Tax Policy Assessment in Slovenia – Case of Interest Tax Shield

Abstract

The tax policy assessment is an indispensable strategy within any modern country's system of governance. There are several types of "impact assessments", with RIA as one of the most commonly used. This tool is used to measure and analyse the benefits, costs and effects of a new or existing legal regime, which can be carried out by collecting and analysing empirical data in the context of a broader decision-making framework. The main objective of the paper is to analyse which stage the Slovenian regulatory impact assessment is in, and whether this stage is sophisticated enough to provide for the essential verification of tax policy and specific instruments, focusing mainly on the case of interest tax shield issues. Methodologically, the paper is based on a systematic literature review, a survey for public consultations and statistical tools for calculating the differences in internal indebtedness in different observed periods. The results show that the Slovenian RIA is not sophisticated enough to evaluate complex tax instruments and policy. Nevertheless, tax policy decision-makers should reconsider the implementation of a thin capitalization rule (but also future tax policy instruments) focusing also on other, non-tax revenue, factors.

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“…factors (OECD, 2020). RIA is thus one of the most common and essential tools for analysing the quality of legislation and/or evaluating the impact of regulations (Jovanović and Klun, 2017).…”

“…To promote equality and social justice, specific impacts arising from tax policies should consider factors such as gender, income and settlement size in the assessment process. According to Jovanović and Klun (2017) the Slovenian Regulatory Impact Assessment lacks the sophistication needed to evaluate complex tax policies and instruments considering some of these factors.…”

The Impact Of Thin Capitalization Rules On Tax Avoidance In Indonesia

“…However, Overesch & Wamser (2010) stated a decrease in the company's internal debt was also followed by an increase in external debt, so the thin capitalization rules was not eminently suitable as an anti-tax avoidance tool. Jovanovic & Klun (2017) also stated that the thin capitalization rules was ineffective because it did not influence the number of tax avoidance in Slovenia. The results of studies in Indonesia equally vary.…”