|Abstract: ||The paper aims to establish whether the special economic zone taxation regime in the EU is considered to be a harmful taxation practice. For this purpose, I will discuss below the notion of harmful tax competition and the regulations introduced by the OECD and the EU.
This thesis seeks to analyze the problem and determine why it exists regarding the special economic zone taxation regimes in the EU in the context of harmful taxation practice. To accomplish this, the following tasks are completed:
A) determine the scope and meaning of harmful taxation and SEZ - Tax competition is a process when states seek to entice capital or businesses by decreasing taxes on capital. It can be characterized as enhancing the relative competitive position of one state against other states by diminishing tax burden. Also, when a business moves its capital or labor force to the low-tax system country. The existing tax competition is created by the fierce rivalry between states. It may jeopardize tax income of the EU Members with higher fiscal duties. Tax competition is harmful when it impedes the ability of countries to pursue policies that they would have adopted in the absence of competition;
B) analyze the historical development of the concept of the SEZ and relevant EU regulations - The first models of the current SEZs were established long time ago. The historical development illustrates „that in all times SEZs were characterized by such an overall feature as special customs regime.“ Economic representatives, taxpayers, and member countries, in general, have obligatory incorporating laws, which are created by the EC Treaty and a wide range of obligatory secondary codification acts, e.g., the EC Treaty establishing the fundamental freedoms, the EC directives on tax issues and Code of Conduct, which set up the borders to the fiscal and economic characters of the Member States. Despite the legally non-binding character, the code has an outstanding success index in tackling various harmful tax practices through the years;
C) analyze research studies regarding the SEZ and harmful taxation practice - SEZ is a particular geographical area, which sets up the special privileged foreign custom investments, monetary, financial rules. A particular region in a state that is subordinate to a distinctive economic ruling that different from other parts of the same country. Main purposes and tasks were achieved through the special economic and administrative privileged regime over the territory of the economic zone. The OECD is one of the main institutions which already has impressive experience and reputation in the field of harmful tax competition. It produces statistical data and analyses, financial reports, and predictions on the prospect of financial sustainability around the world. One of the main characteristics of the organization is to identify and tackle corruption and diverse fiscal wrongdoing, with the aim of limiting harmful tax competition.
D) examine the correspondence among SEZ taxation regimes in the EU and harmful taxation. Rapid scientific and technological development of the countries resulted in a new type of special economic zone - science and implementation zones. Largely due to the EU regulations, in most Western European countries manufacturing and production is rather restricted, and only packing/re-packing and warehousing is allowed. Effective tax systems are crucial for development. Obviously, they provide to the supply of public goods, to state building and good governance. Taxation strategies assisting the commercial, entrepreneurial operations, foreign partners, and attracting foreign investments with modern know-how technologies. In general, developing states experience high tax losses as a result of their economic structure, incompetent management, and inefficient taxation strategies. The EU continually tries to improve the regulations with the participation of its Members to balance the harmful and competitive tax regime and make it even fairer.
Historical research method will be used to review the development of the concept of Special Economic Zone and Harmful Tax Competition. Analytical research method is used to analyze the case law, legislative acts and works of other researchers. Instead of traditional legal analysis, the paper also uses a socio-legal method, in order to present the wider perspective of the subject and draw subsequent conclusions.
After having accomplished all the objectives of the thesis, it was possible to conclude that the special economic zone taxation regime in the EU is considered to be a harmful taxation practice.|