Taxation of International Transactions

Semestre Semestre 2
Crédits ECTS 5

Objectifs

Survey of the content of public procurement law. Understand the role of public procurement in international trade and the impact of the international and European legal framework.

Contenu

Study of the various trends in opening public procurement markets and their objectives. Overview of the EU procurement liberalized market. The students will also focus on the bilateral and multilateral international agreements being negotiated by the EU in order to gain access to foreign public procurement markets. The articulation with the WTO Government Procurement Agreement will be discussed. Indeed, the said agreement has entered into force on 6 April 2014 and is the only legally binding WTO agreement in the field of government procurement. Among others, the EU, Canada, Switzerland and the United States are part of the agreement. VAT - a tax also named GST in some countries - is relatively young. It has however widely spread over the world in more than 140 countries where it often accounts for one-fifth of the total tax revenues. VAT may even play a bigger role now that revenues from corporate income taxes, personal income taxes and social contributions are significantly decreasing further to the financial and economic crisis. Indeed, many companies pay little or no corporate income tax because losses can be carried forward. Personal income tax and social security contributions decrease as a result of freezes on salaries and increases in unemployment. VAT will suffer to some extent from reduced consumption but should comparatively be less affected. Furthermore, in countries that do not allow bank and financial institutions to recover input VAT on their purchases, VAT is one of the only taxes paid by the financial sector. Many countries already slightly increased their VAT rates in order to increase revenues on a short-term basis. Greece is of course one of the most striking example. In developing countries also, reforms broadening the VAT base by removing exemptions or multiple tax rates may significantly increase revenues, build their tax capacity and make them less dependent on foreign development aid. Why has the VAT been so popular? This can be explained by the mechanism of VAT. It allows raising revenues in a neutral and transparent manner. Businesses can normally recover VAT on their purchases of goods and services. Exports are normally exempt from VAT while allowing the recovery of the corresponding input tax. From a government perspective, the marginal cost of raising funds through VAT is generally lower than it would be if other taxes were employed. Furthermore, the VAT staged collection mechanism makes it relatively secure from serious fraud in a domestic market. From an economic point of view, VAT encourages savings and investments because it taxes consumption and not income. Recent OECD studies suggest that VAT is more pro-growth than an income or corporate tax. Many countries already implemented a shift from income taxes to VAT (New Zealand for instance) or from social contributions to VAT (Germany for instance). However, VAT is a sophisticated tax. Because it is a tax based on transactions and -unlike income taxes - does not apply on an allocation of profits between countries, complex rules determine how to tax crossborder transactions. There is normally only one place of taxation per transaction. However, when countries do not implement the same set of rules, this can lead to double-taxation or unintended nontaxation. Within the European Union, Directives are normally transcribed into national laws and this allows avoiding some discrepancies between the legislations of EU member states. However, outside the EU, there are no such rules. This is where the OECD has a role to play by developing International VAT/GST Guidelines. As a first step, the OECD is currently developing Guidelines for determining place of taxation rules for cross-border supplies of services or intangibles (see www.oecd.org/ctp/ct ). VAT is one of the highest issues on the agenda for businesses; and to deal with its complexity, many businesses already implemented VAT units within their tax departments. The ambition of this course is to provide students with an understanding of international VAT policy issues while providing them with the required knowledge to face practical issues. Participants should thus be made more familiar with a system that is not based on accounting concepts - unlike corporate income tax - but is transaction-based. At the end of the course, students should be able to identify practical issues faced by companies when doing business abroad.

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