measuring and improving the performance of customs valuation controls an illustration with gabon modern customs administrations aim to both facilitate legal trade and combat fraud to meet this dual objective many customs administrations in developing countries must give risk management a highly prominent role in this context of modernisation this paper first provides stylised facts on the performance of the customs controls carried out at the gabon border then we compare gabon s granular import customs data with international trade statistics based on this comparison we identify undetected fraud and present a methodology to target ex post audits finally we define indicators to monitor the performance of customs valuation controls

tariff evasion and rules of origin violations under the canada u s free trade agreement using product level data on trade between canada and the u s this paper presents evidence of tariff evasion and violation of the rules of origin occurring under the canada u s free trade agreement cusfta it shows that more imports go unreported at the destination country when tariffs are higher consistent with the tariff evasion hypothesis this result implies that the trade creation effect of a free trade agreement may in fact be due to less underreporting further this paper shows that the larger canadian tariff preference margin for the u s is associated with more goods originating in third countries being transshipped through the u s territory for re export the preference margin is also positively correlated with the value of excess imports from the u s which qualify for preferential treatment both results suggest the presence of persistent violations of cusfta s rules of origin a l aide de donnees au niveau des produits sur les flux de commerce entre le canada et les etats unis on montre qu il y a evitement de tarif et violation des regles d origine dans les operations de l accord de libre echange canada etats unis on montre que davantage d importations ne sont pas declarees au point de destination quand les tarifs sont eleves dans l esprit meme de l hypothese d evitement de tarif ce resultat implique que l effet de creation de commerce d un accord de libre echange peut en fait etre attribuable a moins de sous declaration de plus le texte montre que les plus grandes marges preferentielles des tarifs avec les etats unis sont associees a davantage de biens en provenance de tiers pays et convoyes a travers le territoire americain pour re exportation la marge preferentielle est aussi positivement co reliee avec la valeur des importations excedentaires en provenance des etats unis qui se qualifient pour un traitement preferentiel ces deux ensembles de resultats suggerent la presence persistante de violations des regles d origine de l accord de libre echange canada etats unis

a consistency test of the time trade off this paper tests the internal consistency of time trade off utilities we find significant violations of consistency in the direction predicted by loss aversion the violations disappear for higher gauge durations we show that loss aversion can also explain that for short gauge durations time trade off utilities exceed standard gamble utilities our results suggest that time trade off measurements that use relatively short gauge durations like the widely used euroqol algorithm are affected by loss aversion and lead to utilities that are too high

tax motivated transfer pricing and us intrafirm trade prices abstract this paper analyzes monthly data on us international trade prices between 1997 and 1999 in order to investigate the impact of tax influences on intrafirm trade prices results indicate that there is substantial evidence of tax motivated transfer pricing in us intrafirm trade prices there is a strong and statistically significant relationship between countries tax rates and the prices of intrafirm transactions controlling for other variables that affect trade prices as country tax rates are lower us intrafirm export prices are lower and us intrafirm import prices are higher this finding is consistent with theoretical predictions regarding tax motivated income shifting behavior

fiscal paradise foreign tax havens and american business the tax haven affiliates of american corporations account for more than 20 percent of u s foreign direct investment and nearly a third of the foreign profits of u s firms american companies report extraordinarily high profit rates on their tax haven investments in 1982 this behavior implies that the revenue maximizing tax rate for a typical haven is around 5 8 percent american and foreign investment in tax havens has an uncertain effect on u s tax revenue but since low tax rates encourage american companies to shift profits out of high tax foreign countries it is possible that low foreign tax rates ultimately enhance u s tax collections

quota hopping in bond diversion we show that the u s in bond system of imports may be used by firms to illegally avoid trade barriers a practice known as in bond diversion the illicit scheme involves declaring chinese exports bound for mexico but diverting them to the u s market while in transit thus creating a gap between chinese and mexican reports using the phaseout and removal of u s quotas at the end of the multifiber agreement as a policy experiment as well as variation in quota bindingness across products we show that quota bound products were associated with larger trade gaps which shrunk following the quota removals jel f13 o17 o19

designing economic instruments for the environment in a decentralized fiscal system designing economic instruments for the environment when external effects are important markets will be inefficient and economists have considered several broad classes of economic instruments to correct these inefficiencies however the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants the enforcement authority of various levels of government and the fiscal responsibilities of the levels of government for example externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions also local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction but they may not consider the effects of their actions on other jurisdictions finally the existence of locally generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government the standard analysis therefore focuses mainly upon an aggregate or national perspective it typically ignores the possibility that the externality may be created and addressed by local governments and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems this paper examines the implications of decentralization for the design of corrective policies that is how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities

multinationals profit response to tax differentials effect size and shifting channels this paper provides a quantitative review of the empirical literature on profit shifting behavior of multinational firms we synthesize the evidence from 25 studies and find a substantial response of profit measures to international tax rate differentials accounting for misspecification biases by means of meta regressions we predict a tax semi elasticity of subsidiary pre tax profits of about 0 8 moreover we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel our results suggest that transfer pricing and licensing are the dominant profit shifting channel

entrepot trade and smuggling in west africa benin togo and nigeria official trade statistics indicate very little intra african trade but this is often because of the prevalence of unrecorded trade particularly smuggling this paper explores smuggling from benin and togo into nigeria nigeria has very high import tariffs and bans on certain products togo and benin have deliberately maintained low import barriers to facilitate an entrepot role vis a vis nigeria and land locked sahelian countries togo competes at a geographic disadvantage relative to benin for access to the nigerian market and compensates with lower transit taxes the volume and composition of cross border trade is analysed using data obtained from benin and togo customs authorities as well as interviews with traders and customs officials in both countries benin and to a lesser extent togo are the origin of a very large volume of transshipment of precisely those products which are heavily protected in nigeria such as used cars cloth and rice it is common knowledge in benin and togo that these imports although declared for domestic consumption or transit to other countries are in fact overwhelmingly intended for nigeria smuggling is a major source of income and employment in benin and togo but provides a fragile and unreliable foundation for economic development

the peter pan syndrome in emerging markets the productivity transparency trade off in it adoption firms invest in technology to increase productivity yet in emerging markets where a culture of informality is widespread information technology it investments leading to greater transparency can impose a cost through higher taxes and the need for regulatory compliance the tendency of firms to avoid productivity enhancing technologies and remain small to avoid transparency has been dubbed the peter pan syndrome we examine whether firms make the trade off between productivity and transparency by examining it adoption in the indian retail sector we find that computer technology adoption is lower when firms are motivated to avoid transparency specifically technology adoption is lower when there is greater corruption but higher when there is better enforcement and auditing so firms have a higher productivity gain threshold to adopt computers in corrupt business environments that suffer from patchy and variable enforcement of the tax laws not accounting for this motivation to hide from the formal sector underestimates productivity gains from computer adoption thus in addition to their direct effects on the economy enforcement auditing and corruption can have indirect effects through their negative impact on adoption of productivity enhancing technologies that also increase operational transparency

