nach oben

Erschienen in:

2021 | OriginalPaper | Buchkapitel

26. Unusual Taxes

verfasst von : Parthasarathi Shome

Erschienen in: Taxation History, Theory, Law and Administration

Verlag: Springer International Publishing

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

Countries occasionally introduce taxes to plug loopholes elsewhere in their tax systems and to enhance revenue generation. A tax on financial transactions has been contemplated at a global level though not successfully, but has been used in Latin America in different forms such as in Argentina and Brazil. Argentina removed it and Brazil kept it in the statutes at a zero rate. Subsequently, India too introduced a tax on bank withdrawals but then abolished it. The design, economic effects, revenue productivity and collection costs of this tax are analysed. A tax on fringe benefits has been used in Australia and New Zealand. There is some justification for this tax when fringe benefits are not voluntarily reported as a part of the income tax base and tax paid on it. India introduced a well-designed tax on fringe benefits though its administration proved challenging. Hence it was removed. This chapter examines the conceptual basis of these taxes and takes up India as a case study.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Vorheriges Kapitel Taxation of International Trade: Design and Experience

Nächstes Kapitel Double Taxation Avoidance Agreements

Of course it could be argued that the sheer size of foreign exchange transactions would produce a lot of revenue even with a tiny tax that would cause minimal distortions. As is illustrated in this section, this argument continues to exist.

See Keynes (1936/2006).

See Tobin (1978).

Essentially, any tax would raise costs, so that the argument against tax metamorphosed not so much as a choice between different taxes but, rather, between tax and non-tax alternatives.

Definitions from the website may be useful: http://www.investopedia.com/terms/b/bid.asp.

‘Bid’ is an offer made by an investor, a trader or a dealer to buy a security. The bid will stipulate both the price at which the buyer is willing to purchase the security and the quantity to be purchased. ‘Ask’ is the price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.

‘Bid-Ask Spread’ is the amount by which the ask price exceeds the bid. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it.

See Jackson and O’Donnell (1985).

See Bond et al. (2004). Note, however, that financial intermediaries are exempt from UK’s Stamp Duty Land Tax (SDLT).

See Stiglitz (1989) and Summers and Summers (1989).

Note that the trader makes no after-tax profit.

The after-tax profit is shown by the black area. Note that, even though the tax paid is higher in the long term than in short-term case, nevertheless the trader makes a profit in the long term.

See Farmer et al. (2004).

A useful example is provided in Beinhocker (2007).

See Palley (1999) and Wei and Kim (1999).

This was why Tobin viewed long-term investment to bear little tax, while extremely short term (in seconds today) to carry a high tax, which would reduce the latter type of trade.

An example of a derivative is a futures contract, an agreement to exchange the underlying asset at a future date at a price specified today. Derivatives offer only a partial substitute for equities or foreign exchange, for example equity derivatives do not come with voting rights or dividend rights. Further, they can be used for both speculation and hedging of risks.

Some options to buy at a later date are never used if the agreed price is above the market price.

Nevertheless, the United Kingdom operates a stamp duty on trade in exchanges, and a stamp duty reserve tax on assessed tax bases in parallel. Moreover, policy trends are to create exchanges for certain over-the-counter (OTC) transactions and render them mandatory for trading.

Hawkins and McCrae (2002).

HMRC (2019).

Both types of options are between two parties—the writer and the buyer of the contract—used to manage risk on an underlying asset or commodity. In call options, the purchaser of the contract gets the right (but not the obligation) to buy the underlying asset from the writer of the contract at a fixed price set at the start of the contract. In put options, the purchaser of the contract gets the right (but not the obligation) to sell the underlying asset to the writer of the contract at a fixed price set at the start of the contract. In a variation, European call/put options have a single end date (or short period close to the end date) at which time the contract purchaser can decide to exercise the option (enforce the contract and buy/sell the underlying commodity), while American call/put options can be exercised at any time up to the termination date of the contract.

It might increase financial costs but it has to be viewed in light of artificially low financial sector costs that made ‘ninja’—no income, no job, no assets—loans possible prior to the 2008 global financial crisis. It would limit future costs on taxpayers who are now suddenly burdened with a formidable shift up in public debt whose impact is likely to fall significantly on future generations of taxpayers.

See Soares da Silva (2004). In the first three quarters of 2004, assessments resulting from CPMF cross-checking totaled BRL 28 billion (US$ 9.63 billion, BRL 1 = US$ 0.344) a record since the CPMF began to be used as a tax audit instrument.

Since then the rupee has depreciated to about Rs. 75 to US$ 1 (as on 6 August 2020).

Employers collaborate with employees to design tax efficient compensation packages by converting salary into a benefit at the cost of public revenues. Government, as an employer, also use such practices commonly, for example by providing under-valued housing, leave travel, schooling for children and so on.

Brooks (2001), p. 23. Also see Burns and Krever (1998).

Average exchange rate was US$ 1 = Rs. 10.34 at that time.

