Governance, Policies and Legal Conditions for Access to
Market through Extended and Dynamic Clustering of SMEs
Taxation Issues and SME
Clustering, Lessons for
Policymakers
The Substantial and Procedural Aspects of SME
Clustering and Taxation
Davide M. Parrilli
ICRI – K.U. Leuven – IBBT
[email protected]
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Agenda
• Starting points and overall
considerations;
• Substantial aspects of taxation;
• Procedural aspects of taxation;
• Conclusions.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Starting points (I)
Taxation is perceived to be one of the main
barriers to business. Alternatives:
•No taxation at all: not feasible from the
social and political point of view;
•Taxation as an enabler: competitive
advantages for a country in terms of tax
rates and fiscal administration.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Starting points (II)
It is time that policymakers focus their
attention to SMEs and clusters and not
only to MNEs.
Provided that SME clusters must be
flexible and international as MNEs,
many considerations applicable to
MNEs are valid also for clusters.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (I)
Corporate tax
At company level there is surely
a strong interaction between the
performance of the business and
the applicable corporate tax rate.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (II)
Contradictions (empirical experience vs.
theory)
1. Countries with a high corporate tax rate
often have more companies and they
perform better than others with a much
lower rate: taxation does not explain all but
it has been proved that rates of business
investment are inversely related to effective
tax rates.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (III)
2. It is very difficult to assess whether
or not a low tax rate is an enabler to
clustering and available data show
controversial findings: Ireland (low
taxation, low clustering) vs. Denmark,
the Netherlands, Italy (higher taxation,
high clustering).
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (IV)
Conclusions:
1. A moderate tax rate and the
implementation of corporateoriented policies are potential
enablers to clustering: e.g. the
Netherlands, Iceland, Luxembourg.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (V)
2. The effect of lower tax rate on
clustering is only indirect: it has the
primary and direct effect to let firms
and companies grow up and as a
result, when they have reached a
certain level of maturity, they tend to
cooperate more or less formally.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (VI)
3. The creation of tax enablers for
companies is a good policy and it
can stimulate SME clustering: i.e.
reduction of corporate tax rate,
application of group taxation to
clusters, combination of taxes.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (VII)
Reduction of corporate tax rate: the
Netherlands.
From 1/1/2007 maximum corporate tax rate
from 29,6 % to 25,5 % for profits
exceeding € 60.000
+
Changes in the participation exemption
regime, patent and group interest boxes,
etc.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (VIII)
Application of group taxation to clusters: Italy
SME clusters (distretti produttivi) can be a single taxpayer:
application of the rules for groups: compensation of profits and
losses; the cluster as a single entity from the income taxation
point of view.
Problems and criticism:
•It does not help to select the best firms and exclude the others;
•It is an indirect state aid prohibited under EC law;
•It is only an experiment, lack of political willingness to
implement the reform;
•Constitutional issues: balance between powers of the central
government and of the regions.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Substantial aspects (IX)
Combining taxes:
effect of reducing the administrative
costs related to paying taxes, but it does
not necessarily mean decreasing the
overall burden of taxation for firms and
companies.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Procedural aspects (I)
Proceedings for paying taxes:
what the policymaker should do:
• On-line filing mechanism: better
service, less corruption;
• Simplification of the
proceedings: less costs, less
litigation.
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
Procedural aspects (II)
On-line filing mechanisms:
paying taxes and contributions
through a web portal
+
possibility to send documents on
electronic format
(e.g. HM Revenue & Customs
Services in the UK).
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)
THANK YOU!
Leuven,
Brussels,
October4/7/2008
19, 2007
Davide
M. Parrilli - ICRI
(Name
of Presenter/Organisation)
Effort
workshop
WPx:
(WP Title)