The new Directive contains several provisions not available in the Directive of 2008. Competent authorities of EU member states should establish a central contact office responsible for contacts with other countries - EU members in the field of mutual assistance in the implementation of the provisions of this Directive. Competent authorities of the countries - EU members can create multiple contact offices responsible for contacts with other EU member states in the framework of mutual assistance in one or more types or categories of taxes and duties. The competent authorities may also establish contact departments for mutual assistance within their territorial or operating competence. If a contact office or contact department receives the request beyond its competence, RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES it shall forward the request to the competent office or department, if it is known, what office or department is such, or redirect the request to the central contact office, having informed the requesting competent authority. The competent authority of each of the countries - EU member states shall inform the Commission of the European Union there is a central contact office, contact offices, liaison departments. The Commission provides this information to EU member states.
There is the lower limit of the claim for recovery to be collected within the framework of mutual assistance: the competent authority of the requested country is not obliged to provide assistance in collecting the requirements if the amount of the claim less than Euro 1500.
We have not covered all changes adopted in 2010 in the framework of the relevant EU directives, but have highlighted only those provisions, which, in our view, would be reasonable to introduce in the effective or new international agreements with Russia. We’ll call them again.
1. Definition of cases, when a competent authority of the requesting country has the right to request assistance in the claims enforcement to competent authorities of the requested country before application of all the possible procedures within the country.
2. Allowing the debtor additional time or payment by installments with a possible interest charges.
3. Refusal to provide assistance in the claims recovery, if such recovery, given the situation of the debtor, can create serious economic or social difficulties in the requested country.
4. Restrictions in age and the amount of claims for recovery subject to mandatory assistance.
5. Creating a central contact office responsible for contacts with other states for mutual assistance in the recovery of tax claims.
INTERNATIONAL TAX COMPETITION AS AN INNOVATION DEVELOPMENT FACTOR INTERNATIONAL TAX COMPETITION AS AN INNOVATION DEVELOPMENT FACTOR A.Levashenko In order to achieve innovation and modernization of its economy, Russia needs to modify its tax legislation in accordance with the experience of other states. Unlike the Russian Federation, practically all the other countries of the world consider small and medium-size businesses as a separate subject of taxation for the purpose of granting them a special tax regime.
It has become a widely accepted notion that the international competitiveness level of a countryindeed influences to a certain degree the quantity and level of development of its innovationoriented enterprises.
In its turn, the level of international tax competitiveness of a country is directly or indirectly influenced by a broad range of factors. These factors include, for example, the inter-country differences in the degree of national economy development and in economic orientation (raw material production, innovation), as well as a variety of geopolitical and social circumstances. Also, countries can follow different principles of taxation, or practice different approaches to determining tax jurisdictions or to treating certain consolidated groups of taxpayers.
When it comes to debating the issue of international tax competition and its influence on the development of innovative enterprises in a given country, the first thing that is needed is a precise definition of the term ‘innovation’. Unfortunately, neither the economic nor legal doctrine has so far formulated any single concept of innovation. At present, more than four types of innovation are typically singled out: product innovation, process innovation, market innovation, and organizational innovation.
Product innovation is understood as the creation of products or services that are either technologically new or significantly improved. Significant improvements imply the introduction of improvements in the technical specification, components, materials and backup software of a product, and improvements of user backup or other functional characteristics.
Process innovation is understood as the production of new or significantly improved products, or the introduction of a new or significantly improved method of supply (or delivery), including the introduction of considerable changes in a relevant technology, equipment and (or) backup software.
Marketing innovation is understood as the introduction of new methods of marketing, which involve significant changes in the design, packaging, placement, promotion or evaluation (pricing) of a product.
Organizational innovation is understood as the introduction of new organizational into entrepreneurial practice and into the organization of jobs or external links2.
Thus, one of the principal features of all innovations would be a certain element of novelty and improvement that they bring into the life of people as a result of their implementation.
Below, we will consider the purely legal factors that influence the competitiveness of a country and are directly made use of by the State in order to increase the attractiveness of the country from the point of view of innovation developers. In other words, we will focus on determining the characteristic features of a country that can influence its position in the system of international tax competition.
It is now an accepted fact that, in order to significantly increase the volume of innovations, it is necessary to introduce economic preferences in the form of special tax regimes, tax benefits 1 The tax competitiveness of a country is determined by the size of the rates and the sphere of application of its taxes, as well as by their stability, simplicity and predictability.
2 Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data, 3 Ed. // URL: http://www.oecd.org (hereinafter to be referred to as the OECD Manual).
RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES and targeted state subsidies. As state subsidies do not fall into the category of tax stimulation measures, the case in point will be the special tax regimes and tax incentives designed by the State to promote the development of innovation activities.
One of the major mechanisms of tax competition is the development of tax incentives in the sphere of law. At the early stage of development of the innovation process and the entire innovation space of a country, it is very important that the State should grant tax benefits to innovative enterprises. Such benefits should be granted in the form of tax holidays, providing the enterprises with complete exemption from some taxes for a limited period of time. It is precisely this mechanism of international tax competition that is applied in most countries.
Also, in one form or another, each state consolidates in its legislation certain tax incentives – such as reduction of the taxable base of an enterprise engaged in innovation activities, reduction of profits tax for such enterprises, tax benefits in the sphere of amortization of scientific equipment, etc. The extent of these tax incentives may vary from country to country.