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

cross jurisdictional income shifting and earnings valuation this research investigates the extent to which u s multinational enterprises mnes engage in tax motivated income shifting between the u s and foreign jurisdictions and whether investors differentially capitalize shifted income based on its true source or its reported source we find evidence that u s mnes facing foreign tax rates that on average exceed the u s statutory tax rate shift taxable income into the united states and that investors recognize firms income shifting patterns when valuing the foreign versus domestic components of reported earnings we examine u s multinational manufacturing companies from 1984 to 1992 to determine the cross sectional relation between firm level foreign profit margins and average foreign tax rates if u s mnes respond to high low foreign tax rates by shifting income into out of the united states then ceteris paribus we expect a negative relation between foreign profit margins and average foreign tax rates in addition

multinational firms and tax havens multinational firms with operations in high tax countries can benefit the most from reallocating taxable income to tax havens though this is sufficiently difficult and costly that only 20 4 of german multinational firms have any tax haven affiliates among german manufacturing firms a 1 percentage point higher foreign tax rate is associated with a 2 3 greater likelihood of owning a tax haven affiliate this is consistent with tax avoidance incentives and contrasts with earlier evidence for u s firms the relationship is less strong for firms in service industries possibly reflecting the difficulty of reallocating taxable service income

the political economy of tariff protection in china evidence from the wto accession we analyze china s tariff rates at wto accession using a political economy approach a model drawing on branstetter and feenstra 2002 is used to derive an optimal tariff rate for each industry the model predicts that a government would set a high tariff rate if an industry is of large state owned enterprise soe share multinational share or small foreign import share from the model we reveal the chinese government s preference towards different interest groups under the binding tariff constraint from the wto commitments the estimated structural parameters imply that the political weights on both the soe profits and consumer income diminish with the economic opening more important the government still favours soes over consumer income our findings are consistent with the special features of china s economy economie politique de la protection tarifaire en chine resultats derives de l accession a l omc l auteur analyse a l aide d une approche d economie politique les droits de douane de la chine lors de son accession a l office mondial du commerce un modele s inspirant de branstetter feenstra 2002 est utilise pour deriver un droit de douane optimal pour chaque industrie le modele predit qu un gouvernement va fixer un droit de douane eleve si l industrie est soit partie du grand secteur des entreprises d etat ee du secteur des multinationales ou du secteur ou l importation est peu importante on revele les preferences du gouvernement chinois entre les divers groupes d interets face aux contraintes imposees par les engagements vis a vis l office mondial du commerce les parametres structurels calibres impliquent que le poids politique a la fois des profits des ee et des revenus des consommateurs diminue quand il y a liberalisation du commerce plus important peut etre le gouvernement favorise toujours les profits des ee plutot que le revenu des consommateurs ces resultats s arriment bien aux caracteristiques speciales de l economie chinoise

foreign direct investment and investment under uncertainty we show that in uncertain environments ownership and internalization advantages may be negatively rather than positively associated with fdi this reversal from extant theory occurs because ownership advantages often serve to make fdi delayable while internalization advantages often serve to make it less reversible when fdi becomes either more delayable or less reversible it is less likely to occur at a point in time our approach enriches the who where and why explanations offered by current fdi theory to incorporate the question of when

corruption trade costs and gains from tariff liberalization evidence from southern africa this paper exploits quasi experimental variation in tariffs in southern africa to estimate trade elasticities traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities in contexts of pervasive corruption even small bribes can significantly reduce tariffs making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms import behavior the tariff liberalization scheme is however still associated with improved incentives to accurately report quantities of imported goods and with a significant reduction in bribe transfers from importers to public officials

the social welfare function and individual responsibility some theoretical issues and empirical evidence the literature on income distribution has attempted to evaluate different degrees of inequality using a social welfare function swf approach however it has largely ignored the source of such inequalities and has thus failed to consider different degrees of inequity the literature on egalitarianism has addressed issues of equity largely in relation to individual responsibility this paper builds upon these two literatures and introduces individual responsibility into the swf results from a small scale study of people s preferences in relation to the distribution of health benefits are presented to illustrate how the parameter values of a swf might be determined

the predictive validity of prospect theory versus expected utility in health utility measurement most health care evaluations today still assume expected utility even though the descriptive deficiencies of expected utility are well known prospect theory is the dominant descriptive alternative for expected utility this paper tests whether prospect theory leads to better health evaluations than expected utility the approach is purely descriptive we explore how simple measurements together with prospect theory and expected utility predict choices and rankings between more complex stimuli for decisions involving risk prospect theory is significantly more consistent with rankings and choices than expected utility this conclusion no longer holds when we use prospect theory utilities and expected utilities to predict intertemporal decisions the latter finding cautions against the common assumption in health economics that health state utilities are transferable across decision contexts our results suggest that the standard gamble and algorithms based on should not be used to value health

international corporate tax avoidance a review of the channels magnitudes and blind spots this paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations it surveys evidence on main channels of corporate tax avoidance including transfer mispricing international debt shifting treaty shopping tax deferral and corporate inversions moreover it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting we find that the literature suggests that for the most recent year a 1 percentage point lower corporate tax rate compared to other countries will expand before tax income by 1 5 percent an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time the literature on tax avoidance still has several unresolved puzzles and blind spots that require further research

the korean manufacturing multinationals as an extension of the export led growth of national economy overseas direct investment by korean multinationals has been rapidly increasing this article explores the development of the overseas manufacturing direct investment by korean firms and the relationship between parent firms and overseas affiliates three main issues are discussed the ownership specific assets location specific factors and government policies are the important sets of variables that help to explain the internationalization of the korean firms in the manufacturing sector the nature of technology transfer by korean multinationals to their subsidiaries and the benefits as a result of its overseas investment to korean the data for this study were gathered through structured interviews with the parent companies of 18 out of 21 manufacturing overseas subsidiaries and joint ventures formed by korean firms

taxation with costly administration the concept of a tax technology is used here as providing a unified framework for analyzing both administrative activity by tax authorities and tax resisting activity by taxpayers this framework provides a simple formalization of adam smith s four components of tax costs administration substitution active noncompliance and passive compliance the model is used to derive policy implications concerning the proper measurement of the cost of public funds and concerning the criterion for optimal administration

