the testing of the hypothesis, whether there is negative correlation between the time series of corporate income tax yield and personal income tax yield in the states of EMU and the Czech Republic. The correlation analysis has not proved the negative correlation (except Netherlands) on 5% level of importance. It can be assumed, that in most cases the present competition in the filed of corporate income taxation in the EU does not lead to the shift in the tax burden from corporations on the individuals. The differences of corporate income taxation in individual member states reflect the different economic conditions - countries with higher tax rates offers more quality labor force and stable business environment, while the newly accessed countries use the lower tax rates for their establishment on the internal market of the European union.