Taxing Issues with Privatization : A Checklist

Privatization has been a popular strategy for improving efficiency in both market and transition economies. The literature on privatization includes broad discussions of pricing techniques but overlooks tax issues. In reality, a state-owned company...

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Main Authors:	Mintz, Jack M., Chen, Duanjie, Zorotheos, Evangelia
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCUMULATED INCOME BAD DEBT BANK OF CANADA BANKS BONDS BOOK VALUE BORROWING CAPITAL COSTS CAPITAL GAIN CAPITAL GAINS CAPITAL TAXES COMPETITIVE ADVANTAGE CONSUMERS CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES COST OF CAPITAL DEBT DEBT FINANCING DEBT INSTRUMENTS DEPRECIABLE ASSETS DEPRECIATION DEPRECIATION OF ASSETS DISCOUNT RATE DIVIDENDS ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EXPENDITURES GROSS REVENUES INEFFICIENCY INSURANCE INSURANCE PREMIUMS INTANGIBLE ASSETS INTEREST EXPENSE INTEREST RATES INVENTORY LAWS LEVIES MARKET COMPETITION MARKET VALUE MUNICIPAL FINANCE MUNICIPAL GOVERNMENTS MUNICIPALITIES OPERATING LOSSES PAYROLL TAXES PENSIONS POLICY MAKERS POWER PLANTS PRESENT VALUE PRIVATE SECTOR PRIVATIZATION PRODUCERS PROFITABILITY PROPERTY TAXES PROVINCIAL GOVERNMENTS PROVISIONS PUBLIC DEBT PUBLIC POLICY RETIREMENT SAVINGS SUBSIDIARIES TAX TAX CREDITS TAX INCENTIVES TAX LAW TAX RATES TAX REVENUE TAXATION TRANSITION ECONOMIES UTILITIES VALUATION WAGES WRITEOFFS
Online Access:	http://documents.worldbank.org/curated/en/2000/05/437633/taxing-issues-privatization-checklist http://hdl.handle.net/10986/18850

