sou · H2B340 · 2014-06-12 00:00:00 — Än viktigare att ha i åtanke är det faktum att beräkningen ovan är en rent statisk kalkyl. Detta innebär att kalkylen inte beaktar de statsfinansiella effekterna av de skatteeffektiva och mer incitaments- skapande optionsprogram som blir möjliga under de föreslagna reglerna. Med andra ord bortser kalkylen helt ifrån de förväntade statsfinansiella effekterna av den positiva beteendepåverkan som är själva motivationen till varför de införs. Oräkneliga politiker, opinionsbildare och intressegruppsföreträdare har ställt sig frågan: Hur kan vårt land eller vår region bli mer som ? De svar som forskningen ger på denna fråga sammanfattas väl av (2009). är solklar på en punkt: politiken har en avgörande betydelse genom att säker- ställa bra spelregler. Det måste vara privatekonomiskt lönsamt för individer med värdefull kunskap och redan välbetalda jobb att pröva på nyföretagande, lönsamt för annan nyckelpersonal att redan innan framgången är säkerställd gå in i företaget och lönsamt för kompetenta kapitalister att stödja investeringen. Politikens huvuduppgift blir således att kratta manegen. Det är med andra ord villiga entreprenörers efterfrågan på risk- kapital snarare än utbudet av riskkapital som är den främsta flask- halsen (Gompers och 1998). Finansiering av entreprenör- iella företag utgör endast en bråkdel av det samlade riskvilliga kapitalet i ekonomin. Därför är ökat utbud av kapital i sig inte vik- tigt för att främja innovativt entreprenörskap. Det handlar om att skapa förutsättningar för att utbudet av redan existerande riskvilligt kapital ska möta efterfrågan från entreprenörer, vilka är flaskhalsen. Skattelagstiftningen bör inte omöjliggöra de kontrakts- lösningar som vuxit fram för att minska principal–agent-problemen i en bransch med betydande transaktionskostnader. att det är viktigare med rimligare beskattning av personaloptioner och kapitalvinster vid aktieförsäljningar i onoterade bolag än med riskkapitalavdrag eller att offentliga medel via fondbildningar öron- märks för investeringar i entreprenörsföretag. Vidare bör generella åtgärder förstärka de strukturer (branscher, klusterbildningar, kontraktsformer) som uppstått spontant på mark- naden, ofta som resultatet av en lång process av lärande och experi- ment. De lösningar som utvecklats organiskt på detta sätt bör vägleda även de offentliga insatserna. Det är viktigt att offentliga insatser inte tränger undan privata finansiärer eller för över resurser till entreprenörsföretag av låg kvalitet som saknar förutsättningar att attrahera privata finansiärer. Att få ett nystartat innovationsföretag att växa är en komplex uppgift. Det kräver att flera slags aktörer med olika intressen sam- arbetar i en svårnavigerad ekonomisk terräng. Lösningar för att hantera dessa transaktionskostnader har utvecklats spontant i fram- för allt . Optioner till entreprenörer och andra nyckel- medarbetare har blivit en central komponent i detta. De möjliggör lägre lönekostnad för att tidigt knyta till sig duktiga grundare och nyckelpersonal. Optioner ger också investerare möjlighet att gradvis ta ifrån grundaren kontrollen om företaget underpresterar. Detta som entreprenören belönas med finansiell avkastning och kontroll (vilket för många är viktigare) över sitt företag då sats- ningen blir framgångsrik. Aktieoptioner kan därför erbjuda en effektiv lösning på reella transaktionsproblem i företags tidiga utvecklingsskeden. I har användningen av optionsinstrumentet för detta syfte förhindrats av skattelagstiftningen, vilket ger en hög – i praktiken prohibitiv – beskattning av avkastningen på sådana optioner. Det är inte osannolikt att de svenska skattereglerna har hämmat entrepren- örskap i , och bidragit till att driva över riskkapital till uppköp av mogna företag i stället för till experiment med nya företag. Entre- prenörssektorn är synnerligen viktig för innovation och förnyelse men förhållandevis obetydlig rent finansiellt, vilket innebär att skatteintäkterna i fråga är näst intill försumbara i en riktad reform. En reformering av skattebehandlingen av personaloptioner vore därför ett både billigt och effektivt sätt att förbättra klimatet för nya, snabbväxande företag i , ett mål som alla riksdagspartier ställer sig bakom. Vi föreslår därför att vinster på aktieoptioner och konvertibler knutna till anställningen bör beskattas som kapitalinkomst och heller inte beläggas med sociala avgifter. Hur hög skattesatsen bör vara är en öppen fråga, men då tilldelningen sker i onoterade bolag anser vi det rimligt att samma skattesats tillämpas som vid större