One of the principles underpinning the OECD Base Erosion and Profit Shifting (“BEPS”) project is the concept of “substance”. Taxation is to be aligned with substance so that profits are being taxed in the location where value is created. However, what constitutes “substance” has not been clearly defined. This paper seeks to examine the concept of substance as applied in different contexts and attempts to put forth a notion of substance that is relevant to Singapore. Having examined the subject matter, the authors are of the view that it is no longer sufficient to have “substance” as a vague guiding principle or a simple threshold test. In view of the recent development in international tax rules, the concept of substance requires a measure of economic realities in order to resolve international tax issues by some norm justified by some concept of proportionality. Such an analysis would necessarily be a multi-faceted and subjective one. In this sense, it is doubtful whether there will ever be a consensus internationally on what constitutes substance or an acceptable level of substance, and the implementation of this principle would not be void of conflicts.
{"title":"'Substance' – A Singapore's Perspective","authors":"Cindy Wong Siu Ching, T. Yan","doi":"10.2139/ssrn.3104981","DOIUrl":"https://doi.org/10.2139/ssrn.3104981","url":null,"abstract":"One of the principles underpinning the OECD Base Erosion and Profit Shifting (“BEPS”) project is the concept of “substance”. Taxation is to be aligned with substance so that profits are being taxed in the location where value is created. However, what constitutes “substance” has not been clearly defined. This paper seeks to examine the concept of substance as applied in different contexts and attempts to put forth a notion of substance that is relevant to Singapore. Having examined the subject matter, the authors are of the view that it is no longer sufficient to have “substance” as a vague guiding principle or a simple threshold test. In view of the recent development in international tax rules, the concept of substance requires a measure of economic realities in order to resolve international tax issues by some norm justified by some concept of proportionality. Such an analysis would necessarily be a multi-faceted and subjective one. In this sense, it is doubtful whether there will ever be a consensus internationally on what constitutes substance or an acceptable level of substance, and the implementation of this principle would not be void of conflicts.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-04-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132649610","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-04-04DOI: 10.17072/1995-4190-2017-35-42-55
A. Demin
The article examines discretionary powers of the tax authorities. Purpose: to identify the main characteristics of the use of discretion in tax law. Methods: the study is based on empirical methods of comparison, description and interpretation, theoretical methods of formal and dialectical logic, and specific scientific methods: legal dogmatic method and method of legal norm interpretation. Results: Russian and foreign lawmakers are actively using discretionary powers of the tax authorities to achieve the objectives of legal regulation to overcome the uncertainty in tax law. Conclusions: discretion in tax law is designed so that in a situation of complete or relative uncertainty the tax authority could have the opportunity to choose the optimal solution from a number of legitimate alternatives. The attribute signs of discretion in tax law include: existence of legal bases; implementation of discretionary powers strictly within the competence; alternativeness of the choice, where each of possible alternatives is lawful; accounting of the specific situation in case of adoption of the discretionary decision (the situation-based approach); creative nature; a discretionary decision is made under the influence of both objective and subjective factors; discretion is limited by legal and extra-legal framework; the exercise of a discretion power results in choosing the optimal resolution for the case. Legal forms of discretion in tax law: the use of legal principles, anti-avoidance rules, valuation norms, presumptive taxation, analogy of the law, relative sanctions, etc.