the effect of the stock market on investment a comparative study this paper is concerned with examining whether exogenous events whose only direct effect is to change stock prices can indirectly affect corporate investment through the stock price mechanism it is argued that the actual effect of share price changes depends on institutional considerations which affect the degree of managerial autonomy e g the extent of the use of the takeover mechanism gearing ratios and the role of employees in corporate decision making therefore it would be reasonable to expect the stock market to be less influential in japan or germany when compared with the u s or u k this paper provides some econometric evidence which supports this view in that once one has allowed for other influences on investment share prices provide no additional explanatory power for investment behaviour in japan or germany but they do affect investment in the u k and u s if one believes that the stock market is sometimes swayed by irrational considerations the absence of an influence of share prices on investment in japan or germany may then be regarded as an advantage

wto accession and tariff evasion abstract this study documents some unintended consequences of the world trade organization wto membership by providing evidence on displacement of tariff evasion driven by the wto accession process the analysis focuses on the wto customs valuation agreement cva which limits the discretion of customs officials when it comes to assessing the price of imports while prior to the wto accession customs officials are free to use their own judgment or apply minimum or reference prices after their country joined the wto they are mandated to accept the invoice price issued by the exporter if customs officials enjoy discretion with respect to assessing the import price they may assist importers with tariff evasion in exchange for bribes removing such discretion limits their ability to facilitate misrepresentation of import prices using data on 15 countries which joined the wto between 1996 and 2008 we find a positive relationship between underreporting of import prices and the tariff rate which is expected as the incentive to evade increases with the tariff rate importantly this relationship disappears after a country joins the wto this result is consistent with the cva closing one channel for corrupt behavior however we also find that changes to customs valuation procedures induce importers to seek alternative ways of tariff evasion such as underreporting of quantities and product misclassification the overall level of evasion remains unchanged

the optimal elasticity of taxable income abstract the strength of the behavioral response to a tax rate change depends on the environment individuals operate in and may be manipulated by instruments controlled by the government we first derive a measure of the social benefit to affecting this elasticity the paper then examines this effect in the solution to the optimal income taxation problem when such an instrument is available first in a general model and then in an example when the government chooses the income tax base

international relocation firm and industry determinants this article is the first to explore the determinants of international relocation of a firm it is found that labour intensive firms in a highly industrialized and open economy such as belgium tend to relocate more to other countries than their highly productive capital intensive counterparts access to a global network firm size and the rate of innovation have a positive effect on the probability of relocation uncertainty has a negative impact on the probability of relocation the positive effect of firm size and profitability on the relocation decision is clearly distinct from its effect on the exit decision of a firm

tariffs enforcement and customs evasion evidence from india we examine the effect of tariff policies on evasion of customs duties in the context of the trade reform in india of the 1990s by exploiting the variation in tariff rates across time and products we identify a robust positive elasticity of evasion with respect to tariffs a second contribution of the paper is to provide some evidence on the impact of enforcement while we cannot identify the direct impact of enforcement on evasion we can establish the extent to which enforcement related factors such as product characteristics that determine the ease of detection of evasion affect the evasion elasticity the results render support to the hypothesis that improvements in enforcement can reduce the responsiveness of evasion to tariffs

comparative analysis of the foreign investment evaluation practices by u s based manufacturing multinational companies a large sample of u s based manufacturing multinational companies were surveyed regarding their investment valuation practices it was found that a foreign direct manufacturing investment fdmi is motivated primarily by profit rather than the recently proposed behavioral considerations b the majority of companies practice project by project analysis of the simple accept reject type rather than the comparative project analysis advocated by financial analysts c most of the companies utilized criteria for single investments cash flows and cost of capital that were in general agreement with the analytical literature d companies were concerned more with business risk than currency and political risks moreover all three types of risk were evaluated subjectively and accounted through adjustments in the required rates of return rather than the cash flows of the fdmi as specified in financial research e analysis of demographic and behavioral variables for possible relationships to fdmi evaluation practices yielded interesting but variable specific results the questionnaires were mailed in may 1979 and the personal interviews were conducted during december 1979 and the first six months of 1980

prospect theory in the health domain a quantitative assessment it is well known that expected utility eu has empirical deficiencies cumulative prospect theory cpt has developed as an alternative with more descriptive validity however cpt s full function had not yet been quantified in the health domain this paper is therefore the first to simultaneously measure utility of life duration probability weighting and loss aversion in this domain we observe loss aversion and risk aversion for gains and losses which for gains can be explained by probabilistic pessimism utility for gains is almost linear for losses we find less weighting of probability 1 2 and concave utility this contrasts with the common finding of convex utility for monetary losses however cpt was proposed to explain choices among lotteries involving monetary outcomes life years are arguably very different from monetary outcomes and need not generate convex utility for losses moreover utility of life duration reflects discounting causing concave utility

regional development or resource preservation a perspective from japanese appliance exports abstract this paper examines japanese resource outflows in the form of exported used and functional products in 2007 by quantifying the unintentional metal exports for a number of specialty metals typically used in electronics and electrical equipment we find that more than half of the indium and 20 30 of the barium lead antimony strontium zirconium silver gold and tin in domestically discarded products were not recycled in japan but rather were exported in products to be used elsewhere the destinations of these metals were mainly asian countries with rudimentary recycling technology these results demonstrate that although these metals could have been stockpiled domestically for future recovery and recycling they were instead sent to countries where recycling of these scarce metals is unlikely from a resource perspective therefore the free trade of used japanese products compromises long term domestic resource availability as it increases the quality of life in developing countries

the eclectic paradigm of international production a restatement and some possible extensions this article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade and restates its main tenets the second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to mne activity as well

experienced vs described uncertainty do we need two prospect theory specifications this paper reports on the results of an experimental elicitation at the individual level of all prospect theory components i e utility loss aversion and weighting functions in two decision contexts situations where alternatives are described as probability distributions and situations where the decision maker must experience unknown probability distributions through sampling before choice for description based decisions our results are fully consistent with prospect theory s empirical findings under risk furthermore no significant differences are detected across contexts as regards utility and loss aversion whereas decision weights exhibit similar qualitative properties across contexts typically found under prospect theory our data suggest that for gains at least the subjective treatment of uncertainty in experience based and description based decisions is significantly different more specifically we observe a less pronounced overweighting of small probabilities and a more pronounced underweighting of moderate and high probabilities for experience based decisions on the contrary for losses no significant differences were observed in the evaluation of prospects across contexts this paper was accepted by george wu decision analysis