kapital- vinster i 3:12-bolag, dvs. Ett räkneexempel indikerar att den statsfinansiella kostnaden för en sådan reform är låg, trots att kalkylen inte beaktar de förväntade positiva beteendeeffekterna. Med tanke på de låga kostnaderna för reformen skulle en beskatt- ning av personaloptionsvinsterna , vilket är den normala skattesatsen för kapitalvinster på onoterade aktier, kunna övervägas. Villkor om inlåsning (t.ex. ) bör krävas för att denna lägre skattesats ska vara tillämplig. I rapporten skissas också ett förslag till hur de nuvarande reglerna om förvärv av värdepapper respektive personaloptioner i inkomst- skattelagen skulle kunna förändras för att möjliggöra en effektiv användning av personaloptioner i entreprenörsdrivna innovations- företag även i . Enligt vår bedömning skulle en sådan för- ändring innebära en förbättring av villkoren för entreprenörskap och företagsbyggande inom framför allt den högteknologiska sektorn utan betydande inkomstbortfall för staten. Med de föreslagna begräns- ningsreglerna bedömer vi också att risken för missbruk och icke önskvärd användning av optionsinstrumentet är på en hanterbar nivå. (2002), The Free-Market Innovation : Analyzing the Growth Miracle of Capitalism. , och (2010), Employee Compensation in . Tillgängligt på SSRN: , och (2011), in . 26(4), 391–411. , och (2010), Match with Startup Founders?. Tillgängligt på SSRN: . , och . Sensoy (2011), Investor Abilities and Financial Contracting: Evidence from Venture Capital. 20(4), 477–502. , och . Gilson (1998), Venture Capital and the Structure of Capital Markets: Banks versus Stock Markets. 47(3), 243–277. Bolton, och (2005), Contract Theory. , MA: . Braunerhjelm, (1999), Venture capital, mångfald och tillväxt. Ekonomisk Debatt 27(4), 213–222. (2007), Specificity and the Macroeconomics of Restructuring. , MA: . , och (2012), Corporate Dividend and Capital Gains Taxation: A Comparison of the to Other Developed Nations. Tillgängligt på Dividend_and_Capital_Gains_International_Comparison_Repo rt_2012-02-03.pdf (2011), Prognos Statens budget och de offentliga finanserna. Rapport 2011:33, september, . , (1996), Firm Objectives, Controls and Organization: The Use of Information and the Transfer of Knowledge within the Firm. : Kluwer Academic Publishers. Fenn, , och (1995), The Economics of the Market. , DC: of System. Gilson, . och . Schizer (2003), Capital Structure: A Tax Explanation for Convertible Preferred Stock. 116(3), 874–916. Gompers, . och (1998), What Drives Venture Capital Fundraising?. Brookings Papers on Economic Activity: Microeconomics, , 149–192. Gompers, . och (1999), An Analysis of Compensation in the U.S. Venture Capital Partnership. 51(1), 3–44. , och (2010), The Burden of the Nondiversifiable Risk of Entrepreneurship. 100(3), 1163–1194. Hand, (2008), Give Everyone a Prize? Employee Stock Options in . 23(4), 385–404. , och (2002), Venture Capital and the Professionalization of : Empirical Evidence. 57(1), 169–197. Henrekson, och (2012), The Swedish Corporate Control Model: Convergence, Persistence or Decline?. Corporate Governance: 20(2), 212–227. Henrekson, och (2009), Competencies and . Foundations and Trends in Entrepreneurship 5(1), 1–80. , (2010), The Theory of the Experimentally Organized Economy and Competence Blocs: An Introduction. 20(2), 185–201. , och (2005), Performance: Returns, Persistence, and Capital Flows. 60(4), 1791–1823. , och (2003), Financial Contracting Theory Meets the Real World: Evidence from . 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Fakta om svenskt småföretagande. , (2011), Finansiering av unga, innovativa tillväxt- företag: bästa och komplementär marknadspolitik. : , och finans – Cefin. (2009), The Economics of Entrepreneurship. , UK: . M. och (2006), Profitability of in Europe and the . Economic Papers No. 245, Directorate-General for Economic and Financial Affairs. : European Commission. Sanandaji, (2011), Essays in Entrepreneurship Policy. Doktors- avhandling i Public Policy. : . , . (2004 [1934]), The Theory of Economic Development. : Transaction Publishers. SOU 2012:3, Skatteincitament för riskkapital. SVCA (2011a), Riskkapitalmarknaden : Analys och statistik om riskkapitalbolagens aktiviteter. SVCA (2011b), Analys av riskkapitalmarknaden tredje kvartalet 2011: Med kommentarer till investeringar, avyttringar och kapitalanskaffning. , (2011), När är statligt stöd till innovativa företag och entreprenörer effektivt? , (2011), Private Equity Fund Investing: Investment Strategies, Entry Order and Performance. Doktorsavhandling i företagsekonomi. Tåg, (2012), The Real Effects of