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The notion of economic value in taxation - A comparison of valuation methods

Linder, Martin LU (2020) JURM02 20201
Faculty of Law
Department of Law
Abstract
The concept of economic value is not well explored nor consistently applied in the field of taxation. Different systems of taxation assess value from their own perspectives and with their own interests in mind resulting in situations where different values for taxation are determined for the same transaction. Efforts have been made to harmonise valuations between customs and transfer pricing. This has however met resistance by the Court of Justice of the European Union through their judgment in the recent Hamamatsu case.

Using a comparative, functional method this thesis examines the valuation methodologies of customs, transfer pricing and VAT. Focus is on the degree and method of harmonisation within the systems and how their... (More)
The concept of economic value is not well explored nor consistently applied in the field of taxation. Different systems of taxation assess value from their own perspectives and with their own interests in mind resulting in situations where different values for taxation are determined for the same transaction. Efforts have been made to harmonise valuations between customs and transfer pricing. This has however met resistance by the Court of Justice of the European Union through their judgment in the recent Hamamatsu case.

Using a comparative, functional method this thesis examines the valuation methodologies of customs, transfer pricing and VAT. Focus is on the degree and method of harmonisation within the systems and how their underlying principles of value guide valuations of cross-border transactions between related parties. The Hamamatsu judgment serves as a basis for discussion on the practical implications of their divergent purposes and methodology.
Notable differences exist in the level of harmonisation between the areas. While customs matters are extensively harmonised, direct taxation is almost exclusively governed by the Member States. As for value added tax the principle of neutrality necessitates harmonisation of the taxable amount although this is subject to derogations for the purpose of combatting tax evasion.
Where customs and value added tax to a large extent rely on the positive value as decided by the parties, the object of transfer pricing is establishing conformance to a notional value. Differences exist also as regards from which perspective value is determined as customs focus on the value of a good on the Union market while transfer pricing seeks to establish appropriate divison of the use value of the good. Division is apparent also from a temporal perspective. Where customs valuation is determined at the time of importation, transfer pricing valuations may be retroactively adjusted based on subsequent profit margins. The effect on value added tax in this regard is uncertain and has been subject to debate.

The opportunities for legislative harmonisation of valuation methods appear slim though increased cooperation in data collection does seem feasible. Improved horisontal harmonisation of customs and value added tax valuations would also bring benefits to international traders. (Less)
Abstract (Swedish)
Konceptet ekonomiskt värde är vare sig väl utforskat eller konsekvent tillämpat inom det skatterättsliga området. Olika skattesystem bedömer värde utifrån sina egna perspektiv och intressen vilket skapar situationer där olika skattemässiga värden bestäms för samma transaktion. Ansträngningar har gjorts för att harmonisera värderingar mellan tull och internprissättning. Dessa har dock stött på motstånd genom domen från Europeiska unionens domstol i det nyligen avgjorda Hamamatsu-målet.

Utifrån en funktionell komparativ metod utforskar denna uppsats värderingsmetodologin inom tull, internprissättning och moms. Uppsatsen fokuserar på nivån av och metoderna för harmonisering inom systemen samt hur deras bakomliggande principer kring värde... (More)
Konceptet ekonomiskt värde är vare sig väl utforskat eller konsekvent tillämpat inom det skatterättsliga området. Olika skattesystem bedömer värde utifrån sina egna perspektiv och intressen vilket skapar situationer där olika skattemässiga värden bestäms för samma transaktion. Ansträngningar har gjorts för att harmonisera värderingar mellan tull och internprissättning. Dessa har dock stött på motstånd genom domen från Europeiska unionens domstol i det nyligen avgjorda Hamamatsu-målet.

Utifrån en funktionell komparativ metod utforskar denna uppsats värderingsmetodologin inom tull, internprissättning och moms. Uppsatsen fokuserar på nivån av och metoderna för harmonisering inom systemen samt hur deras bakomliggande principer kring värde styr deras värderingar av gränsöverskridande transaktioner mellan parter i intressegemenskap. Hamamatsu-målet används som utgångspunkt för diskussion kring de praktiska implikationerna av deras skiftande syften och metoder.

Det finns noterbara skillnader vad gäller nivån av harmonisering inom respektive område. Emedan tullärenden är föremål för långtgående harmonisering står direkt beskattning närmast uteslutande under medlemsstaternas kontroll. Vad gäller moms fordrar neutralitetsprincipen harmonisering av beskattningsunderlaget. Undantag ges dock utifrån syftet att motverka undandragande från skatt.
Inom tull och moms förlitas i stor utsträckning på det positiva värdet såsom bestämt mellan parterna medan syftet med internprissättning är att finna överensstämmelse med ett teoretisk belopp. Skillnader finns också ifråga om ur vilket perspektiv värdet bestäms där tullvärdering fokus på en varas värde på unionsmarknaden medan internprissättning eftersträvar en lämplig fördelning utifrån varans bruksvärde. Skillnader finns också från ett temporalt perspektiv. Tullvärdet bestäms vid tiden för import medan värderingar relaterade till internprissättning kan justeras i efterhand baserat på resulterande vinstmarginaler. Vilken effekt detta får i momshänseende är osäkert och har varit föremål för diskussion.

Möjligheterna att åstadkommande harmoniserade regelverk vad gäller värderingsmetoder tycks starkt begränsade. Utökat samarbete vad gäller insamling av data tycks dock uppnåeligt. En utökad horisontell harmonisering av värderingar gällande tull och moms hade också varit till nytta för den internationella handeln. (Less)
Please use this url to cite or link to this publication:
author
Linder, Martin LU
supervisor
organization
course
JURM02 20201
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
EU law, Tax law, Transfer pricing, Customs law, VAT, Valuation methods
language
English
id
9010232
date added to LUP
2020-06-15 09:26:06
date last changed
2020-06-15 09:26:06
@misc{9010232,
  abstract     = {{The concept of economic value is not well explored nor consistently applied in the field of taxation. Different systems of taxation assess value from their own perspectives and with their own interests in mind resulting in situations where different values for taxation are determined for the same transaction. Efforts have been made to harmonise valuations between customs and transfer pricing. This has however met resistance by the Court of Justice of the European Union through their judgment in the recent Hamamatsu case.

Using a comparative, functional method this thesis examines the valuation methodologies of customs, transfer pricing and VAT. Focus is on the degree and method of harmonisation within the systems and how their underlying principles of value guide valuations of cross-border transactions between related parties. The Hamamatsu judgment serves as a basis for discussion on the practical implications of their divergent purposes and methodology.
Notable differences exist in the level of harmonisation between the areas. While customs matters are extensively harmonised, direct taxation is almost exclusively governed by the Member States. As for value added tax the principle of neutrality necessitates harmonisation of the taxable amount although this is subject to derogations for the purpose of combatting tax evasion. 
Where customs and value added tax to a large extent rely on the positive value as decided by the parties, the object of transfer pricing is establishing conformance to a notional value. Differences exist also as regards from which perspective value is determined as customs focus on the value of a good on the Union market while transfer pricing seeks to establish appropriate divison of the use value of the good. Division is apparent also from a temporal perspective. Where customs valuation is determined at the time of importation, transfer pricing valuations may be retroactively adjusted based on subsequent profit margins. The effect on value added tax in this regard is uncertain and has been subject to debate.
 
The opportunities for legislative harmonisation of valuation methods appear slim though increased cooperation in data collection does seem feasible. Improved horisontal harmonisation of customs and value added tax valuations would also bring benefits to international traders.}},
  author       = {{Linder, Martin}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The notion of economic value in taxation - A comparison of valuation methods}},
  year         = {{2020}},
}