My doctoral dissertation concerns the neutrality of value-added tax and the use of economic arguments. I am most interested in the use of economic arguments in the context of decision making. How we can use the arguments and if we use them, what is the relevance of them in the decision-making process? The dissertation focuses on the reduced rates (tax subsidy), which is why I am also interested in the state aid questions.
European Union law is based on the idea that the legal differences between the member states and their juridical system should not affect the competition or placing in the union. This leads to the question, why is it essential to understand the concept of neutrality? Most often we focus on the neutrality of competition when neutrality is a concept that includes several aspects. We can talk about the neutrality of consumption or neutrality between industries – the list of different angles might be too long to list here so I leave that to the reader´s own curiosity. A neutral tax will contribute to efficiency – how? It ensures optimal allocation of the means of production is achieved. And now, finally, we get to the question presented in the headline.
Neutrality in the tax system is typically considered to be one of the requirements in keeping the competition or the operation of the markets from becoming distorted. What is to be remembered is that taxation has other, non-fiscal purposes like advance business, employment, regional, revenue-sharing, or environmental policies. These purposes can be advanced by tax reliefs, which may lead to have a guiding effect on society. So, the tampons and other women’s hygiene products are taxed by the general tax rate 24 % in Finland – there is no loss of income to the state but there has been discussion should it, should the state provide the users of those products a relief and reduce the tax rate down to 10 %, like it does for some products, for example, medicine. If that kind of change of regulation were to happen, we would encounter questions: what are the competitive products that should be included in the regulation – this is not always clear. This is one of the examples of why we need more systematization of the legal praxis.
The blog post is a part of social media course to shed some light on the area of study I am interested in.
University of Vaasa