This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Back to contents

Taxes and Taxation

Reference:

Gileva A.R. Foreign experience of taxation of financial investments of individuals // Taxes and Taxation. 2022. № 3. P. 1-15. DOI: 10.7256/2454-065X.2022.3.38119 URL: https://en.nbpublish.com/library_read_article.php?id=38119

Foreign experience of taxation of financial investments of individuals

Gileva Alena Romanovna

Student, Department of Taxes and Tax Administration, Financial University under the Government of the Russian Federation

127083, Russia, g. Moscow, ul. Verkhnyaya Maslovka, 15, of. Rossiya, Moskva, Bol'shaya Andron'evskaya ulitsa, 22

alyona.gilyova@mail.ru

DOI:

10.7256/2454-065X.2022.3.38119

Received:

21-05-2022

Published:

29-05-2022

Abstract: The subject of research is foreign experience of taxation of financial assets of individuals. Annually investment activity of individuals gains momentum. That is why tax legislation should be adaptable and effective. With the as high as possible tax revenue individual taxation should not prevent the investment activity of individuals. For that government should create comfortable conditions for investment activity of individuals. In this work were reviewed the basic principles of calculation and payment of personal taxes in foreign countries. The methodology of the research includes analysis, synthesis, deduction and modeling. Reviewed the main advantages of foreign personal income taxation of investment activity, there was achieved the main goal – analysis of tax aspects which are potentially could be used in Russian tax legislation. Among the most effective ways of improvement of personal taxation of investment activity are expansion of criteria of tax residency, implementation of preferential tax rates for investments and establishment of capital gains taxation. Earlier the issue of foreign experience of personal income taxation was raised in articles of such authors as U.V. Malkova, K.I. Gizzatullina, A.G. Garifullina, E.T. Anisimova. Furthermore, the uniqueness of this article consists of detailed analysis of personal income taxation of financial investments of individuals.

Keywords:

tax residency, income tax, international taxation, financial investments, tax base, tax incentives, tax allowance, withholding tax, tax stimulation, investment appeal
This article is automatically translated. You can find original text of the article here.

Thus, it can be concluded that the procedure for taxation of investment activity varies significantly between countries. Rates, benefits, and tax bases are adapted to the specific economic goals of a particular country. According to the order of taxation of financial assets, it can be concluded whether the country is aimed at maintaining investment activity at the existing level or at stimulating its further growth and attractiveness. Also, the peculiarities of taxation of financial assets allow us to judge the implementation of the principle of fairness of the tax system in various countries. The analysis of foreign taxation experience makes it possible to identify common features between tax systems, identify differences, as well as assess advantages and disadvantages. Based on the tax systems considered, the Russian tax legislation could adopt part of the foreign experience by expanding the concept of a tax resident of the Russian Federation. This term can be expanded by criteria such as the presence of a domicile or a center of vital interests. The current understanding of the tax resident of Russia is not adapted to modern reality and limits the number of persons who fall under this criterion. Also, personal income tax can be improved by introducing elements of capital gains tax into it, which allows increasing the efficiency of income taxation of transactions on the disposal of financial assets for both the state and private investors. In addition, in order to stimulate investment activity among the population, the provisions of Chapter 23 of the Tax Code of the Russian Federation may include certain benefits for this type of income, for example, the introduction of a reduced personal income tax rate for investing in national companies. Thus, despite the ongoing process of improving tax legislation, legislative bodies still have something to learn from the foreign experience of taxation of investment activities of individuals.