id	okr-10986-18850
recordtype	oai_dc
spelling	okr-10986-188502021-04-23T14:03:46Z Taxing Issues with Privatization : A Checklist Mintz, Jack M. Chen, Duanjie Zorotheos, Evangelia ACCUMULATED INCOME BAD DEBT BANK OF CANADA BANKS BONDS BOOK VALUE BORROWING CAPITAL COSTS CAPITAL GAIN CAPITAL GAINS CAPITAL TAXES COMPETITIVE ADVANTAGE CONSUMERS CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES COST OF CAPITAL DEBT DEBT FINANCING DEBT INSTRUMENTS DEPRECIABLE ASSETS DEPRECIATION DEPRECIATION OF ASSETS DISCOUNT RATE DIVIDENDS ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EXPENDITURES GROSS REVENUES INEFFICIENCY INSURANCE INSURANCE PREMIUMS INTANGIBLE ASSETS INTEREST EXPENSE INTEREST RATES INVENTORY LAWS LEVIES MARKET COMPETITION MARKET VALUE MUNICIPAL FINANCE MUNICIPAL GOVERNMENTS MUNICIPALITIES OPERATING LOSSES PAYROLL TAXES PENSIONS POLICY MAKERS POWER PLANTS PRESENT VALUE PRIVATE SECTOR PRIVATIZATION PRODUCERS PROFITABILITY PROPERTY TAXES PROVINCIAL GOVERNMENTS PROVISIONS PUBLIC DEBT PUBLIC POLICY RETIREMENT SAVINGS SUBSIDIARIES TAX TAX CREDITS TAX INCENTIVES TAX LAW TAX RATES TAX REVENUE TAXATION TRANSITION ECONOMIES UTILITIES VALUATION WAGES WRITEOFFS Privatization has been a popular strategy for improving efficiency in both market and transition economies. The literature on privatization includes broad discussions of pricing techniques but overlooks tax issues. In reality, a state-owned company loses its privilege of paying no taxes once it is privatized. This change in tax status would certainly complicate the financial transaction of a newly privatized company, affect industry-wide economic efficiency, and change the revenue pattern of governments. Using Ontario Hydro and the Canadian tax regime as examples, the authors provide policymakers with a checklist on tax issues under privatization. Their main observations: 1) The tax status of the company to be privatized must be considered in analyzing the firm's financial transition. 2) The economic efficiency targeted by privatization may depend partly on the tax regime for a particular industry. 3) Privatization affects government revenue through the revenue-sharing structure determined by intergovernmental fiscal relationships and cross-border tax arrangements. Time is a factor in tax and transition issues. At the time of privatization, for example, how are assets to be valued for calculating capital gains and cost deductions, for tax purposes? Are the assets transferred to the new owners at fair market value, book value, or at cost, for tax purposes? How should heavy debt loads be treated? Ontario Hydro will not be privatized but it will become taxable. How the taxes will be paid will depend on how the transition is treated. Tax policy will be a key determinant of the industry's future development. 2014-06-30T19:11:00Z 2014-06-30T19:11:00Z 2000-05 http://documents.worldbank.org/curated/en/2000/05/437633/taxing-issues-privatization-checklist http://hdl.handle.net/10986/18850 English en_US Policy Research Working Paper;No. 2348 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCUMULATED INCOME BAD DEBT BANK OF CANADA BANKS BONDS BOOK VALUE BORROWING CAPITAL COSTS CAPITAL GAIN CAPITAL GAINS CAPITAL TAXES COMPETITIVE ADVANTAGE CONSUMERS CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES COST OF CAPITAL DEBT DEBT FINANCING DEBT INSTRUMENTS DEPRECIABLE ASSETS DEPRECIATION DEPRECIATION OF ASSETS DISCOUNT RATE DIVIDENDS ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EXPENDITURES GROSS REVENUES INEFFICIENCY INSURANCE INSURANCE PREMIUMS INTANGIBLE ASSETS INTEREST EXPENSE INTEREST RATES INVENTORY LAWS LEVIES MARKET COMPETITION MARKET VALUE MUNICIPAL FINANCE MUNICIPAL GOVERNMENTS MUNICIPALITIES OPERATING LOSSES PAYROLL TAXES PENSIONS POLICY MAKERS POWER PLANTS PRESENT VALUE PRIVATE SECTOR PRIVATIZATION PRODUCERS PROFITABILITY PROPERTY TAXES PROVINCIAL GOVERNMENTS PROVISIONS PUBLIC DEBT PUBLIC POLICY RETIREMENT SAVINGS SUBSIDIARIES TAX TAX CREDITS TAX INCENTIVES TAX LAW TAX RATES TAX REVENUE TAXATION TRANSITION ECONOMIES UTILITIES VALUATION WAGES WRITEOFFS
spellingShingle	ACCUMULATED INCOME BAD DEBT BANK OF CANADA BANKS BONDS BOOK VALUE BORROWING CAPITAL COSTS CAPITAL GAIN CAPITAL GAINS CAPITAL TAXES COMPETITIVE ADVANTAGE CONSUMERS CORPORATE INCOME TAX CORPORATE INCOME TAXES CORPORATE TAXES COST OF CAPITAL DEBT DEBT FINANCING DEBT INSTRUMENTS DEPRECIABLE ASSETS DEPRECIATION DEPRECIATION OF ASSETS DISCOUNT RATE DIVIDENDS ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EXPENDITURES GROSS REVENUES INEFFICIENCY INSURANCE INSURANCE PREMIUMS INTANGIBLE ASSETS INTEREST EXPENSE INTEREST RATES INVENTORY LAWS LEVIES MARKET COMPETITION MARKET VALUE MUNICIPAL FINANCE MUNICIPAL GOVERNMENTS MUNICIPALITIES OPERATING LOSSES PAYROLL TAXES PENSIONS POLICY MAKERS POWER PLANTS PRESENT VALUE PRIVATE SECTOR PRIVATIZATION PRODUCERS PROFITABILITY PROPERTY TAXES PROVINCIAL GOVERNMENTS PROVISIONS PUBLIC DEBT PUBLIC POLICY RETIREMENT SAVINGS SUBSIDIARIES TAX TAX CREDITS TAX INCENTIVES TAX LAW TAX RATES TAX REVENUE TAXATION TRANSITION ECONOMIES UTILITIES VALUATION WAGES WRITEOFFS Mintz, Jack M. Chen, Duanjie Zorotheos, Evangelia Taxing Issues with Privatization : A Checklist
relation	Policy Research Working Paper;No. 2348
description	Privatization has been a popular strategy for improving efficiency in both market and transition economies. The literature on privatization includes broad discussions of pricing techniques but overlooks tax issues. In reality, a state-owned company loses its privilege of paying no taxes once it is privatized. This change in tax status would certainly complicate the financial transaction of a newly privatized company, affect industry-wide economic efficiency, and change the revenue pattern of governments. Using Ontario Hydro and the Canadian tax regime as examples, the authors provide policymakers with a checklist on tax issues under privatization. Their main observations: 1) The tax status of the company to be privatized must be considered in analyzing the firm's financial transition. 2) The economic efficiency targeted by privatization may depend partly on the tax regime for a particular industry. 3) Privatization affects government revenue through the revenue-sharing structure determined by intergovernmental fiscal relationships and cross-border tax arrangements. Time is a factor in tax and transition issues. At the time of privatization, for example, how are assets to be valued for calculating capital gains and cost deductions, for tax purposes? Are the assets transferred to the new owners at fair market value, book value, or at cost, for tax purposes? How should heavy debt loads be treated? Ontario Hydro will not be privatized but it will become taxable. How the taxes will be paid will depend on how the transition is treated. Tax policy will be a key determinant of the industry's future development.
format	Publications & Research :: Policy Research Working Paper
author	Mintz, Jack M. Chen, Duanjie Zorotheos, Evangelia
author_facet	Mintz, Jack M. Chen, Duanjie Zorotheos, Evangelia
author_sort	Mintz, Jack M.
title	Taxing Issues with Privatization : A Checklist
title_short	Taxing Issues with Privatization : A Checklist
title_full	Taxing Issues with Privatization : A Checklist
title_fullStr	Taxing Issues with Privatization : A Checklist
title_full_unstemmed	Taxing Issues with Privatization : A Checklist
title_sort	taxing issues with privatization : a checklist
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2000/05/437633/taxing-issues-privatization-checklist http://hdl.handle.net/10986/18850
_version_	1764441624719392768

Taxing Issues with Privatization : A Checklist

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