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 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 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 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 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 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 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 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 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 Heterogeneous Firms profit Shifting FDI and International Tax Competition written by Sebastian Krautheim and published by . This book was released on 2009 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Tax Sovereignty Tax Competition and the Base Erosion and Profit Shifting Concept of Permanent Establishment written by A.C. dos Santos and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article studies the new concept of permanent establishment (PE) suggested in the base erosion and profit shifting (BEPS) Report on Action 7 (Preventing the artificial avoidance of PE status), which was built on proposals put forward in the G20/OECD's discussion drafts in the year of 2015. The new definition of PE is crucial in the international tax context, since it determines the right of a country to tax profits of non-residents as well as avoids situations of double taxation. Moreover, nowadays, the PE concept is both obsolete and not in line with the global and digital economy.
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 OECD G20 Base Erosion and Profit Shifting Project Tax Challenges Arising from Digitalisation Interim Report 2018 Inclusive Framework on BEPS written by OECD and published by OECD Publishing. This book was released on 2018-03-16 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: This interim report of the OECD/G20 Inclusive Framework on BEPS is a follow-up to the work delivered in 2015 under Action 1 of the BEPS Project on addressing the tax challenges of the digital economy.
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 Competition for FDI and Profit Shifting written by Oscar Amerighi and published by . This book was released on 2013 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits to lower-tax jurisdictions. In such framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition is also preferable from an efficiency point of view (overall surplus) by changing the firm's investment decision when profit shifting motivations induce the firm to locate in the (before tax) least profitable country.
