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Taxation And Forms Of Organising Business Activities

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  • Srđan Đinđić

Abstract

This paper takes sample tax regimes and tendencies from the developed countries in the EU-15 and the USA, and uses them to analyse the influence of taxation on the choice of organisational form of profit-oriented entities in Serbia. In order to understand how the procedure of taxation affects the sphere of business decision-making it is necessary to focus on the tax status of business losses and valorisation and the effects of the double taxation of dividends. The rule of successive deduction of losses ensures the fiscally transparent entity receives a tax saving in the form of a reduction of the present value of the total paid tax. Meanwhile the corporation is handicapped because it postpones loss deductions, that is, it postpones tax saving, which directly influences the level of the present value of saved tax. The global trend of gradually moving from the classical system towards shareholder relief provision, above all in the form of a reduced withholding tax rate on dividends, has two opposing features: it simplifies the tax procedure while neglecting the distributional aims (consequences) of taxation. The analysis of a particular practical example from the Serbian tax context enables us to draw a conclusion in relation to the relative taxes paid by entrepreneurs versus enterprises. The developed countries favour fiscally transparent entities, whereas Serbia allocates tax privileges to enterprises.

Suggested Citation

  • Srđan Đinđić, 2013. "Taxation And Forms Of Organising Business Activities," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(196), pages 133-156, January –.
  • Handle: RePEc:beo:journl:v:58:y:2013:i:196:p:133-156
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    File URL: http://ea.ekof.bg.ac.rs/pdf/196/05.pdf
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    References listed on IDEAS

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    1. Sijbren Cnossen, 1996. "Company Taxes in the European Union: Criteria and Options for Reform," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 67-97, November.
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    3. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    4. Messere, Ken & de Kam, Flip & Heady, Christopher, 2003. "Tax Policy: Theory and Practice in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199241484.
    5. Alan Auerbach & Michael P Devereux & Helen Simpson, 2007. "Taxing corporate income," Working Papers 0705, Oxford University Centre for Business Taxation.
    6. James Poterba, 2004. "Taxation and Corporate Payout Policy," American Economic Review, American Economic Association, vol. 94(2), pages 171-175, May.
    7. European Commission, 2013. "Taxation trends in the European Union: 2013 edition," Taxation trends 2013, Directorate General Taxation and Customs Union, European Commission.
    8. European Commission, 2011. "Taxation trends in the European Union: 2011 edition," Taxation trends 2011, Directorate General Taxation and Customs Union, European Commission.
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    More about this item

    Keywords

    personal income tax; corporate income tax; forms of organising business; economic behaviour; tax saving; developed countries; Serbia;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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