the effect of tax enforcement on tax elasticities evidence from charitable contributions in france optimal tax formulas expressed in sufficient statistics are usually calibrated under the assumption that the relevant tax elasticities are unaffected by other available policy instruments in practice though tax authorities have many more instruments than the mere tax rates and tax elasticities are functions of all these policy instruments in this paper we provide evidence that tax elasticities are extremely sensitive to a particular policy instrument the level of tax enforcement we exploit a natural experiment that took place in france in 1983 when the tax administration tightened the requirements to claim charitable deductions the reform led to a substantial drop in the amount of contributions reported to the administration which can be credibly attributed to overreporting of charitable contributions before the reform rather than to a real change in giving behaviours we show that the reform was also associated with a substantial decline in the absolute value of the elasticity of reported contributions this finding allows us to partially identify the elasticity of overreporting contributions which is shown to be large and inferior to 2 in the lax enforcement regime we further show using bunching of taxpayers at kink points of the tax schedule that the elasticity of taxable income also experienced a significant decline after the reform our results suggest that optimizing the tax rate for a given tax elasticity when other policy instruments are not optimized can lead to misleading conclusions when tax authorities have another instrument that could set the tax elasticity itself at its optimal level as in kopczuk and slemrod 2002

china s exports export tax rebates and exchange rate policy this paper examines the relationship between china s exports export tax rebates and exchange rate policy it offers an explanation for why china s exports continued to rise under rmb real appreciations during the asian financial crisis based on a traditional export demand model we test our hypothesis that the counteracting effects of china s export tax rebate policy have diminished the effectiveness of real exchange rates in facilitating the resolution of trade imbalances under the current pegged exchange rate regime we find evidence that rmb real appreciations during the crisis negatively affected china s exports but the negative effects were mitigated by the positive effects of export tax rebates we also find evidence of a long run relationship between china s exports and the other explanatory variables the empirical evidence suggests that under the pegged exchange rate regime with limited adjustments real exchange rate movements alone cannot resolve china s external imbalances the policy implication of this study is that china needs to redirect its decades long export oriented development strategy to one that emphasises domestic demand oriented development and to replace the current pegged exchange rate regime with a market oriented more flexible exchange rate regime

r d intensity and the effective tax rate a meta regression analysis we apply meta regression techniques to provide a quantitative review of the empirical literature on how research and development r d expenses affect the effective tax rate etr r d expenses relate to a well accepted profit shifting channel strategic placement of intellectual property within a multinational entity using a unique hand collected data set we add a new perspective to the current base erosion and profit shifting beps state of research and debate in three ways first observing that primary studies report mixed evidence on how r d expenses affect etr we provide a consensus estimate for this effect second we consider this effect in more detail by separating a tax accounting effect and a profit shifting effect which to our knowledge has not yet been investigated we detect that one third of the r d effect on the etr is due to the tax accounting effect and could be mitigated via book tax conformity we further find that 10 of the profit shifting effect can be traced back to r d tax credits third our meta regression reveals factors that are possible sources of variation and bias in previous empirical studies

the rise of china and east asian export performance is the crowding out fear warranted this paper examines how china s emergence as a major trading nation is affecting export performance of its east asian neighbours following a stage setting overview of trends and patterns of china s export performance it probes china competition in third country markets and emerging patterns of imports the east asian export experience is examined in a wider global context against the backdrop of the ongoing process of global production sharing the findings indicate that the china threat has been vastly exaggerated in the contemporary policy debate china s rapid market penetration in traditional labour intensive manufactured goods has occurred mostly at the expense of the high wage east asian countries without crowding out the export opportunities of low wage countries in the region more importantly china s rapid integration into global production networks as a major assembly centre has created new opportunities for the other east asian countries to engage in various segments of the value chain in line with their comparative advantage

why pay more corporate tax avoidance through transfer pricing in oecd countries this paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of oecd countries we use a new method to disentangle the income shifting effects from the effects of tax rates on real activity our baseline estimates suggest that a substantial share of the revenues from a unilateral increase in the corporate tax rate is lost because of a decline in reported income

size location and agglomeration of inward foreign direct investment fdi in the united states halvorsen t size location and agglomeration of inward foreign direct investment fdi in the united states regional studies since the late 1970s a range of economic development policies to attract foreign direct investments fdis have been tried out despite a policy reorientation from a large size bias to policies also favouring smaller investments little empirical work has been performed on the determinants of investment size this paper presents empirical evidence on how the size of fdis is determined by agglomeration and other state level factors the results indicate that fdi agglomeration and urbanization affect investment size and that taxes markets labour land and the concentration of scientific knowledge are important determinants in the size composition of fdi halvorsen t le montant la localisation et l agglomeration de l investissement direct etranger ide aux etats unis regional studies depuis la fin des annees 1970 on met en vigueur toute une serie de politiques de developpeme

tax rates and tax evasion evidence from missing imports in china tax evasion by its very nature is difficult to observe we quantify the effects of tax rates on tax evasion by examining the relationship in china between the tariff schedule and the evasion gap which we define as the difference between hong kong s reported exports to china at the product level and china s reported imports from hong kong our results imply that a one percentage point increase in the tax rate is associated with a 3 percent increase in evasion furthermore the evasion gap is negatively correlated with tax rates on closely related products suggesting that evasion takes place partly through misclassification of imports from higher taxed categories to lower taxed ones in addition to underreporting the value of imports

the demand for tax haven operations what types of firms establish tax haven operations and what purposes do these operations serve analysis of affiliate level data for american firms indicates that larger more international firms and those with extensive intrafirm trade and high r and d intensities are the most likely to use tax havens tax haven operations facilitate tax avoidance both by permitting firms to allocate taxable income away from high tax jurisdictions and by reducing the burden of home country taxation of foreign income the evidence suggests that the primary use of affiliates in larger tax haven countries is to reallocate taxable income whereas the primary use of affiliates in smaller tax haven countries is to facilitate deferral of u s taxation of foreign income firms with sizeable foreign operations benefit the most from using tax havens an effect that can be evaluated by using foreign economic growth rates as instruments for firm level growth of foreign investment outside of tax havens one percent greater sales and investment growth in nearby non haven countries is associated with a 1 5 to 2 greater likelihood of establishing a tax haven operation

disguised carry trade and the transmission of global liquidity shocks evidence from china s goods trade data abstract currency carry trade disguised as goods trade can potentially channel external financial shocks to domestic economic environment despite capital controls we identify this channel in the context of post gfc china using variations in product characteristics and a policy shock we show that trade volumes of cost efficient products responded significantly more to carry returns however such differential responses to carry returns vanished after the government s clampdown on illicit capital flows at the aggregate level we demonstrate further that the surge in disguised carry trades led to a significant expansion of china s shadow banking credit but not its traditional bank lending credit

