RESTRAINING HARMFUL TAX COMPETITION: AN ANALYSIS OF AMERICAN CFC LEGISLATION
Capital and labor mobility facilitates cross-border activities of enterprises. In the era of globalization the optimal choice of investment location gives enterprises an opportunity to profit maximization. As a result the governments competing for foreign direct investment offer to enterprises preferential tax treatment. In order to minimize the loss of tax revenue countries imposing high effective tax rates on enterprises implement diversified anti-tax-avoidance measures. One of these measures is controlled foreign corporation. The article examines the application of the controlled foreign corporation rules in the United States of America to combat harmful tax competition. It has to be underlined, that the American controlled foreign corporation legislation was a prototype for other countries that use this institution to prevent tax avoidance. The aim of this article is to review the controlled foreign corporation legislation in the USA, analyze the structure of CFCs and the structure of their subpart F income in this country and evaluate the efficiency of this anti-tax-avoidance measure. The author describes inter alia, implications of harmful tax competition and the CFC rules. As the provisions of controlled foreign corporation are also planned to be introduced in Poland, the American legislation might be a good example of its successful implementation.
REFORMING CONTROLLED FOREIGN CORPORATIONS IN INDONESIA: LESSONS LEARNED FROM BEPS ACTION PLAN AND GERMANY
Abstrak: Meningkatnya aktivitas ekonomi antar negara memberikan ruang bagi perusahaan untuk membentuk perusahaan terkendali yang berada di luar negeri (Controlled Foreign Corporations) sehingga menyebabkan naiknya risiko penggelapan pajak. OECD dan G20 merekomendasikan Base Erosion and Profit Shifting (BEPS) Action Plan agar negara-negara dapat mengadopsi peraturan yang ideal terkait CFC. Oleh karena itu, Indonesia merilis Peraturan Menteri Keuangan no. 93/PMK.03/2019, dimana Jerman juga mengadaptasi peraturan CFC ini melalui German Foreign Transaction Act 1972. Namun, Jerman dinilai lebih berhasil dalam melindungi basis pajk negaranya dalam ruang lingkup CFC. Maka, riset ini dilakukan untuk membandingkan antara peraturan CFC di Indonesia dengan Jerman serta OECD BEPS Action Plan dalam aspek control, kualifikasi pendapatan, serta keringanan beban pajak. Melalui penelitian yuridis-normatif dan pendekatan kualitatif, telah dikemukakan bahwa perbedaan utama tertera dalam lingkup pengendali tidak langsung, kewajiban keterbukaan pemegang saham, spesifikasi yurisdiksi pajak, dan metode keringanan pajak, yang selanjutnya akan diolah sebagai rekomendasi kebijakan untuk memperkuat regulasi CFC di Indonesia. Abstract: The rise of cross-border multinational companies allows the occurrence of Controlled Foreign Corporation (CFC), which consequently gives rise to the risk of tax evasion. The OECD and G20 enacted the Base Erosion and Profit Shifting (BEPS) Action Plan to recommend nations in adopting an ideal policy for CFC. In response, Indonesia promulgated Ministry of Finance Regulation No.93/PMK.03/2019, whereas Germany adopted the German Foreign Transaction Tax Act 1972. However, Germany was deemed more successful in maintaining the tax base of the nation from the conduct of CFC. Hence, this research was conducted to compare the CFC regulation in Indonesia and Germany as well as the OECD BEPS Action Plan, especially in pertaining to the aspect of control, income qualification, and tax relief. Through juridical-normative research and qualitative approach, it is found that the main differences are prevalent in the scope of indirect controller, mandatory disclosure, tax jurisdiction, and method of tax relief, which are incorporated as policy recommendations to further strengthen the CFC regulation in Indonesia
FORMULA APPORTIONMENT: IS IT BETTER THAN THE CURRENT SYSTEM AND ARE THERE BETTER ALTERNATIVES?
This analysis of formula apportionment compared to the current U.S. system recognizes that income shifting has two main sources, excess returns attributable to intangibles and debt, and that a major goal of income division systems is preserving neutrality between arm s length and related party transactions. A model demonstrates that separate accounts (SA) and formula apportionment (FA) distort behavior along different margins. Simulations indicate that FA has no clear advantage over SA. Static estimates of U.S. tax revenues under FA suggest potentially large increases, but simulations show that revenue under FA and SA is similar once behavioral responses are taken into account.