{"title":"Discretion in Tax Law","authors":"A. Demin","doi":"10.17072/1995-4190-2017-35-42-55","DOIUrl":"https://doi.org/10.17072/1995-4190-2017-35-42-55","url":null,"abstract":"The article examines discretionary powers of the tax authorities. Purpose: to identify the main characteristics of the use of discretion in tax law. Methods: the study is based on empirical methods of comparison, description and interpretation, theoretical methods of formal and dialectical logic, and specific scientific methods: legal dogmatic method and method of legal norm interpretation. Results: Russian and foreign lawmakers are actively using discretionary powers of the tax authorities to achieve the objectives of legal regulation to overcome the uncertainty in tax law. Conclusions: discretion in tax law is designed so that in a situation of complete or relative uncertainty the tax authority could have the opportunity to choose the optimal solution from a number of legitimate alternatives. The attribute signs of discretion in tax law include: existence of legal bases; implementation of discretionary powers strictly within the competence; alternativeness of the choice, where each of possible alternatives is lawful; accounting of the specific situation in case of adoption of the discretionary decision (the situation-based approach); creative nature; a discretionary decision is made under the influence of both objective and subjective factors; discretion is limited by legal and extra-legal framework; the exercise of a discretion power results in choosing the optimal resolution for the case. Legal forms of discretion in tax law: the use of legal principles, anti-avoidance rules, valuation norms, presumptive taxation, analogy of the law, relative sanctions, etc.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129675466","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Article considers the distributional consequences of the Supreme Court’s federalism jurisprudence over the past quarter century, focusing specifically on the anti-commandeering, anti-coercion, and state sovereign immunity doctrines. The first of these doctrines prevents Congress from compelling the states to administer federal programs; the second prevents Congress from achieving the same result through offers that for practical purposes the states cannot refuse; the third prohibits Congress from abrogating state sovereign immunity outside a limited class of cases. These doctrines vest the states with valuable entitlements and allow the states to sell those entitlements back to Congress for a price. In this respect, the doctrines have an intergovernmental distributional effect, shifting wealth from the federal government to the states. The distributional consequences of the anti-commandeering, anti-coercion, and state sovereign immunity doctrines are not purely intergovernmental, however. The doctrines also have potential implications for the distribution of wealth across individuals and households. By forcing Congress to bear a larger share of the costs of federal programs, and by shifting some of the costs of liability-imposing statutes from the states to Congress, these doctrines allow the states to raise less revenue and compel Congress to raise more. For a number of historical as well as structural reasons, the federal tax system is dramatically more progressive than even the most progressive state tax systems, and so the reallocation of fiscal responsibility resulting from these federalism doctrines causes more revenue raising to occur via the more progressive system. The likely net effect is a shift in wealth from higher-income households (who bear a larger share of the federal tax burden) to lower- and middle-income households (who would have borne a larger share of the burden of state taxes). This conclusion comes with a number of caveats. The distributional consequences of the Supreme Court’s federalism doctrines may be moderated—or magnified—by differences in federal and state spending priorities. Moreover, the doctrines may affect the size of government as well as the allocation of fiscal responsibility across levels of government (though the net effect on government size is ambiguous). And the doctrines may have distributional consequences that are not only interpersonal, but also intergenerational. What seems clear from the analysis in this Article is that federalism doctrines affect the distribution of income and wealth in subtle and sometimes unexpected ways, and that a comprehensive understanding of wealth inequality in the United States requires careful attention to key features of our fiscal constitution.
{"title":"Federalism as a Safeguard of Progressive Taxation","authors":"Daniel Hemel","doi":"10.2139/ssrn.2943713","DOIUrl":"https://doi.org/10.2139/ssrn.2943713","url":null,"abstract":"This Article considers the distributional consequences of the Supreme Court’s federalism jurisprudence over the past quarter century, focusing specifically on the anti-commandeering, anti-coercion, and state sovereign immunity doctrines. The first of these doctrines prevents Congress from compelling the states to administer federal programs; the second prevents Congress from achieving the same result through offers that for practical purposes the states cannot refuse; the third prohibits Congress from abrogating state sovereign immunity outside a limited class of cases. These doctrines vest the states with valuable entitlements and allow the states to sell those entitlements back to Congress for a price. In this respect, the doctrines have an intergovernmental distributional effect, shifting wealth from the federal government to the states. \u0000 \u0000The distributional consequences of the anti-commandeering, anti-coercion, and state sovereign immunity doctrines are not purely intergovernmental, however. The doctrines also have potential implications for the distribution of wealth across individuals and households. By forcing Congress to bear a larger share of the costs of federal programs, and by shifting some of the costs of liability-imposing statutes from the states to Congress, these doctrines allow the states to raise less revenue and compel Congress to raise more. For a number of historical as well as structural reasons, the federal tax system is dramatically more progressive than even the most progressive state tax systems, and so the reallocation of fiscal responsibility resulting from these federalism doctrines causes