taxes and leverage at multinational corporations abstract empirical research has struggled to show that variation in corporate capital structure arises from variation in estimated corporate income tax rates we argue that in previous studies both the tax rates applied to multinational corporations and the taxable income earned have been mismeasured using the bureau of economic analysis annual survey sample combined with each firm s income and country specific tax rate we find that firms do have higher leverage ratios and lower interest coverage ratios when they operate in countries with higher tax rates as theory would suggest the trade off theory of capital structure continues to have empirical support

discrepancies in international data an application to china hong kong entrepot trade before discussing discrepancies in international data it is essential to talk about the sources of the data the principal source for global trade statistics is the united nations un that agency relies on the trade statistics reported by its member countries the obvious discrepancy in these reports is that what country a says it sends to country b is not the same as what country b says it receives from a such differences in what the exporting and importing countries report is not just a feature of developing countries these discrepancies are pervasive in industrial countries as well for example since 1989 the united states has abandoned its attempt to keep track of exports to canada and now just relies on canadian data on its imports from the united states see robert feenstra 1997 table 2 prior to this action the united states underreported its exports to canada by more than 10 percent as compared to the canadian value this illustrates the general principle that the information collected by the importer which is often collecting tariff revenues and therefore has an incentive to record imports accurately is usually viewed as more accurate than that collected by the exporter there are then two problems with the un data it contains different information from the exporting and importing countries and it is expensive at least by the standards of lowbudget academic work progress on the first of these problems has been made by statistics canada in the world trade database wtdb that agency obtains the un trade data and then attempts to resolve the differences between the exporters and importers providing a single number for the value of each disaggregate good sent from country a to b these data are distributed on cd rom but are still fairly expensive by academic standards to make progress on the second problem the statistics canada data set for an early set of years 1970 1992 is distributed by the national bureau of economic research nber for a nominal fee also in cd rom format see feenstra et al 1997 in view of the widespread use of these data distributed by the un statistics canada or the nber it is worth asking how well the statistics canada database resolves the differing reports by the exporters and importers to take a particularly important example consider u s trade with china in 1996 the united states reported a deficit with china of 39 5 billion while the chinese reported a value of the u s deficit of 10 5 billion these two figures differ by 29 billion or a factor of three times at the heart of these differing values is the treatment of goods shipped through hong kong which remains a separate entity from china for customs purposes to what extent does statistics canada resolve the differences between these reported trade values to arrive at some credible value of bilateral trade unfortunately this issue is not resolved at all the values given in the statistics canada wtdb for chinese exports to the united states are very close to those reported by china and are much less than those reported by the united states this is contrary to the general principle stated above of treating the exporter s record of trade as less accurate than the importer s record on the other hand the u s official figures for imports from china are too high because they include the feenstra department of economnics university of california davis ca 95616 haas school of business university of califomia berkeley and national bureau of economic research hai department of economics fort lewis college and china centre for economic research beijing university woo and yao department of economics university of califomia davis we thank li yan jin hongman and jiang xiaozhu from the customs general administration people s republic of china for assisting with the study from which the results reported here are drawn

the transformation of competitive advantage in east asia an analysis of technological and trade specialisation summary in recent years there has been considerable interest in the relationship between a country s export competitiveness and the role played by technology in strengthening and maintaining competitive advantage a central feature of recent empirical work mainly focused on the oecd countries has rested on examining patterns of export and technological specialization between economies and sectors this paper moves attention away from the advanced industrialized economies to examine the trends for trade and technological specialization among the east asian developing economies in particular two aspects of specialization are examined first to what extent have patterns of competitive advantage changed over time and second to measure the relationship between patterns of trade and technological specialization important differences are found in the patterns of specialization and in the relationship between them among the advanced east asian economies and those catching up

tax motivated transfer mispricing in south africa direct evidence using transaction data abstract this paper provides the first direct systematic evidence of profit shifting through transfer mispricing in a developing country using south african transaction level customs data i directly test for transfer price deviations from arm s length pricing i find that multinational firms in south africa manipulate transfer prices in order to shift taxable profits to low tax countries the estimated tax loss relating to imported goods alone is 0 5 of corporate tax payments my estimates do not support the common belief that transfer mispricing in south africa is more severe than in advanced economies i find that an oecd recommended reform had no long term impact on transfer mispricing but argue that the method used in this paper provides a cost efficient way to curb transfer mispricing

the us china trade imbalance will revaluing the rmb help much abstract the large us china trade imbalance is regularly blamed on the undervalued rmb using an estimated model of the trade balance we find that improvements in the trade balance are likely to be modest for plausible revaluations

political connections and tariff evasion evidence from tunisia are politically connected firms more likely to evade taxes this paper presents evidence suggesting firms owned by president ben ali and his family were more prone to evade import tariffs during ben ali s reign evasion gaps defined as the difference between the value of exports to tunisia reported by partner countries and the value of imports reported at tunisian customs were correlated with the import share of connected firms this association was especially strong for goods subject to high tariffs and driven by underreporting of unit prices which diminished after the revolution consistent with these product level patterns unit prices reported by connected firms were lower than those reported by other firms and declined faster with tariffs than those of other firms moreover privatization to the ben ali family was associated with a reduction in reported unit prices whereas privatization per se was not

income tax compliance in india an empirical analysis abstract aggregate data are used to study determinants of income tax revenues and taxpayer compliance in india during 1965 1966 to 1992 1993 the estimates show that both revenues collected and compliance were significantly affected by tax structure marginal tax rates and exemption limit in addition inflation as well as declining assessment intensity had a significant negative effect while traditional enforcement tools searches penalties and prosecution activity had only a limited effect best practice enforcement assessment and tax structure policies could have yielded at most a 90 revenue increase leaving india s income tax performance below the average of countries with similar gdp per capita thorough reform of tax administration is therefore needed to raise income tax collection in india to international standards

