Tax Policy Assessment Challenges: The Case of the Slovenian Interest Tax Shield

• Published date: 01 July 2017
• Author: Tatjana Jovanović,Maja Klun
• Date: 01 July 2017
• DOI: http://doi.org/10.1002/jcaf.22279

© 2017 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22279

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Tax Policy Assessment Challenges:

The Case of the Slovenian

Interest Tax Shield

Tatjana Jovanovic´ and Maja Klun

INTRODUCTION

Globalization

is viewed as the

“increasing inter-

nationalisation of

markets for goods

and services, means

of production,

financial systems,

competition, cor-

porations, technol-

ogy and industries”

(Kumar & Quinn,

2012). Consequently,

the world’s economy

is facing increased

mobility of individu-

als, companies, and

financial transac-

tions. Businesses and

individuals enjoy a

greater supply of

various types of

goods and services.

Additionally, there

are several chances to

choose the location

for investments or

place for employment

and retirement. The

world’s globalization

affects the whole area

of economic policy,

having a strong influ-

ence on national

tax systems. From

the national taxa-

tion point of view,

globalization causes

mobility of tax bases

in individual sectors

of taxpayers and

corporations as well,

especially as far as

multinational compa-

nies are concerned.

Globalization,

also called inter-

national market

integration, affects

national government

fiscal policy, and

therefore the recent

policy debates focus

on international

fiscal competition.

The tax competi-

tion literature that is

most popular in this

research area high-

lights the phenomena

Globalization affects national government fiscal

policy; therefore, the recent policy debates focus

on international fiscal competition. The national

tax policies pay special attention to multinational

companies, which are highly mobile and able to

avoid taxes. The trend of tax rate cutting and tax

base broadening (“the race to the bottom”) means

that tax completion is one of the most important

topics in the professional public. There are two

main instruments to avoid the multinational com-

panies’ profit shifting; decreasing the corporate

tax rates or the implementation of anti-avoidance

rules. While tax policy implementation affects mul-

tiple stakeholders, a thorough, empirically tested

and publicly aligned impact assessment procedure

should be carried out. The main idea of this article

is to analyze the procedure of impact assessment

for tax policy in Slovenia, focusing mainly on the

example of the interest tax shield, verifying the

impact of the tax policy (thin capitalization rule)

implemented in 2005 and offering recommenda-

tions for future tax policy. The results revealed

that the Slovenian procedure for impact assess-

ment concerning tax policy is used to fulfill formal

compliance requirements. Such a declaratory and

theoretical level of usage cannot contribute to

effective results for tax policy. This turned out to

Refereed (Double-Blind

Peer Reviewed)