more revenue raising to occur via the more progressive system. The likely net effect is a shift in wealth from higher-income households (who bear a larger share of the federal tax burden) to lower- and middle-income households (who would have borne a larger share of the burden of state taxes). \u0000 \u0000This conclusion comes with a number of caveats. The distributional consequences of the Supreme Court’s federalism doctrines may be moderated—or magnified—by differences in federal and state spending priorities. Moreover, the doctrines may affect the size of government as well as the allocation of fiscal responsibility across levels of government (though the net effect on government size is ambiguous). And the doctrines may have distributional consequences that are not only interpersonal, but also intergenerational. What seems clear from the analysis in this Article is that federalism doctrines affect the distribution of income and wealth in subtle and sometimes unexpected ways, and that a comprehensive understanding of wealth inequality in the United States requires careful attention to key features of our fiscal constitution.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"395 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122086718","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There is widespread consensus that higher cigarette taxes are the most effective policy tool in reducing population smoking rates and tobacco-induced mortality, but the efficacy of such taxes is tempered by the possibility of a rise in smuggling and the availability of contraband tobacco. Understanding the extent to which stronger law enforcement affects the consumption of contraband tobacco is key given the significant tobacco tax increases recently implemented by the federal, Ontario and Quebec governments. Concerns have been raised about lost tax revenue and even the funnelling of black-market revenue to organized crime and terrorist activities. The study employs rigorous econometric methods in order to estimate the amount of smuggled cigarette cartons, along with associated lost tax revenues, in Quebec and Ontario from 2006 to 2014. While the amount of contraband has been quite significant in both provinces, it has been particularly high for Ontario, with lost tax revenue of approximately $816 million to $900 million in 2014. But the amount of contraband has declined over time for both provinces and coincided with an increase in excise cigarette taxes. The reduction in contraband since 2008 has been especially dramatic in Quebec. Lost tax revenue from current levels of contraband in Quebec is roughly a tenth of corresponding amounts in Ontario. The decline in illegal sales can be at least partially attributed to additional federal and provincial resources devoted to law enforcement. Given the magnitude of the decrease in estimated lost tax revenues as a likely consequence of stronger policing, and the risks to higher tobacco taxes undermining fruitful enforcement efforts, it appears that Ontario in particular would be better off by focusing on strengthening enforcement and regulation.
{"title":"Smokes, Smugglers and Lost Tax Revenues: How Governments Should Respond","authors":"Anindya Sen","doi":"10.2139/ssrn.2927815","DOIUrl":"https://doi.org/10.2139/ssrn.2927815","url":null,"abstract":"There is widespread consensus that higher cigarette taxes are the most effective policy tool in reducing population smoking rates and tobacco-induced mortality, but the efficacy of such taxes is tempered by the possibility of a rise in smuggling and the availability of contraband tobacco. Understanding the extent to which stronger law enforcement affects the consumption of contraband tobacco is key given the significant tobacco tax increases recently implemented by the federal, Ontario and Quebec governments. Concerns have been raised about lost tax revenue and even the funnelling of black-market revenue to organized crime and terrorist activities. The study employs rigorous econometric methods in order to estimate the amount of smuggled cigarette cartons, along with associated lost tax revenues, in Quebec and Ontario from 2006 to 2014. While the amount of contraband has been quite significant in both provinces, it has been particularly high for Ontario, with lost tax revenue of approximately $816 million to $900 million in 2014. But the amount of contraband has declined over time for both provinces and coincided with an increase in excise cigarette taxes. The reduction in contraband since 2008 has been especially dramatic in Quebec. Lost tax revenue from current levels of contraband in Quebec is roughly a tenth of corresponding amounts in Ontario. The decline in illegal sales can be at least partially attributed to additional federal and provincial resources devoted to law enforcement. Given the magnitude of the decrease in estimated lost tax revenues as a likely consequence of stronger policing, and the risks to higher tobacco taxes undermining fruitful enforcement efforts, it appears that Ontario in particular would be better off by focusing on strengthening enforcement and regulation.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125500217","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Australia’s goods and services tax (GST) follows the conventional VAT model and treats loan intermediary services as input taxed (exempt) supplies. Financial supplies are defined in regulations in terms not greatly different than found elsewhere. However, the Australian rules contain a number of features not usual elsewhere, reflecting in part different features of the Australian financial system such as the surcharge commonly imposed on sales paid by credit card. A general apportionment rule for input tax credits related to making financial supplies and taxable supplies is supplemented by a de minimis rule that allows many businesses to avoid the need for apportionment of input tax. A unique measure that deems some financial acquisitions to be financial supplies removes any possibility of investors claiming input tax credits. Another rule, adopted to remove the financial institution self-supply bias that favours large financial institutions over smaller competitors unable to bring some services in-house, provides a special ‘reduced input tax credit’ (usually 75% of the input tax) for selected inputs used by financial suppliers in the course of making supplies of loan intermediary services.