The distinctive feature of a country can be the choice of an object of innovation-oriented tax stimulation. What is meant here is that any innovation goes through at least three major stages:
training of scientific cadres, R&D and, finally, the commercialization of the innovation – namely, the creation, in a country, of a tax climate that would be favorable to making investments in innovation development.
An analysis of the international practice in the sphere of tax stimulation of innovations has indicated that each country independently determines which of the above stages would require the introduction of the most radical tax benefits for the purposes of strategic development of innovationoriented enterprises. Thus, for example, US tax legislation envisages that equal benefits should be granted at each of the three stages of the State’s innovation development. Germany’s tax incentives are mainly focused on R&D. Nevertheless, nearly in all countries the profit-making innovation enterprises are endowed with the right to reduce their taxable bases by the amount of qualified expenditures (that is, corresponding to state-established criteria), or even by the value in excess of those expenditures.
Based on the data provided by the Directorate-General of the European Commission, the Maastricht Economic and Social Research and Training Center on Innovation and Technology has carried out a comparative analysis of the innovation performance of EU Member States and a number of non-EU countries (EIS)1. The analyzed countries are subdivided into the following four country groups:
Innovation leaders – Sweden, Switzerland, Finland, Denmark, Germany and the UK. Their innovation-performance indicators are the highest.
Innovation followers – Austria, Belgium, Cyprus, France, Iceland, Ireland, Luxemburg, the Netherlands, Estonia and Slovenia.
Moderate innovators – Czech Republic, Italy, Norway, Slovakia, Spain, Poland, Portugal, Malta, Lithuania, Greece and Hungary.
Catching-up countries – Bulgaria, Croatia, Latvia, Turkey, Serbia and Rumania.
Below we will consider the experience of some of these countries, so as to analyze in what ways tax legislation can influence the development of their innovation economies.
The United Kingdom, one of the current innovation leaders, has introduced a number of special tax benefits for small, medium-sized and large enterprises engaged in innovative activities.
Tax benefits are granted a) in the sphere of innovative activities - to companies engaged in R&D (companies engaged in innovation activities), which are exempted from corporate tax on the income derived from such activities; and b) in the sphere of depreciation tax deductions.
These tax benefits were introduced in 2000 for small and medium-sized enterprises, and were then extended, in 2002, to large companies. It should be noted that, in accordance with EU and UK legislation, a company should be defined as a large company if it does not fall into the categories of ‘small’ and ‘small and medium-sized’ companies. Small and medium-sized companies are defined as having less than 250 employees; their annual turnover, in money terms, does not exceed 50 mln Euro, and their balance sheet total is no more than 43 mln Euro.
1 http://www.proinno-europe.eu/page/european-innovation-scoreboard-INTERNATIONAL TAX COMPETITION AS AN INNOVATION DEVELOPMENT FACTOR UK legislation regulating the granting of tax benefits for R&D consists of the following major normative legal acts: the Income and Corporation Taxes Act 1988, the Finance Act 2000, and the Finance Act 2002.
All companies spending more than 10,000 pound sterling on R&D (as defined for tax purposes) are entitled to a deduction when calculating their taxable profits of – 150 % of qualifying expenditure for small and medium-sized companies, and – 125% of qualifying expenditure for large companies.
This tax credit is not available to individuals and partnerships.
A company’s expenditures qualifying for R&D tax credit purposes include its revenue expenditure on employing staff that are directly or indirectly engaged in R&D; expenditure on paying a staff provider for the staff provided to the company who are directly or indirectly engaged in R&D;
expenditure on consumable or transformable materials used directly in carrying out R&D (broadly, physical materials which are consumed in the R&D); and expenditure on power, water, fuel and computer software used directly in carrying out R&D.
In order to obtain a tax credit, a company should submit its tax credit request to the local branch of HMRC in accordance with the established procedure.
As mentioned above, companies are also entitled to tax benefits in the sphere of depreciation deductions: 40 % of depreciation deductions1, for small and medium-sized enterprises, with regard to investments in plant and machinery, except for those being leased out; 100% of depreciation deductions for small enterprises with regard to investments in information and communication technologies (for example, computers, computer software, etc.), and 100 % of depreciation deductions with regard to investments in water-saving equipment2.
As regards the UK tax regime in general (the total amount of taxes, the total tax rate, the timing of tax payment, the ease of paying tax,), it should be said that the UK rates highly in 16th place in the World Bank’s international ranking of tax regimes (covering 132 countries)3.
Denmark, another innovation leader, uses other forms of tax stimulation, which are aimed nor so much at decreasing the total profits tax burden and the level of depreciation deductions as at the attraction of highly qualified staff. Thus, in order to attract investments to hi-tech enterprises, Denmark pays much attention to improving the training of staff for such enterprises. In this connection, enterprises are granted tax credits for hiring scientific personnel.
However, Denmark, like the UK, has a system of tax rebates for the entrepreneurial sector as a whole (introduced in 2002). This system makes it possible to reduce the taxable base of a company by an amount equal to up to 150 % of the company’s expenditure on R&D.
Germany, yet another innovation leader, has abolished the so-called research-related tax benefits.
Germany believes the mechanism of general reduction in corporate profits tax to be more efficient, because the maintenance of R&D tax benefits considerably complicates general tax legislation. At the same time, according to the World Bank, Germany’s rating in the international rating of tax regime attractiveness is rather low – 80th place.
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