Buyouts. I , red., The Handbook of . Zider, (1998), Capital Works. , –, 131–139. THE CORPORATE INCOME TAX IN THE TAX SYSTEM Expert report to taxation () * The author would like to thank, without implicating them, , and for extensive comments. This report is written for the Swedish commission on corporate taxation (). The agreement behind writing the report was signed by the parties involved after the author presented preliminary thoughts and a possible structure for the report at a meeting in the commission in on , 2012. In writing the report I have benefited from discussions with numerous colleagues on issues of corporate or capital income taxation in the open economy and indeed elements of design of the overall tax system in open economies. I appreciate assistance from and discussions with members of the secretariat of the commission. Of course, only I am to blame for any errors and misunderstandings. STRUCTURE OF THE REPORT The report is structured as follows. Chapter 1 starts out with some very basic reflections and deliberations as a prelude to basic tax system design. They end up proposing a distinction between income generated by labor effort and income generated by capital. Further, it lists a number of considerations which should be taken into account in setting up the tax system. Chapter 2 inquires about the role of the corporate income tax (CIT) in the tax system. Concluding that this tax likely is helpful as part of the overall system, it lays out various versions of the CIT; these differ with respect to whether interest expenses can be deducted; whether the normal return to capital is taxed by the CIT or not; whether immediate investment expenses are deductible; and whether capital investments can be depreciated, and how. A series of important balances are useful in characterizing neutralities or lack thereof in the tax system. Chapter 3 goes through some of these balances; they pertain to different ways to declare what are really the fruits of labor effort; different savings vehicles; and different types of investments in firms together with their different financing methods. A good tax system should allow non- tax factors to determine the patterns of savings, investment and financing rather than differential tax treatment, and should not lead to income shifting between wage income and capital income. While the discussion in the first three chapters might as well have taken the closed economy as its point of departure, chapter 4 explicitly considers some of the complicating factors presented by openness of the economy and the associated mobility of portfolio and physical capital, as well as company income. In particular, it looks at the so-called home bias and its possible implications, and it also deals with the difficulties of taxing multinational enterprises. When corporate and personal income taxes are discussed, parti- cular attention is typically devoted to innovation, entrepreneurship and start-up companies. Chapter 5 looks at the characteristics of entrepreneurship and how tax policy may influence entrepreneurship. It is important to separate out innovative entrepreneurship (and, indeed, intrapreneurship within mature companies) from entre- preneurship which merely consists of duplicating what is already around. Once these distinctions are made, it is interesting to assess whether certain tax instruments may be especially harmful within innovative start-ups. The first five chapters portray elements of the setting and the considerations which are relevant for the formation of tax policy. Chapter 6 then takes a brief look at actual tax systems in and some neighboring countries. There are many common features in countries tax systems, the reason being that the countries eco- nomic structure and premises for tax policy are not that different. In addition, countries have learned from each other along the way. Nonetheless, the fact that some countries have moved away from comprehensive income taxation to(wards) the dual income tax, plus the fact that many countries put considerably more weight on social security contributions than others, do lead to inter-country differences. Tax policy is consistently in a flux. adjustments as well as larger reforms are proposed all the time. From recent years we pick the containing suggestions for reform of the UK tax system, as well as a proposal for reform of the Swiss tax system put forth by Keuschnigg and . Common to these is the to offer more equal treatment of debt and equity capital in the corporate income tax; differences in the proposals are related to whether the normal