References

1. Malkova, U.V. (2018). Foreign experience of personal taxation and opportunities of its implementation in Russia. Taxes and taxation, 10, 49-66. doi: 10.7256/2454-065X.2018.10.28544. Retrieved from https://nbpublish.com/library_read_article.php?id=28544 (accessed 04/10/2022)
2. Gizzatullina, K.I., Garifullina, A.G. (2018). System of personal income taxation in the Russian Federation in comparison with other countries: problems and prospect. The Bulletin of modern research, 11.6(26), 147-150. Edn: VPQMNT. (accessed 04/10/2022)
3. Anisimova, E.T., Agapova, A.A. (2018). Experience of personal income taxation in foreign countries. In E.U. Vlasova (Eds.), Education, science and business – indicators of development of digital economy: The collection of scientific works based on materials of International scientific-practical conference of young scientists of Plekhanov Russian University of Economics dated April 25, 2018 (pp. 223-227). Moscow: Auditor.
4. Research. FTSE Equity Country Classification Process. September 2021. Retrieved from https://research.ftserussell.com/products/downloads/FTSE_Equity_Country_Classification_Paper.pdf?_ga=2.140757938.1827811411.1631013797-646606433.1617273360 (accessed 04/10/2022)
5. IBFD. Romania-Individual Taxation-Country Tax Guides. Retrieved from https://ezpro.fa.ru:3088/#/doc?url=/collections/ita/html/ita_ro_s_001.html (accessed 04/10/2022) – Subscription access mode
6. "Tax Code of the Russian Federation (Part Two)" dated August 5, 2000 N 117-FZ (as amended on 03/26/2022). Chapter 23 Personal income tax. Retrieved from http://www.consultant.ru/document/cons_doc_LAW_28165/6e508f67e051bccbe249e6f0aebb2fa31f61a111/ (accessed 04/11/2022)
7. Romania – Income tax – KPMG Global. Retrieved from https://home.kpmg/xx/en/home/insights/2021/06/romania-taxation-of-international-executives.print.html (accessed 04/17/2022)
8. IBFD. United Arab Emirates-Individual Taxation-Country Tax Guides. Retrieved from https://ezpro.fa.ru:3088/#/doc?url=/collections/gthb/html/gthb_ae_s_001.html (accessed 04/11/2022) – Subscription access mode
9. Government of United Kingdom – Income tax. Retrieved from https://www.gov.uk/browse/tax/income-tax (accessed 04/11/2022)
10. IBFD. United Kingdom-Individual Taxation-Country Tax Guides. Retrieved from https://ezpro.fa.ru:3088/#/doc?url=/linkresolver/static/ita_uk (accessed 04/11/2022) – Subscription access mode
11. IBFD. Serbia-Individual Taxation-Country Tax Guides. Retrieved from https://ezpro.fa.ru:3088/#/doc?url=/collections/ita/html/ita_rs_s_001.html%23ita_rs_s_1. (accessed 01/10/2022) – Subscription access mode

Peer Review

Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
The list of publisher reviewers can be found here.

