Download or read book The Impact of Profit Shifting on Economic Activity and Tax Competition written by Mr.Alexander D Klemm and published by International Monetary Fund. This book was released on 2019-12-20 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: A growing empirical literature has documented significant profit shifting activities by multinationals. This paper looks at the impact of such profit shifting on real activity and tax competition. Real activity can be affected as profit shifting changes—and theoretically most likely reduces—the cost of capital. Tax competition, even over real capital, is affected, because a permissive attitude toward profit shifting can be seen as a selective tax reduction for multinationals. Tightening profit shifting rules in turn can affect tax competition through the main rate. This paper discusses these issues theoretically and with the help of a simulation to assess the impact of profit-shifting on investment, revenues, and government behavior. Using the theoretical framework, it also provides a brief overview of the related empirical literature.
Download or read book Corporate Income Taxes under Pressure written by Ruud A. de Mooij and published by International Monetary Fund. This book was released on 2021-02-26 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book describes the difficulties of the current international corporate income tax system. It starts by describing its origins and how changes, such as the development of multinational enterprises and digitalization have created fundamental problems, not foreseen at its inception. These include tax competition—as governments try to attract tax bases through low tax rates or incentives, and profit shifting, as companies avoid tax by reporting profits in jurisdictions with lower tax rates. The book then discusses solutions, including both evolutionary changes to the current system and fundamental reform options. It covers both reform efforts already under way, for example under the Inclusive Framework at the OECD, and potential radical reform ideas developed by academics.
Download or read book Winning the Tax Wars written by Brigitte Alepin and published by Kluwer Law International B.V.. This book was released on 2016-04-24 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past few decades, the concentration of wealth and property in the hands of a few has been facilitated by tax evasion, tax avoidance, and above all by tax competition. Fortunately, a determined move toward international cooperation among tax authorities is gathering its forces to do battle. This invaluable book shows how the globalization of trade, the digitization of the economy, tax competition between sovereign states, the erosion of the tax base, and the transfer of pro ts have all revealed the weaknesses of a traditional tax system that has reached its limits, and how numerous states and groups of states have joined efforts in creating a new international tax system designed to restore fairness and stability in the levying of taxes worldwide. Stemming from a 2016 conference initiated by the Canadian non-pro t organization TaxCOOP, convened by the World Bank and bringing together well-known taxation experts from prominent international organizations, the book presents outstanding contributions highlighting the impacts of tax competition and viable solutions. Among the issues and topics covered are the following: – electronic commerce and electronic money; – transfer pricing; – derivatives and hedge funds; – protecting tax whistle-blowers; – offshore tax investigations; – possibility of an international tax court; – impact of tax competition on developing countries; – carbon pricing; – tobacco taxation; and – effective taxation of the ultra-wealthy and their nancial capital. The chapters include details of country experiences and results, in some cases analyzed by key protagonists themselves. Collectively, the contributions take a giant step toward reinforcing the power of sovereign states in sectors such as the environment, education, and health. As an authoritative guide to increasing the level of transparency and accountability of private and public economic actors and restoring citizens’ trust in the fairness of our global governance systems, this peerless volume will be warmly welcomed by tax lawyers, taxation authorities, and interested academics worldwide.
Download or read book Tax Competition and Profit Shifting written by Clemens Fuest and published by . This book was released on 2002 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The residence-based taxation of interest income in the EU faces the difficulty that taxpayers may evade taxation by holding bank accounts in other countries. The EU therefore makes considerable efforts to achieve cooperation among EU member states in order to improve tax enforcement. The present paper argues that international cooperation in tax enforcement may not be sufficient to implement an effective taxation of interest income. The reason is that taxpayers may also avoid income taxes by holding financial assets in the corporate sector. If corporate tax competition reduces corporate income tax rates below personal income tax rates, taxpayers will increasingly shift income from the personal to the corporate sphere. We show that this type of income shifting is empirically important. According to our results, a one percentage point increase in the personal income tax rate increases the fraction of private savings held within corporations by approximately 2.6 percentage points.
Download or read book Tax Competition in Presence of Profit Shifting written by Steeve Mongrain and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Pareto Improving Minimum Corporate Taxation written by Mr. Shafik Hebous and published by International Monetary Fund. This book was released on 2021-10-22 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent international agreement on a minimum effective corporate tax rate marks a profound change in global tax arrangements. The appropriate level of that minimum, however, has been, and remains, extremely contentious. This paper explores the strategic responses to a minimum tax, which—the policy objective being to change the rules of tax competition game--—are critical for assessing the design and welfare impact of, and prospects for, this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low as well as high tax countries, over the uncoordinated equilibrium.