{"title":"GST and Loan Intermediary Services: Australia","authors":"R. Krever, J. Teoh","doi":"10.2139/ssrn.3243112","DOIUrl":"https://doi.org/10.2139/ssrn.3243112","url":null,"abstract":"Australia’s goods and services tax (GST) follows the conventional VAT model and treats loan intermediary services as input taxed (exempt) supplies. Financial supplies are defined in regulations in terms not greatly different than found elsewhere. However, the Australian rules contain a number of features not usual elsewhere, reflecting in part different features of the Australian financial system such as the surcharge commonly imposed on sales paid by credit card. A general apportionment rule for input tax credits related to making financial supplies and taxable supplies is supplemented by a de minimis rule that allows many businesses to avoid the need for apportionment of input tax. A unique measure that deems some financial acquisitions to be financial supplies removes any possibility of investors claiming input tax credits. Another rule, adopted to remove the financial institution self-supply bias that favours large financial institutions over smaller competitors unable to bring some services in-house, provides a special ‘reduced input tax credit’ (usually 75% of the input tax) for selected inputs used by financial suppliers in the course of making supplies of loan intermediary services.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132763759","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
November’s election thrust to the fore the tax reform Blueprint released last June by House GOP leaders. One of the plan’s key features, which has received surprisingly little attention, is its treatment of business investment. Outlays for plant, equipment and other business assets would be immediately deductible, rather than depreciated over time, while interest costs would be deductible only to the extent of interest income. This plan to replace net interest deductions with expensing of capital outlays is likely to hurt most businesses — some significantly — and so is likely to face a growing chorus of objections in coming months as this becomes clear to business leaders. Moreover, claims made about this part of the Blueprint’s positive impact on the economy — that it will reduce distortion and encourage investment — are subject to significant caveats and are, in some cases, contradicted by the conceptual understructure of the plan itself.
{"title":"Expensing and Interest in the GOP Blueprint: Good Deal? Good Idea?","authors":"C. Sanchirico","doi":"10.2139/ssrn.2908926","DOIUrl":"https://doi.org/10.2139/ssrn.2908926","url":null,"abstract":"November’s election thrust to the fore the tax reform Blueprint released last June by House GOP leaders. One of the plan’s key features, which has received surprisingly little attention, is its treatment of business investment. Outlays for plant, equipment and other business assets would be immediately deductible, rather than depreciated over time, while interest costs would be deductible only to the extent of interest income. This plan to replace net interest deductions with expensing of capital outlays is likely to hurt most businesses — some significantly — and so is likely to face a growing chorus of objections in coming months as this becomes clear to business leaders. Moreover, claims made about this part of the Blueprint’s positive impact on the economy — that it will reduce distortion and encourage investment — are subject to significant caveats and are, in some cases, contradicted by the conceptual understructure of the plan itself.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"208 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116325420","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Two principle purposes of the OECD/G20 BEPS project can be identified: First, to combat against aggressive tax planning which results in less than single taxation, and secondly, to allocate taxing rights to the state in which the economic activity gives rise to income. This note demonstrates that Article 1(2) tends to enable diametrically opposite results.
{"title":"BEPS Hybrid Entities Proposal: A Slippery Slope, Especially for Developing Countries","authors":"Dhruv Sanghavi","doi":"10.2139/ssrn.2915454","DOIUrl":"https://doi.org/10.2139/ssrn.2915454","url":null,"abstract":"Two principle purposes of the OECD/G20 BEPS project can be identified: First, to combat against aggressive tax planning which results in less than single taxation, and secondly, to allocate taxing rights to the state in which the economic activity gives rise to income. This note demonstrates that Article 1(2) tends to enable diametrically opposite results.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122303390","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The rules of subchapter K of the Internal Revenue Code impose substantial compliance burdens on partnerships and substantial administrative burdens on the government. These burdens could make the option to have periodic deemed realizations of gains and losses on partnership assets attractive to many partnerships. Although deemed realizations would impose valuation costs and a slightly higher expected tax liability for partners than they bear under current law, for many partnerships, the tradeoff likely would prove worthwhile, especially if partners could continue to take advantage of the long-term capital gain preference for gains that would be taxed at preferential rates in the absence of deemed realizations. This article describes some of the compliance burdens faced by partnerships and proposes a partnership election that would provide for mark-to-market taxation of partnership property. The article also describes two secondary elections for partnerships making the mark-to-market election. One would preserve capital gain treatment for assets that would be subject to such treatment in the absence of the mark-to-market election; the other would reduce valuation costs.