A recommendation that was made in 2002 came from a former Chairman of the Central Board of Direct Taxes (CBDT) advocated the introduction of an Australian type FBT as a separate levy. The then finance minister directed CBDT to examine this suggestion. However, CBDT argued that the Australian type FBT entailed high compliance cost and administrative burden. Accordingly, it recommended that the suggestion made by Pandey should be rejected, which was accepted by the finance minister. The FBT introduced later in 2005 overcame the problem of high compliance and administrative cost by resorting to a presumptive method for determining the tax base.

The Finance Bill, 2005, provided for much higher percentages. However, based on subsequent discussions with trade and industry representatives, the percentages were reduced to these levels.

It excluded any fund, trust or institution that was eligible for exemption granted under certain sections of the Income-tax Act viz. cl (23C) of Section 10 or registered under Section 12AA; a local authority; or an artificial juridical person. An entity which did not have any employees based in India, was not liable to FBT. For example, a law firm, having only retainer relationship arrangements and no employees on its rolls, was not liable to FBT.

Beinhocker, Eric D. 2007. The Origin of Wealth: Evolution, Complexity and the Radical Remaking of Economics. Boston: Harvard Business School Press.

Bond, Steve, Mike Hawkins, and Alexander Klemm. 2004. Stamp Duty on Shares and its Effects on Prices. Institute of Fiscal Studies WP04/11. http://www.ifs.org.uk/wps/wp0411.pdf.

Brooks, Neil. 2001. Key Issues in Income Tax: Challenges of Tax Administration and Compliance. Tax Conference. Asian Development Bank.

Burns, Lee, and Richard Krever. 1998. Individual Income Tax. In Tax Law Design and Drafting, ed. Victor Thuronyi, vol. 2. Washington, DC: International Monetary Fund.

Farmer, J. Doyne, Laszlo Gillemot, Fabrizio Lillo, Szabolcs Mike, and Anindya Sen. 2004. What Really Causes Large Price Changes? Quantitative Finance 4 (4): 383–397. https://doi.org/10.1080/14697680400008627.CrossRef

Hawkins, Mike, and Julian McCrae. 2002. Stamp Duty on Share Transactions: Is There a Case for Change? Institute of Fiscal Studies, Commentary 89. http://www.ifs.org.uk/comms/comm89.pdf. Accessed 26 Oct 2020.

HMRC. 2019. HMRC’s Annual Report and Accounts 2018–19. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/824652/HMRC_Annual_Report_and_Accounts_2018-19__web_.pdf. Accessed 26 Oct 2020.

Jackson, P.D., and A.T. O’Donnell. 1985. The Effects of Stamp Duty on Equity Transactions and Prices in the UK Stock Exchange. Bank of England Discussion Paper No. 25. https://www.bankofengland.co.uk/-/media/boe/files/archive/discussion-paper/the-effects-of-stamp-duty-on-equity-transactions-and-prices.pdf. Accessed 26 Oct 2020.

Keynes, John Maynard. 1936/2006. General Theory of Employment, Interest and Money. Germany and India: Macmillan and Atlantic Publishers & Distributors (P) Limited.

Palley, Thomas I. 1999. Speculation and Tobin Tax: Why Sand in the Wheels can Increase Economic Efficiency. Journal of Economics 69 (2): 113–126. https://doi.org/10.1007/BF01232416.CrossRef

Shome, Parthasarathi, and Janet Stotsky. 1995. Financial Transactions Taxes. Working Paper WP/95/77, International Monetary Fund. https://doi.org/10.5089/9781451849950.001. Accessed 26 Oct 2020.

Soares da Silva, D.R.R. 2004. Tax Assessments Soar as Brazil uses CPMF Information. Tax Analysts, December 2.

Stiglitz, Joseph E. 1989. Using Tax Policy to Curb Speculative Short-Term Trading. Journal of Financial Service Research 3: 101–115. https://core.ac.uk/download/pdf/161443799.pdf.

Summers, Lawrence H., and Victoria P. Summers. 1989. When Financial Markets Work Too Well: A Cautious Case for a Securities Transaction Tax. Journal of Financial Services Research 3: 261–286. https://doi.org/10.1007/BF00122806.CrossRef

Tobin, James. 1978. A Proposal for International Monetary Reform. Eastern Economic Journal 4 (3–4): 153–159. https://web.holycross.edu/RePEc/eej/Archive/Volume4/V4N3_4P153_159.pdf.

Wei, Shang-Jin, and Jungshik Kim. 1999. The Big Players in the Foreign Exchange Market: Do They Trade on Information or Noise? CID Working Papers No. 5. Center for International Development, Harvard University. https://core.ac.uk/download/pdf/6720373.pdf. Accessed 26 Oct 2020.

Titel: Unusual Taxes
verfasst von: Parthasarathi Shome
Verlag: Springer International Publishing
Buch: Taxation History, Theory, Law and Administration
Print ISBN: 978-3-030-68213-2

Electronic ISBN: 978-3-030-68214-9

Copyright-Jahr: 2021
DOI: https://doi.org/10.1007/978-3-030-68214-9_26