Download or read book Action Plan on Base Erosion and Profit Shifting written by OECD and published by OECD Publishing. This book was released on 2013-07-19 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This action plan, created in response to a request by the G20, identifies a set of domestic and international actions to address the problems of base erosion and profit sharing.
Download or read book Royalty Taxation Under Tax Competition and Profit Shifting written by Steffen Juranek and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The increasing use of intellectual property as a means to shift profits to low-tax jurisdictions or jurisdictions with so-called "patent boxes" is a major challenge for the corporate tax base of medium- and high-tax countries. Extending a standard tax competition model for capital-enhancing technology, royalty payments, and profit shifting, this paper suggests a simple fix: It is optimal to set a withholding tax on (intra-firm) royalty payments equal to the corporate tax rate and deny any deductibility of royalties. As the tax applies to the full payment, the problem of identifying the arm's-length component in a digital economy (OECD BEPS Action 1) does not apply. Most importantly, the denial of royalty deductions is the Pareto-efficient solution under coordination and the unilaterally optimal policy under competition for mobile capital. In the latter case, a weakened thin capitalization rule is a crucial part of the policy package in order to avoid negative investment effects. Our results question the ban of royalty taxes in double tax treaties and the EU Interest and Royalty Directive.
Download or read book Global Tax Fairness written by Thomas Pogge and published by Oxford University Press. This book was released on 2016-02-04 with total page 383 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book addresses sixteen different reform proposals that are urgently needed to correct the fault lines in the international tax system as it exists today, and which deprive both developing and developed countries of critical tax resources. It offers clear and concrete ideas on how the reforms can be achieved and why they are important for a more just and equitable global system to prevail. The key to reducing the tax gap and consequent human rights deficit in poor countries is global financial transparency. Such transparency is essential to curbing illicit financial flows that drain less developed countries of capital and tax revenues, and are an impediment to sustainable development. A major break-through for financial transparency is now within reach. The policy reforms outlined in this book not only advance tax justice but also protect human rights by curtailing illegal activity and making available more resources for development. While the reforms are realistic they require both political and an informed and engaged civil society that can put pressure on governments and policy makers to act.
Download or read book Addressing Base Erosion and Profit Shifting written by OECD and published by OECD Publishing. This book was released on 2013-02-12 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report presents studies and data available regarding the existence and magnitude of base erosion and profit shifting (BEPS), and contains an overview of global developments that have an impact on corporate tax matters.
Download or read book Competition and Efficiency written by David Kyungtaek Oh and published by . This book was released on 2017 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter considers the tax information exchange agreement as a way to draw Pareto improvement between off-shore tax havens and non-haven countries. Individuals who reside in a non-haven country choose the volume of tax evasion to maximize the expected payoff which depends on the tax rate and the probability of being detected. A tax haven might be reluctant to sign a TIEA since establishing a TIEA increases the probability of detection thus decreasing the volume of individuals' tax evasion ceteris paribus. However, we find that establishing a TIEA makes the non-haven country increase the tax rate so that both tax evasion and welfare increase. This is because non-haven country government catches tax criminals with greater probability so it can handle greater volume of tax evasion under higher tax rate. Because not only the non-haven country's welfare but also the capital inflow into the tax haven are increased, tax havens would sign TIEAs with non-haven countries voluntarily in anticipation of greater future payoff. The second chapter, I, jointly with Dr. Mongrain and Dr. Ypersele, develop a continuous fiscal competition model in which two countries compete over multinational firms (MNF) by varying the tax rates and the tightness of profit shifting control. Being loose on profit shifting decreases the tax base of one country but at the same time it brings two benefits. First, the country attracts more MNFs for given tax rate. Second, loose control of one country allows the other country to set high tax rate by alleviating the pressure of tax competition. Since the tax rates of the two countries are strategic complements, both countries can achieve efficiency gain by not actively controlling international profit shifting. We also show that relaxing the profit shifting regulations can reduce the equilibrium tax gap between high tax region and low tax region. This is because the high tax region's tax choice is generally more sensitive to the profit shifting control. As all the downward forces on the tax rate choices, which are resulted by the location effect and per-firm profit shifting effect, are positively related to the equilibrium tax gap, choosing the lax profit shifting control may close the tax gap and lead to the higher tax revenue even for the high tax region. The third paper studies the competition in the platform markets where companies improve the quality standard to attract the consumers. In some platform markets, e.g. video game industry, improving the quality standard decreases the number of software developed due to the greater pressure of development cost. Such disadvantage of the quality upgrade in one platform is spread to its competitors because all the platforms share a certain portion of video game software through `porting.' Because of the negative externality created by porting, the platforms tend to increase the quality standard by extra amount. Our model shows that the quality competition in the competitive market is excessive because the platforms fail to internalize the inter-platform externality.