{"title":"A Partnership Mark-to-Market Tax Election","authors":"D. Hasen","doi":"10.2139/SSRN.2895382","DOIUrl":"https://doi.org/10.2139/SSRN.2895382","url":null,"abstract":"The rules of subchapter K of the Internal Revenue Code impose substantial compliance burdens on partnerships and substantial administrative burdens on the government. These burdens could make the option to have periodic deemed realizations of gains and losses on partnership assets attractive to many partnerships. Although deemed realizations would impose valuation costs and a slightly higher expected tax liability for partners than they bear under current law, for many partnerships, the tradeoff likely would prove worthwhile, especially if partners could continue to take advantage of the long-term capital gain preference for gains that would be taxed at preferential rates in the absence of deemed realizations. This article describes some of the compliance burdens faced by partnerships and proposes a partnership election that would provide for mark-to-market taxation of partnership property. The article also describes two secondary elections for partnerships making the mark-to-market election. One would preserve capital gain treatment for assets that would be subject to such treatment in the absence of the mark-to-market election; the other would reduce valuation costs.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128670948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The present millennia has witnessed a tremendous growth in the Information Technology field in India and the software transactions, both domestic and foreign, have grown manifold during this period. The International and domestic software companies have found India as a market with an immense potential for their off-shelf as well as customised products. As the underlying intellectual property rights in the software is subject to the copyright laws, the transfer of proprietary rights involved in a purchase of software totally differs from the sale of traditional goods and services. Even though the medium of storage of software, like a CD Rom or a memory card, is tangible the inherent intangible nature of the software for which the purchaser is paying brings in an element of ambiguity, making it difficult to draw a definite boundary to define the transaction either as a sale of good or extension of service. Under the present indirect tax laws these software transfers are subject to sales tax/VAT, service tax or both, many a time resulting in double taxation of such transfers. The net effect of this is an increase in the effective price of the software which is ultimately borne by the purchaser. Even though Hon’ble Supreme Court had in Tata Consultancy Services v. State of Andhra Pradesh brought in some clarification to the prevailing ambiguities, the question as to whether the sale of a software is to be classified as a sale of good or a service is yet to be answered concretely which is evidenced by the subsequent clarification given under the Education guide released by CBEC and the subsequent writ applications filed before various High Courts in this regard.This paper attempts to understand the nature of software transactions and how the same stands different from the traditional sale of goods. An attempt is made herein to understand whether the software transaction can be fit into watertight compartments of Sale of Goods or service, in the light of the Judgement given by various legal forums.
