Tax Optimization Schemes for Income Tax in Europe and Relevance for Businesses and Society

Purpose: The objective of this article is to analyse how tax optimization schemes for Corporate Income Tax (CIT) in the European Union may impact the societies. Emphasis is placed on how these phenomena were incorporated into the business activities of modern corporations, and how increasing its application and adoption. In addition, will be identified challenges that may be posed before tax authorities of EU Countries, as a consequences of increasing popularity of tax optimization schemes. Design/Methodology/Approach: This article formulates the following research problems: What are the tax optimization schemes for Income Tax in the European Union? What are the potential deficiencies and obstacles in EU CIT legislation of different policy approaches for addressing these schemes as challenges? Corresponding to this research problem the research hypothesis was formulated: The increasing popularity of tax optimization schemes in the field of CIT among international corporations has a negative impact on the state of public finances of European Union countries. Moreover these phenomena/trends are difficult to be controlled under the current legal regulations. The study employs a detailed analysis of existing scientific literature, standards and regulations related to taxes field. The analysed sources include books, financial statements and scientific articles aimed at understanding the theoretical foundations of tax regulations and tax schemes, as well as identifying challenges in this field. Findings: To avoid reducing public revenues, the European Union should strengthen and harmonise its actions in the field of tax avoidance, especially by large international corporations. In order to achieve this goal should be created an efficient European Union tax policy system. Practical Implications: The results of the study indicate negative, social and economic consequences for European countries of using tax optimization in the area of Corporate Income Tax, especially by large international corporations. The article describes only those optimization strategies, which construction have been recognized and examined, and which have been regulated to some extent. The author pointed out that it is not easy to regulate and solve problems of income tax optimizations, especially in the area of new technologies. In such cases it is difficult to clearly link income with the place of its generation, as in online services or Internet advertising. This area is extremely dynamic and law-making bodies and tax authorities still face many challenges to regulate these issues and persuade large corporations to participate in social costs of individual countries. Originality/Value: The article presents a comprehensive approach to the increasing phenomenon of tax optimizations with particular emphasis on its impact on contemporary business organizations and societies. It discusses key problems, methods and potential recommendations in order to reduce the problem