Download or read book Harmful Tax Competition An Emerging Global Issue written by OECD and published by OECD Publishing. This book was released on 1998-05-19 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax competition in the form of harmful tax practices can distort trade and investment patterns, erode national tax bases and shift part of the tax burden onto less mobile tax bases. The Report emphasises that governments must intensify their cooperative actions to curb harmful tax practices.
Download or read book International Tax Policy written by Tsilly Dagan and published by Cambridge University Press. This book was released on 2017-12-14 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bringing a unique voice to international taxation, this book argues against the conventional support of multilateral co-operation in favour of structured competition as a way to promote both justice and efficiency in international tax policy. Tsilly Dagan analyzes international taxation as a decentralized market, where governments have increasingly become strategic actors. While many of the challenges of the current international tax regime derive from this decentralized competitive structure, Dagan argues that curtailing competition through centralization is not necessarily the answer. Conversely, competition - if properly calibrated and notwithstanding its dubious reputation - is conducive, rather than detrimental, to both efficiency and global justice. International Tax Policy begins with the basic normative goals of income taxation, explaining how competition transforms them and analyzing the strategic game states play on the bilateral and multilateral level. It then considers the costs and benefits of co-operation and competition in terms of efficiency and justice.
Download or read book The Impact of Profit Shifting on Economic Activity and Tax Competition written by Alexander Klemm and published by . This book was released on 2019 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: A growing empirical literature has documented significant profit shifting activities by multinationals. This paper looks at the impact of such profit shifting on real activity and tax competition. Real activity can be affected as profit shifting changes-and theoretically most likely reduces-the cost of capital. Tax competition, even over real capital, is affected, because a permissive attitude toward profit shifting can be seen as a selective tax reduction for multinationals. Tightening profit shifting rules in turn can affect tax competition through the main rate. This paper discusses these issues theoretically and with the help of a simulation to assess the impact of profit-shifting on investment, revenues, and government behavior. Using the theoretical framework, it also provides a brief overview of the related empirical literature.
Download or read book Taxing Multinationals in Europe written by Ernesto Crivelli and published by International Monetary Fund. This book was released on 2021-05-25 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper aims to contribute to the European policy debate on corporate income tax reform in three ways. First, it takes a step back to review the performance of the CIT in Europe over the past several decades and the important role played by MNEs in European economies. Second, it analyses corporate tax spillovers in Europe with a focus on the channels and magnitudes of both profit shifting and CIT competition. Third, the paper examines the progress made in European CIT coordination and discusses reforms to strengthen the harmonization of corporate tax policies, in order to effectively reduce both tax competition and profit shifting.
Download or read book Excess Profit Taxes Historical Perspective and Contemporary Relevance written by Mr. Shafik Hebous and published by International Monetary Fund. This book was released on 2022-09-16 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the design of excess profits taxes (EPTs) that gained renewed interest following the COVID-19 outbreak and the recent surge in energy prices. EPTs can be designed as an efficient tax only falling on economic rent, like an allowance for corporate capital, and drawing some parallels with current proposals for reforming multinationals’ taxation. EPTs can be permanent or temporary as an add-on to the corporate income tax to support revenue during an adverse shock episode. The latter reflects experiences with EPTs during and after the World Wars. Different from that era, though, profit shifting is now a challenge. Estimation using firm-level data suggest that, at present, locations of excess profit across countries are consistent with profit shifting practices by multinationals. Destination-based EPTs can address this concern. Estimates suggest that a 10 percent EPT on the globally consolidated accounts of multinationals (on top of the current corporate income tax), with the EPT base being allocated using sales, raises global revenue by 16 percent of corporate income tax revenues. The analysis suggests that international coordination would be desirable to mitigate the risks of profit shifting and tax competition. Eventually, EPTs could mark an evolution of corporate taxation toward a non-distortionary rent tax.
Download or read book Catching Capital written by Peter Dietsch and published by Oxford University Press, USA. This book was released on 2015 with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax competition draws into question political economic life as we know it. It undermines the fiscal autonomy of states and contributes to rising income inequalities. This book develops a normative and institutional framework to regulate tax competition. Importantly, the author shows that the proposed regulation compromises neither efficiency nor sovereignty.