{"title":"Taxation of Software Transactions in India","authors":"Manoranjan Ayilyath","doi":"10.2139/SSRN.2870236","DOIUrl":"https://doi.org/10.2139/SSRN.2870236","url":null,"abstract":"The present millennia has witnessed a tremendous growth in the Information Technology field in India and the software transactions, both domestic and foreign, have grown manifold during this period. The International and domestic software companies have found India as a market with an immense potential for their off-shelf as well as customised products. As the underlying intellectual property rights in the software is subject to the copyright laws, the transfer of proprietary rights involved in a purchase of software totally differs from the sale of traditional goods and services. Even though the medium of storage of software, like a CD Rom or a memory card, is tangible the inherent intangible nature of the software for which the purchaser is paying brings in an element of ambiguity, making it difficult to draw a definite boundary to define the transaction either as a sale of good or extension of service. Under the present indirect tax laws these software transfers are subject to sales tax/VAT, service tax or both, many a time resulting in double taxation of such transfers. The net effect of this is an increase in the effective price of the software which is ultimately borne by the purchaser. Even though Hon’ble Supreme Court had in Tata Consultancy Services v. State of Andhra Pradesh brought in some clarification to the prevailing ambiguities, the question as to whether the sale of a software is to be classified as a sale of good or a service is yet to be answered concretely which is evidenced by the subsequent clarification given under the Education guide released by CBEC and the subsequent writ applications filed before various High Courts in this regard.This paper attempts to understand the nature of software transactions and how the same stands different from the traditional sale of goods. An attempt is made herein to understand whether the software transaction can be fit into watertight compartments of Sale of Goods or service, in the light of the Judgement given by various legal forums.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132976187","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Reform of the U.S. international income taxation system has been a hotly debated topic for many years. The principal competing alternatives are a territorial or exemption system and a worldwide system. For reasons summarized in this article, we favor worldwide taxation if it is real worldwide taxation – i.e., a non-deferred U.S. tax is imposed on all foreign income of U.S. residents at the time the income in earned. This approach is not acceptable, however, unless the resulting double taxation is alleviated. The longstanding U.S. approach for handling the international double taxation problem is a foreign tax credit limited to the U.S. levy on the taxpayer’s foreign income. Indeed, the foreign tax credit is an essential element of the case for worldwide taxation. Moreover, territorial systems often apply worldwide taxation with a foreign tax credit to all income of resident individuals plus the passive income and tax haven income of resident corporations. Thus, the foreign tax credit is actually an important feature of many territorial systems. The foreign tax credit has, however, been subjected to sharp criticisms and Professor Daniel Shaviro has recently proposed replacing the credit with a combination of a deduction for foreign taxes and a reduced U.S. tax rate on foreign income. In this article, we respond to the criticisms and argue that the foreign tax credit is a robust and effective device. Furthermore, we respectfully explain why Professor Shaviro’s proposal is not an adequate substitute. We also explore an overlooked aspect of the foreign tax credit – its role as an allocator of the international tax base between residence and source countries – and we explain the credit’s effectiveness in carrying out this role. Nevertheless, we point out that the credit merits only two cheers because it goes beyond the requirements of the ability-to-pay principle that underlies use of an income base for imposing tax (instead of a consumption base). On balance, however, the credit is the preferred approach for mitigating international double taxation of income.
{"title":"Two Cheers for the Foreign Tax Credit, Even in the BEPS Era","authors":"J. Fleming, R. Peroni, Stephen E. Shay","doi":"10.2139/SSRN.2870713","DOIUrl":"https://doi.org/10.2139/SSRN.2870713","url":null,"abstract":"Reform of the U.S. international income taxation system has been a hotly debated topic for many years. The principal competing alternatives are a territorial or exemption system and a worldwide system. For reasons summarized in this article, we favor worldwide taxation if it is real worldwide taxation – i.e., a non-deferred U.S. tax is imposed on all foreign income of U.S. residents at the time the income in earned. This approach is not acceptable, however, unless the resulting double taxation is alleviated. The longstanding U.S. approach for handling the international double taxation problem is a foreign tax credit limited to the U.S. levy on the taxpayer’s foreign income. Indeed, the foreign tax credit is an essential element of the case for worldwide taxation. Moreover, territorial systems often apply worldwide taxation with a foreign tax credit to all income of resident individuals plus the passive income and tax haven income of resident corporations. Thus, the foreign tax credit is actually an important feature of many territorial systems. The foreign tax credit has, however, been subjected to sharp criticisms and Professor Daniel Shaviro has recently proposed replacing the credit with a combination of a deduction for foreign taxes and a reduced U.S. tax rate on foreign income. In this article, we respond to the criticisms and argue that the foreign tax credit is a robust and effective device. Furthermore, we respectfully explain why Professor Shaviro’s proposal is not an adequate substitute. We also explore an overlooked aspect of the foreign tax credit – its role as an allocator of the international tax base between residence and source countries – and we explain the credit’s effectiveness in carrying out this role. Nevertheless, we point out that the credit merits only two cheers because it goes beyond the requirements of the ability-to-pay principle that underlies use of an income base for imposing tax (instead of a consumption base). On balance, however, the credit is the preferred approach for mitigating international double taxation of income.","PeriodicalId":330166,"journal":{"name":"Law & Society: Public Law - Tax eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125771049","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：