host country reforms and fdi inflows how much difference do they make summary this study examines the effects of various policies on foreign direct investment fdi flows from the perspective of the eclectic theory of international investment and hence the advantages of foreign ownership host country location and internationalization host country policies can influence fdi flows primarily through their influence on the advantages of location in the host country pooled cross section and time series data for 49 less developed countries ldcs over 1970 95 are used to examine the effects of several different types of policy institutional variables including corporate tax rates tariff rates the degree of openness to international capital flows exchange rate distortions contract enforcement nationalization risk bureaucratic delay and corruption a multivariate analysis of the effects on fdi flows of each type of policy with and without controls for other relevant determinants is conducted two different sources of fdi data are employed as well as two different measures of capital controls although there are methodological problems in estimation and especially collinearity problems and relatively severe availability constraints for some of the relevant measures the results demonstrate the relevance and importance for fdi flows of many of the policy institutional variables under study they also indicate that the results from panel methods yield results that differ rather significantly from those obtained from pure cross section analysis because of complementarity between the various elements of a healthy investment climate the effects of some policy reforms estimated from models which do not control for changes in other policies may overstate the effectiveness of individual policy reforms

stickiness synchronization and passthrough in intrafirm trade prices about forty percent of all u s international trades occurs between related parties or intra rm such as trades between a parent and subsidiary of the same multinational corporation this paper uses a transaction level dataset that distinguishes arm s length

the heterogeneous impact of brexit early indications from the ftse abstract the uk s decision to leave the eu is surrounded by several studies simulating its potential effects we take an alternative approach by examining how news of brexit affected expectations as embodied in stock returns using a two stage estimation process while most firms had negative returns following news of the referendum s result with nearly 3 trillion wiped off global markets there was considerable heterogeneity in their changes relative to expectations we show that this heterogeneity can be explained by the firm s global value chain with firms heavily exposed to the eu and uk doing worse in addition we find that firms reliant on imported intermediates also perform worse this however is partially offset via intra firm trade in intermediates when sterling fell relative to host currencies these changes were primarily in the first two trading days and highly persistent understanding these movements gives a better understanding of brexit s potential effects

the impact of controlled foreign company legislation on real investments abroad a multi dimensional regression discontinuity design controlled foreign company cfc rules are frequently imposed by countries as part of their anti tax avoidance legislation this paper aims at quantifying the impact of the german cfc rule on the universe of foreign investments held by german multinational firms the german cfc legislation gives rise to a multi dimensional regression discontinuity design which allows us to estimate local average treatment effects along the dimensions determining treatment our results suggest a significant and economically large impact of the cfc legislation on multinationals real activity abroad we also find evidence of some heterogeneity in estimated treatment effects according to parametric as well as nonparametric estimates

evasion behaviors of exporters and importers evidence from the u s china trade data discrepancy abstract since the late 1990s reported u s imports from china and hong kong have regularly and increasingly exceeded reported exports of china and hong kong to the united states this discrepancy which is not caused by re exporting through hong kong varies by product categories and in some cases takes the opposite sign in this paper we focus on china s direct exports to the united states using a model that allows for simultaneous misreporting to two authorities we find strong statistical evidence of under reporting exports at the chinese border to avoid paying value added tax vat the value of vat avoided is estimated at 6 5 billion during 2002 2008 and the associated understatements account for approximately two thirds of the discrepancy we also provide evidence of tariff evasion at the u s border in particular for related party transactions and indirect evidence of transfer pricing and evasion of chinese capital controls an estimated 2 billion of u s tariff revenue is lost due to such evasion during 2002 2008 which reduces the apparent size of the statistical discrepancy

why the european union should adopt formula apportionment with a sales factor using a two country tax competition model with a multinational enterprise mne this paper addresses the question of whether the european union should replace separate accounting sa in corporate income taxation by formula apportionment fa and if so which apportionment factors should be used our main result is that fa with a sales factor may mitigate or even eliminate fiscal externalities caused by the countries tax policy hence our analysis provides a microfoundation for the sales apportionment factor in an empirical calibration to the eu 15 we show that the transition from sa to fa with a sales only formula raises average tax rates by 2 and average tax revenues by 1 billion euros or 0 1 of gdp these effects result in an increase of welfare

unobserved tax avoidance and the tax elasticity of fdi abstract this paper investigates the tax responsiveness of multinational firms investment decisions in foreign countries distinguishing firms that are able to avoid taxes avoiders from those that are not non avoiders from a theoretical point of view the tax responsiveness of firms crucially depends on this distinction empirically however a firm s ability to avoid profit taxes is inherently unobservable to the researcher to address this problem we use a finite mixture modeling approach which allows us to distinguish avoiders from non avoiders stochastically from a mixture of distributions of the two types of firms using panel data on the universe of foreign affiliates of german multinational firms over the years 1999 2010 we find that investments of tax avoiders do not respond to host country profit taxes at all while those of non avoiders do about 11 of the affiliates are estimated to be able to avoid taxes these investments account for about 58 of the stock of foreign fixed assets held by german multinational firms abroad a one percentage point increase in the statutory corporate profit tax rate of a host country is found to reduce the fixed assets of non avoiders in that host country by 0 81

altered states taxes and the location of foreign direct investment in america this paper compares the distribution between u s states of investment from countries that grant foreign tax credits with investment from all other countries the ability to apply foreign tax credits against home country tax liabilities reduces an investor s incentive to avoid high tax foreign locations state corporate tax rate differences of 1 percent are associated with differences of 9 11 percent between the investment shares of foreign tax credit investors and the investment shares of all others suggesting that state taxes significantly influence the pattern of foreign direct investment in the united states copyright 1996 by american economic association

the shape of utility functions and organizational behavior based on measurements among 332 owner managers we investigate how theglobal shape of the utility function i e s shaped versus concave or convex over the total range of outcomes relates to choice behavior we find that the global shape of the utility function differs across decision makers about one third of the owner managers exhibit an s shaped utility function and that the global shape is linked to organizational behavior i e the production system employed a result that does not change when using different methods to identify the decision maker s global shape of the utility function the decision maker s risk attitude risk averse or risk seeking does not affect the choice of the production system whereas the degree of risk aversion based on thelocal shape of the utility function may be important in explaining owner managers trading behavior pennings and smidts 2000 more structural organizational behavior appears to be linked to theglobal shape of the utility function

eliciting von neumann morgenstern utilities when probabilities are distorted or unknown this paper proposes a new method the gamble tradeoff method for eliciting utilities in decision under risk or uncertainty the elicitation of utilities to be used in the expected utility criterion turns out to be possible even if probabilities are ambiguous or unknown a disadvantage of the tradeoff method is that a few more questions usually must be asked to clients also the lotteries that are needed are somewhat more complex than in the certainty equivalent method or in the probability equivalent method the major advantage of the tradeoff method is its robustness against probability distortions and misconceptions which constitute a major cause of violations of expected utility and generate inconsistencies in utility elicitation thus the tradeoff method retains full validity under prospect theory rank dependent utility and the combination of the two i e cumulative prospect theory the tradeoff method is tested for monetary outcomes and for outcomes describing life duration we find higher risk aversion for life duration but the tradeoff method elicits similar curvature of utility apparently the higher risk aversion for life duration is due to more pronounced deviations from expected utility