A REVIEW of an article on the topic "Foreign experience of taxation of financial investments of individuals". The subject of the study. The article proposed for review is devoted to topical issues of foreign experience "... taxation of financial investments of individuals". The author has chosen a special subject of research: the proposed issues are investigated from the point of view of tax law and the law of foreign countries, while the author notes that "Taxation of financial assets of individuals plays a key role in the development of investment activity among private investors." The main issues studied are "... taxation of financial investments in foreign countries ...", while the author refers "to the rating of countries based on the development of the stock market", and the tax legislation of some countries relevant to the purpose of the study. A certain amount of scientific literature on the stated problems is also studied and summarized. At the same time, the author notes that "... the taxation procedure in a country belonging to a similar category with Russia. The less successful developing countries, in particular, include Romania. The tax legislation of this country in relation to financial investments of individuals provides for a number of features." Research methodology. The purpose of the study is determined by the title and content of the work "... analysis of foreign experience in taxation of investments of individuals, as well as the identification of individual elements of taxation that could be adapted to Russian tax legislation in order to improve the mechanism of income taxation." It can be designated as the consideration and resolution of certain problematic aspects related to the above-mentioned issues and the use of certain experience (which is also missing in the article). Based on the set goals and objectives, the author has chosen a certain methodological basis for the study. In particular, the author uses a set of general scientific, "deduction and modeling", special legal methods of cognition. In particular, the methods of analysis and synthesis made it possible to summarize and separate the conclusions of various approaches to the proposed topic, as well as draw some conclusions from the materials of the opponents. The most important role was played by special legal methods. In particular, the author used a formal legal method, which allowed for the analysis and interpretation of the norms of the current legislation of both Russia and some foreign countries - Romania, Great Britain, etc. Certain questions are raised, for example, "... the amount of expenses that reduce the tax base should be correlated with actual changes in the market and with the price for which an investor would currently purchase similar securities ...", to which the author finds answers. In particular, the following conclusions are drawn: "... the concept of taxation of income from the sale of financial assets is fundamentally different from the taxation procedure for similar income in the Russian Federation, regulated by Chapter 23 of the Tax Code of the Russian Federation.[6] Romanian legislation provides for the possibility of reducing income from the sale of assets by their actual value at the present time ..." etc. Thus, the methodology chosen by the author is fully adequate to the purpose of the article, allows you to study certain aspects of the topic. The relevance of the stated issues is beyond doubt. This topic is one of the most important in Russia, from a legal point of view, the work proposed by the author can be considered relevant, namely, he notes that "An increasing number of people do not bind themselves to a certain country, but travel and change their actual location while working at the same enterprise. Such a dislocation during the year may complicate the principle of determining tax residency based only on the number of days actually spent in Russia." At the same time, the current situation with the isolation of Russia and the attitude towards "Russian capital" abroad is practically not taken into account. The author also provides recommendations and proposals for amendments to the Tax Code of the Russian Federation: "... Russian tax legislation could adopt part of the foreign experience by expanding the concept of a tax resident of the Russian Federation. This term can be expanded by criteria such as the presence of a domicile or a center of vital interests ... in order to stimulate investment activity among the population, the provisions of Chapter 23 of the Tax Code of the Russian Federation may include certain benefits for this type of income, for example, the introduction of a reduced personal income tax rate for investing in national companies." Thus, scientific research in the proposed field is only to be welcomed. Scientific novelty. The scientific novelty of the proposed article is beyond doubt. It is expressed in the specific scientific conclusions of the author. Among them, for example, is this: "According to the order of taxation of financial assets, it can be concluded whether the country is aimed at maintaining investment activity at the existing level or at stimulating its further growth and attractiveness. Also, the peculiarities of taxation of financial assets allow us to judge the implementation of the principle of fairness of the tax system in various countries." And as you can see, these and other "theoretical" conclusions ("... the understanding of a Russian tax resident is not adapted to modern reality and limits the range of persons who fall under this criterion. Personal income tax can also be improved by introducing elements of capital gains tax into it, which makes it possible to increase the efficiency of income taxation of transactions on the disposal of financial assets for both the state and private investors") can be used in further scientific research. Thus, the materials of the article as presented may be of some interest to the scientific community in terms of contribution to the development of science. Style, structure, content. The subject of the article corresponds to the specialization of the journal "Taxes and Taxation", as it is devoted to topical issues of foreign experience "... taxation of financial investments of individuals". The article contains an analysis of the opponents' scientific works, so the author notes that this question has already been raised, but in a different way. The content of the article corresponds to the title, as the author considered the stated problems and achieved the goal of his research. The quality of the presentation of the study and its results should be recognized as improved. The subject, tasks, methodology, results of legal research, and scientific novelty directly follow from the text of the article. The design of the work generally meets the requirements for this kind of work. No significant violations of these requirements were found. Bibliography. The quality of the literature used should be highly appreciated, mainly the foreign legislation of countries (Romania, Serbia) that do not always fall into the research materials of other authors. Thus, the works of the above authors correspond to the research topic, have a sign of sufficiency, and contribute to the disclosure of certain aspects of the topic. Appeal to opponents. The author conducted a serious analysis of the current state of the problem under study. The author describes different points of view on the problem, tries to argue a more correct position in his opinion, and offers solutions to individual problems. Conclusions, the interest of the readership. The conclusions are logical, concrete, proven, and they are obtained using a generally accepted methodology. The article in this form may be of interest to the readership in terms of the systematic positions of the author in relation to the issues stated in the article. Based on the above, summing up all the positive and negative sides of the article, I recommend "publishing".

Journals

Books

Foreign experience of taxation of financial investments of individuals