return to savings should be taxed at the personal level or not. We take a look at these reform proposals in chapter 7. Although many, many technical issues lie ahead, we take on the risk and put forth a tentative recommendation as to corporate income taxation and the treatment of capital income in the tax system in . This we do in chapter 8. Here, it can be revealed that we suggest a combination of Allowance for Corporate Capital (ACC) and flat-rate taxation of personal capital income, to go with the usual progressive taxation of labor income. How to move to such a system involves a number of questions related to transition and to international effects; it will take us too far astray to attempt to deal with these, let alone undertake computations of possible reform effects in the short and long run. Thus, we shall have to leave this to others. 1 REFLECTIONS ON BASIC SYSTEM DESIGN Before contemplating tax system changes it can be a useful exercise to view the tax system in a greater perspective. This chapter attempts to lay out some possible ground rules for tax system design and, in this way, approach the question of the role of capital and labor income taxation more generally. Stepping back and starting afresh, it would appear to be desirable to tax peoples ability to generate income. Some phrase it as a to tax peoples IQ, but there is, after all, no simple relation between IQ and the ability to generate income. Physiological and psychological elements as well as the existence of different types of intelligence disturb the relation. So let us stick to ability to generate income. If we could tax this ability, people with a certain ability level would be subject to a given level of tax. To which extent they actually exploited their ability to generate income would be an individual matter. They might prefer to work in circumstances which do not maximally exploit their ability; they might prefer leisure to higher or lesser degree; but in the end they would be liable to a given level of tax. However, the ability to generate income is not observable and probably known by the individual in question (IQ may be observable to some degree). , we cannot tax the ability to generate income after all. The hourly wage might be thought of as a reasonable proxy for the ability to generate income. But two factors get in the way. The first is that for one reason or another people may choose a job which pays them less than their maximum possible wage. The second is that usually tax authorities do not have access to information on the hourly wage, certainly not the effective hourly wage. As in the famous nonlinear income tax problem tax authorities only possess information on the product of the hourly wage and the number of hours put in, in other words (labor) income. So in the end, peoples labor income (wages, other fruits of labor effort) is what is available to tax authorities as basis for taxation purposes. Still, it is hoped that there is a reasonable link between that income and peoples ability to generate income. On this background, fairness and equity considerations call for redistribution via (labor) income taxation. This is accomplished by a progressive tax on labor income. Progression itself can be achieved by a deduction at the bottom and/or (usually and) increasing marginal rates of tax on labor income. In this way, the average rate of tax on labor income increases with income, fulfilling the criterion of progressive taxation. These contemplations concerned the fruits of labor effort; income from capital has not yet entered the picture. The conclusion must be that to the extent that labor income reflects the ability to generate income, there is no reason to tax the income from capital, no role for capital income taxation. After all, capital income is merely income made possible by postponing consumption to a later point in time than when the underlying labor income was earned (and taxed).1 There are at least three further arguments for not taxing the return to capital, that is the return to savings out of previous labor income and the return to investments – quite apart from the fact that due to behavioral reactions such taxation is bound to be distortionary. First, there is an equity argument. Consider two individuals with equal ability to generate income and also equal labor income streams throughout their lives. One individual is very impatient in her consumption behavior and consumes the income right away, saving nothing. In a situation in which both labor income and the return to savings are taxed, this individual would only pay