Tax Law Design and Drafting, Volume 2

Victor Thuronyi

• Publisher: INTERNATIONAL MONETARY FUND
• Year: 1998
• eBook ISBN: 9781557756336

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¹ The term “income tax” is used here to refer to both the income tax on individuals and the income tax on corporations, which in many countries has a different name, for example, profit tax. In some countries, these taxes are governed by separate laws, and in others by the same law. See infra ch. 14, sec. II(B).

² In this volume we also include in footnotes a few comments by Prof. Leif Mutén, identified as L.M., who kindly reviewed much of the manuscript.

³ See Tax Policy Handbook 294 (Parthasarathi Shome ed., 1995).

⁴ See id. at 300-18.

⁵ See id.

⁶ A recent exception is Hugh Ault et al., Comparative Income Taxation (1997), which considers a broad range of structural issues for the income tax of nine industrial countries, representing four of the eight families of countries identified in Table 1.

⁷ Brian Arnold, The Taxation of Controlled Foreign Corporations: An International Comparison (1986); Brian Arnold, The Taxation of Investments in Passive Foreign Investment Funds in Australia, Canada, New Zealand and the United States, in Essays on International Taxation (Herbert Alpert and Kees van Raad eds., 1993).

⁸ Of course, by focusing on solutions adopted within the same paradigm, research confined to a single group can also be helpful.

⁹ Cf. K. Zweigert and H. Kötz, An Introduction to Comparative Law 66 (2d. ed., Tony Weir trans. 1992).

¹⁰ As far as I have been able to ascertain, only two IMF member countries (The Bahamas and Vanuatu) do not have an income tax. Several have an income tax of only limited application. Thus, Maldives has a tax on bank profits only. St. Kitts and Nevis has an income tax on corporations, but not on individuals. The United Arab Emirates, Oman, and Qatar have corporate taxes, but these apply mostly to oil companies and financial institutions. See 29 Tax Laws of the World 96, 110 (1987). Palau has a schedular and somewhat hybrid system, which includes a tax on wages, a modified turnover tax on businesses, and a tax on the net income of financial institutions.

¹¹ By way of disclaimer, I have not studied all these countries in detail, and it is certainly possible that the classification can be improved on the basis of further study and can be enriched by analysis of cross-family influences. Perhaps there is a doctoral dissertation here for someone?

¹² See Guy Gest, France, in Ault et al, supra note 6, at 39.

¹³ Report of the Inter-Departmental Committee on Income Tax in the Colonies not Possessing Responsible Government, Cmnd. 1788 (Dec. 1922).

¹⁴ The concept of income in these countries is, however, influenced to varying degrees by the same theories that lie behind English judicial decisions on the meaning of income. See Ault et al., supra note 6, at 8-10, 27-29.

¹⁵ See Tiley, United Kingdom, in Ault et al., supra note 6, at 109. The tax was imposed by the Income Tax Act, 1799 (39 Geo. 3, c. 13). For a history of the law, see also 12 Halsbury’s Statutes of England (2d ed. 1949).

¹⁶ See Sylvain Plasschaert, Schedular, Global and Dualistic Patterns of Income Taxation 30 (1988). See infra ch. 14 for a discussion of the distinction between a schedular system and a global system with a schedular definition.

¹⁷ See infra ch. 14, note 8.

¹⁸ See vol. 1, at 91.

¹⁹ In the United States, an additional factor has contributed to this tendency—namely, that under the federal structure while tax concepts are federally defined, corresponding civil law concepts are differently defined in different states, which are not even uniformly common law jurisdictions.—L.M. Similar considerations apply in Australia (also a federal state), Canada (a federal state, with both common and civil law systems), and to some extent even in the United Kingdom (which has two legal systems for private law—one applicable in Scotland and the other in the rest of the country). See also infra ch. 20, note 49.

²⁰ See FRA CGI § 1. The professional income category includes miscellaneous income: “sources of profits not included in another category of benefits or incomes.” Id. § 92.

²¹ See Guy Gest, France, in Ault et al., supra note 6, at 39. For a discussion of schedular and composite taxation, see infra ch. 14, sec. II.

²² See infra ch. 14, sec. IX(B).

²³ See vol. l, ch. 12.

²⁴ See Ault et al., supra note 6, at 198.

²⁵ See id. at 385.

²⁶ For a synopsis, see Plasschaert, supra note 16, at 32.

²⁷ See id. at 30-31.

²⁸ See id. at 17.

²⁹ See CHL IR §§ 52, 56(3), 63.

³⁰ This discussion of Argentina draws on Enrique Reig, Impuesto a las Ganancias 24-25, 37-40(1991).

³¹ See infra ch. 16, Appendix A.

³² See ARG IT § 2.

³³ See vol. 1, ch. l3.

³⁴ See Peter Byrne, The Business Assets Tax in Latin America—The End of the Beginning or the Beginning of the End? 15 Tax Notes Int’l 941 (Sept. 22, 1997); vol. 1, ch. 12, sec. III(C). Colombia has had a presumptive assets-based tax for some time. See McLure et al., The Taxation of Income from Business and Capital in Colombia 46–49, 140–44 (1990). The concept may have been borrowed from Italy. See infra note 47.

³⁵ Russian Federation Act N№ 1998-1, Act on Income Tax on Natural Persons, Dec. 7, 1991.

³⁶ For example, both Kazakhstan and Georgia did not tax capital gains of individuals before adopting tax codes in 1995 and 1997, respectively.

³⁷ See Act on Income Tax, supra note 35, § 13(1)(a).

³⁸ The concept of denying a deduction for excessive wages seems to have to do with a concern that managers of state-owned enterprises would pay excessive wages as an alternative to making profit distributions to the state.

³⁹ Kazakhstan adopted a comprehensive tax code in 1995, the Kyrgyz Republic in 1996, and Uzbekistan and Georgia in 1997. I worked on the codes for Kazakhstan and Georgia (the other two were modeled on the Kazakh code) and in my (biased) opinion, the Georgian code is the best of the lot at the time of writing. Even these relatively more modern codes respond to the stage of development of the tax systems of the countries concerned and will need to be upgraded in the future.

⁴⁰ DEU EStG § 2.

⁴¹ For example, Dutch law divides income into business income, employment income, investment income, periodical payments, and profit from the disposal of a substantial interest. See Gerrit te Spenke and A. Peter Lier, Taxation in the Netherlands 22 ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Introduction
• Chapter 14. Individual Income Tax
• Chapter 15. The Pay-as-You-Earn Tax on Wages
• Chapter 16. Taxation of Income from Business and Investment
• Chapter 17. Depreciation, Amortization, and Depletion
• Chapter 18. International Aspects of Income Tax
• Chapter 19. Taxation of Enterprises and Their Owners
• Chapter 20. Taxation of Corporate Reorganizations
• Chapter 21. Fiscal Transparency
• Chapter 22. Taxation of Investment Funds
• Chapter 23. Income Tax Incentives for Investment
• Comparative Tax Law Bibliography
• Bibliography of Tax Laws
• Index
• Footnotes