The impact of development of contractual relationship’s complex models of TNCs on country’s indirect taxation

DOI

10.2991/ispcbc-19.2019.107How to use a DOI?

Keywords

contractual relationship, efficiency, inter-company relations, fiscal justice, institute, royalty, VAT

Abstract

The problem of contractual relationship’s development firstly received a scientific basis in the process of studying the theory of social contract. Keynesian economists gave much greater importance to contractual relationship. Their main idea was to ensure that market itself is not able to create an economic equilibrium which provides full employment and increases a propensity for saving a portion of income. While examining the important question of incomplete contracts, D. Kreps found that the inevitability of such a state raises the question of the importance and the need to adapt to rapid changes in the external environment. Thus, it becomes obvious that under the terms of a concluded contract it is necessary to create an additional institution of guarantees. According to new institutional economics, the main mission of this institution is to provide protection against opportunistic behavior. So having traced the formation of contractual relationship from the simplest to the more complex forms, it is advisable to confirm in practice that the more complex the model of contractual relationship, the more difficult issues it raises (the case of Oriflame is used as an example). The subject matter of the sub-franchise agreement is granting for a fee the right to use a complex of exclusive rights of an owner to such objects of intellectual property as a trade designation (“Oriflame”), an international registration of ORIFLAME trademarks and protected commercial information on conducting business in the sales records’ system. Thus, the classic Russian-Netherlands-Luxembourg scheme based on the application of mutual agreements to avoid double taxation (henceforth DTT) is evident. This scheme is used by many TNCs that conduct their activities around the world including Russia. So, the case of Oriflame can be considered as an illustrative example of the so-called “fiscal justice” that has dominated in tax disputes. To prove this, it is enough to observe the withdrawal of money through offshore companies, so significant evidence is not needed. On the one hand, the use of this scheme for tax evasion is obvious. On the other hand, the validity and legality of the scheme used by tax authorities to analyze these legal relations is also highly controversial.

Copyright

© 2019, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Elena Sidorova
PY  - 2019/08
DA  - 2019/08
TI  - The impact of development of contractual relationship’s complex models of TNCs on country’s indirect taxation
BT  - Proceedings of the International Scientific-Practical Conference “Business Cooperation as a Resource of Sustainable Economic Development and Investment Attraction” (ISPCBC 2019)
PB  - Atlantis Press
SP  - 198
EP  - 201
SN  - 2352-5428
UR  - https://doi.org/10.2991/ispcbc-19.2019.107
DO  - 10.2991/ispcbc-19.2019.107
ID  - Sidorova2019/08
ER  -