labor income tax. The other individual is very patient in her consumer behavior, so saves over the first part of the life cycle out of earned labor income. The savings thus accumulated generate returns, 1 Strictly speaking, capital income also derives from gifts and inheritances; we come back to this later on. With taxation of both labor and capital income, the individual altogether pays both labor income tax and capital income tax (on the return to savings). Accordingly, the second individual pays higher total taxes over her lifetime than the first individual, even though their streams of labor income are identical. There is a priori no reason for punishing patient consumer behavior, so capital income taxation here is inequitable and unfair. Second, famous research in dynamic macroeconomics claims that over the longer run there is, at least in the simpler dynamic settings, no role for capital income taxation. As the returns to savings are taxed again and again, distortions accumulate over time, corresponding to higher and higher tax burdens on consumption later in life. This fact generates a to bring capital income taxation towards zero over time.2 Third, while the preceding argument was derived in the context of a closed economy and for individuals with infinite lifetimes, it over to an open economy and also, under additional assump- tions, finite lives.3 Moreover, in the small open economy with free mobility of capital, a (source-based) tax on capital income generated by companies turns out to become an especially distortionary tax on employed labor. It is then preferable to substitute explicit taxation of labor for the implicit tax in the form of a capital income tax (corporate income tax). Summing up, the arguments for having no tax on capital income, or at least only a moderate tax, are strong.4 Conversely, though, there are some arguments for bringing in taxation of capital income as part of the overall tax package. First, the tax on labor income is likely to be non-optimal. The general message from tax theory is, then, that to the extent that taxes in the tax system cannot be optimal there are good reasons for supplementing them with taxes which at the outset may have less desirable characteristics – the general second best principle. In this way, capital income taxation may play a role as a complement to labor income taxation. For instance, if the labor income tax redistributes less than preferably, a capital income tax can help to 2See Chamley (1986) and (1985), for instance. 3Gordon (1986) as well as Razin and (1991) discuss capital income taxation in the open economy. McCafferty (1987) and others introduce finite lifetimes in the discussion of optimal taxation of capital income. Generally, a zero capital income tax rate with generational overlap requires age-dependent taxes. 4Somewhat disturbingly, , Manuelli and (1997) and Reinhorn (2009) even show that neither capital income nor labor income should be taxed in steady state in a setting where labor income builds on previous investments in human capital. SOU 2014:40 Bilaga 6 the extent that people with relatively high labor income save disproportionately much out of their income.5 Second, while an ideal tax system might subject the fruits of labor effort to tax while exempting the return to savings/investment, this strategy may be undermined in some instances by reclassifying labor income as capital income. An example is a closely held corporation, where what could have been paid out as wages is retained in the company and later on shows up as a capital gain when the company (shares) is sold. This income shifting phenomenon may partly be counteracted by also subjecting capital income to tax.6 Third, an aspect of inequality can be recognized when individuals inheritances (or gifts from parents) differ markedly. When some inherit a lot and others very or nothing, lifetime opportunities will also differ. Capital taxation in the form of estate or inheritance taxes as well as gift taxes can reduce such inequality. So, in the end a compromise tax system may encompass some capital income taxation, albeit presumably at a modest rate. Absent further considerations, the rate would be flat and equal across all capital income types. Whereas labor effort is inherently tied to a given individual, capital or wealth can be moved around. Therefore, labor income is attached to an individual, whereas capital income can be transferred between individuals. Further, all saving or investment types should in general be handled equally and consistently in the tax system to avoid distortions.