redistribution when avoidance behavior is heterogeneous abstract the optimal income taxation framework is extended to account for heterogeneity in avoidance behavior the optimal tax formulae are shown to be simply and intuitively modified to reflect the value of taxable income as an indicator of the need for transfers at a given skill level this effect is in addition to any effect implied by just considering additional margins of response to taxes alternative sources of heterogeneity and their likely consequences are discussed when the choice of administration is added to the model it is demonstrated that the optimal tax system may include some seemingly wasteful avoidance schemes even if they could be eliminated without any cost when an avoidance scheme is more heavily used by the needy it may provide additional redistribution without affecting standard incentive constraints

income misattribution under formula apportionment abstract alternatives to the current system of separate tax accounting such as the proposed common consolidated corporate tax base in europe would apportion a firm s worldwide profits using formulas based on the location of employment capital or sales this paper offers a new method of evaluating the accuracy of these apportionment rules and the ownership distortions they create evidence from european company accounts indicates that apportionment formulas significantly misattribute income since employment and other factors on which they are based do a very poor job of explaining a firm s profits for example the magnitude of property employment and sales explains less than 22 of the variation in profits between firms and the prediction estimates from using such a formula exceed half of predicted profits 64 of the time and exceed twice predicted income 11 of the time as a result the use of formulas rewards or punishes international mergers and divestitures by reallocating taxable income between operations in jurisdictions with differing tax rates the associated ownership distortion is minimized by choosing factor weights to minimize weighted squared prediction errors for which based on the european evidence labor inputs should play little if any role in allocation formulas but even a distortion minimizing formula creates large incentives for inefficient ownership reallocation due to the enormous variation in profitability that is unexplained by formulary factors implying that significant resource allocation costs would accompany european adoption of formulary apportionment methods

multinational firms and government revenues abstract underinvoicing of intrafirm exports by a multinational firm mnf can increase the exporting country s revenue overinvoicing can increase the importing country s revenue when its tariff rate is higher than its profit tax rate and both countries revenues may change in the same direction transfer pricing increases the mnf s global tax burden unambiguously when the home profit tax rate is not smaller than the foreign and the mnf overinvoices and can increase it in other cases this last result arises when increase in the level of intrafirm trade which accompanies transfer pricing and or non wholly owned subsidiary are considered

an elicitation of utility for quality of life under prospect theory this paper performs several tests of decision analysis applied to the health domain first we conduct a test of the normative expected utility theory second we investigate the possibility to elicit the more general prospect theory we observe risk aversion for gains and losses and violations of expected utility these results imply that mechanisms governing decisions in the health domain are similar to those in the monetary domain however we also report one important deviation utility is universally concave for the health outcomes used in this study in contrast to the commonly found s shaped utility for monetary outcomes with concave utility for gains and convex utility for losses

multinational firms heterogeneity in tax responsiveness the role of transfer pricing in this paper we show that the ability of multinational firms to manipulate transfer prices affects the tax sensitivity of foreign direct investment fdi we offer a model of international capital allocation where firms are heterogeneous in their ability to manipulate transfer prices perhaps paradoxically we show that the ability to shift profits can make parent companies investment more sensitive to host country tax rates as long as investors expect fiscal authorities to use price and profit detection methods we then offer a comprehensive empirical study to test our predictions in the case of japanese fdi we exploit the finding that the unobservable ability to manipulate transfer prices is correlated with whole ownership of affiliates and r d expenditure based on country parent firm and sector characteristics we estimate an investment equation on a sample of 3 614 japanese affiliates in 49 emerging countries we obtain a greater semi elasticity of investment to the statutory tax rate in affiliates that are wholly owned and that have r d intensive parents we interpret these results as indirect evidence that abusive transfer pricing is one of the determinants of fdi activity

fixing the leak in okun s bucket optimal tax progressivity when avoidance can be controlled this paper examines optimal income tax progressivity when avoidance responses to taxation are important and can be controlled at some cost by the government a simple example shows that ignoring the fact that avoidance can be controlled that the leak in okun s bucket can be fixed can lead to misleading implications about the optimal degree of tax rate progressivity the paper then generalizes the standard modei of the optimal linear income tax to include taxpayer avoidance behavior and the ability of government to control the avoidance but not the labor supply response to higher marginal tax ites the discussion suggests that if the tax burden is to be made more progressive base broadening and increased enforcement ought to be considered as alternatives or complements to increasing tax rates for high income individuals

tax avoidance through re imports the case of redundant trade abstract many countries have participated in re imports a type of round trip trade originating from a country and back to the same country china as the largest re importer has imported more from itself than from the u s since 2005 as the first empirical study on re imports this paper shows that china s re imports are at least partially driven by the imperfection of the value added tax vat rebate policy for processing trade in principle firms should be able to claim input vat credits after selling their finished products in china or receive input vat rebates after exporting their products some processing firms however are not qualified for the credits or rebates when selling in china hence they may export their products to obtain rebates some downstream processing firms can benefit from re importing these products duty free as inputs because they cannot obtain the rebates when buying inputs in china even after exporting their final goods

capital flight to germany two alternative measures abstract we use two measures to study two capital flight channels for germany one measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the eurosystem of central banks for both measures we propose refinements to enhance the assessment of capital flight we find that capital flight towards germany via these two channels has been quite sizable in the recent decade and can tally to about 2 of gdp annually regarding their determinants we show that the two capital flight measures are driven by both common and measure specific factors traditional determinants such as covered interest differentials only play a limited role while crisis specific factors such as economic policy uncertainty the ecb collateral policy as well as currency misalignment are driving factors of the investors apparent flight to safety behavior

tax bases tax rates and the elasticity of reported income abstract tax reforms usually change both tax rates and tax bases using a panel of income tax returns spanning the two major u s tax reforms of the 1980s and a number of smaller tax law changes i find that the elasticity of income reported on personal income tax returns depends on the available deductions this highlights that this key behavioral elasticity is not an immutable parameter but rather that it can be to some extent controlled by policy makers one implication is that base broadening reduces the marginal efficiency cost of taxation the results are very similar for all income categories indicating that the rich are more responsive to tax rates because tax rules that apply to them are different their tax base is narrower the point estimates indicate that the tax reform act of 1986 reduced the marginal cost of collecting a dollar of tax revenue with roughly half of this reduction due to the base broadening and the other half due to the tax rate reduction as a by product the analysis in this paper offers a reconciliation of disparate estimates obtained by previous studies of the tax responsiveness of income

building state capacity evidence from biometric smartcards in india anti poverty programs in developing countries are often dicult to implement in particular many governments lack the capacity to deliver payments securely to targeted beneciaries we evaluate the impact of biometrically authenticated payments infrastructure smartcards on beneciaries of employment nregs and pension ssp programs in the indian state of andhra pradesh using a large scale experiment that randomized the rollout of smartcards over 158 subdistricts and 19 million people we nd that while incompletely implemented the new system delivered a faster more predictable and less corrupt nregs payments process without adversely aecting program access for each of these outcomes treatment group distributions rst order stochastically dominated those of the control group the investment was cost eective as time savings to nregs beneciaries alone were equal to the cost of the intervention and there was also a signicant reduction in the leakage of funds between the government and beneciaries in both nregs and ssp programs beneciaries overwhelmingly preferred the new system for both programs overall our results suggest that investing in secure payments infrastructure can signicantly enhance state capacity to implement welfare programs in developing countries

an index of loss aversion to a considerable extent risk aversion as it is commonly observed is caused by loss aversion several indexes of loss aversion have been proposed in the literature the one proposed in this paper leads to a clear decomposition of risk attitude into three distinct components basic utility probability weighting and loss aversion the index is independent of the unit of payment the main theorem shows how the indexes of different decision makers can be compared through observed choices

imperfect tax competition for profits asymmetric equilibrium and beneficial tax havens abstract we present a model of tax competition for real investment and profits and show that the presence of tax havens in some cases increases the tax revenue of countries in the first part of the paper we argue that tax competition for profits is likely to be imperfect in the sense that the jurisdiction with the lowest tax rate does not necessarily attract all shifted profits under this assumption tax competition between a large number of identical countries may lead to either a symmetric equilibrium with no profit shifting or an asymmetric equilibrium where firms shift profits from high tax to low tax countries in the second part of the paper we introduce tax havens starting from a symmetric equilibrium tax havens unambiguously reduce the tax revenue of countries due to a leakage effect tax havens attract tax base from countries and a competition effect the optimal response to the increased tax sensitivity of tax bases involves a reduction of tax rates starting from an asymmetric equilibrium however tax havens also raise the tax revenue of countries through a crowding effect tax havens make it less attractive to compete for profits and thus induce low tax countries to become high tax countries we demonstrate that the latter effect may dominate the former effects so that countries on balance benefit from the presence of tax havens

transfer pricing regulation and tax competition abstract the paper analyzes multinational enterprises incentives to manipulate internal transfer prices to take advantage of tax differences across countries and implications of transfer pricing regulations as a countermeasure against such profit shifting we find that tax motivated foreign direct investment fdi may entail inefficient internal production but may benefit consumers thus encouraging transfer pricing behavior to some extent can enhance social welfare furthermore we consider tax competition between two countries to explore its interplay with transfer pricing regulations we show that the fdi source country will be willing to set a higher tax rate and tolerate some profit shifting to a tax haven country if the regulation is tight enough we also indicate a novel mechanism through which it is the larger country that undertakes tax motivated fdi the pattern we often observe in reality

should countries control international profit shifting we present a fiscal competition model with two policy instruments the level of corporate taxation and the tightness of control of profit shifting by multinational firms mnf we show that a country may optimally decide not to monitor the mnf for two reasons firstly this country becomes an attractive location for mnf activity despite a high corporate tax secondly as the profits of the mnf become mobile the focus of tax competition is shifted taxation then influences both an mnf s location and the place where it declares its profits

integrity for hire an analysis of a widespread customs reform abstract can governments improve bureaucratic performance by hiring integrity from the private sector in the past 2 decades a number of developing countries have hired private firms to conduct preshipment inspections of imports generating independent data on the value and tariff classification of incoming shipments i find that countries implementing such inspection programs subsequently experience large increases in import duty collections by contrast the growth rate of other tax revenues does not change appreciably additional evidence suggests that declines in falsification of import documentation are behind the import duty improvements the programs also lead to declines in undervaluation and misreporting of goods classifications historically this hired integrity appears to have been cost effective with improvements in import duty collections in the first 5 years of a typical inspection program amounting to 2 6 times the program s costs

international profit shifting within multinationals a multi country perspective abstract we model the opportunities and incentives generated by international tax differences for international profit shifting by multinationals the model considers not only profit shifting arising from international tax differences between affiliates and parent companies but also from tax differences between affiliates in different host countries our model yields the prediction that a multinational s profit shifting in a country depends on a weighted average of international tax rate differences between all countries where the multinational is active using a unique dataset containing detailed firm level information on the parent companies and subsidiaries of european multinationals and information about the international tax system we test our model and empirically examine the extent of intra european profit shifting by european multinationals on average we find a semi elasticity of reported profits with respect to the top statutory tax rate of 1 3 while shifting costs are estimated to be 0 6 of the tax base international profit shifting leads to a substantial redistribution of national corporate tax revenues many european nations appear to gain revenues from profit shifting by multinationals largely at the expense of germany

loss aversion under prospect theory a parameter free measurement agrowing body of qualitative evidence shows that loss aversion a phenomenon formalized in prospect theory can explain a variety of field and experimental data quantifications of loss aversion are however hindered by the absence of a general preference based method to elicit the utility for gains and losses simultaneously this paper proposes such a method and uses it to measure loss aversion in an experimental study without making any parametric assumptions thus it is the first to obtain a parameter free elicitation of prospect theory s utility function on the whole domain our method also provides an efficient way to elicit utility midpoints which are important in axiomatizations of utility several definitions of loss aversion have been put forward in the literature according to most definitions we find strong evidence of loss aversion at both the aggregate and the individual level the degree of loss aversion varies with the definition used which underlines the need for a commonly accepted definition of loss aversion

does post ante investment experience matter lessons from fdi in china ample efforts of fdi literature have researched on the motives and determinants of fdi flows based on ex ante conditions little has been studied with regard to the effects of post ante behaviour in determining future investment decisions post ante experience of fdi decisions with regard to foreign investors satisfaction or dissatisfaction and future profit expectations on recurrent decisions are critical this paper thus attempts to investigate fdi in the context of an emerging market environment with emphasis on how environmental and institutional factors and the micro firm effects of how investors post ante views on profits expectations and investment experience would affect mncs decisions on recurrent investment and firm relocation empirical results show that decisions in the short and long run were affected differently by the factors under study specifically the short run decisions were more affected by profit expectations while the long run by post ante experience on investment satisfaction dissatisfaction and environmental and institutional determinants