transfer pricing double taxation and the cost of capital the effects of double taxation are analysed when a multinational enterprise can shift profits by transfer pricing behaviour it is shown that the well known hartman sinn neutrality result may not hold in this case surprisingly an increase in the taxation of foreign dividends may lead to a lower cost of capital for the foreign subsidiary i introduction in recent years there has been growing awareness that multinational firms can evade a large portion of their statutory tax burden by manipulating transfer prices in cross border transactions one reason for shifting profits between jurisdictions using transfer pricing is the differences in corporate tax rates by underpricing intra company sales and overpricing intracompany purchases a subsidiary located in a high tax country can increase the multinational s overall profit since the parent s gain in after tax profit is higher than the subsidiary s net of tax loss a second reason for setting

taxation and the allocation of risk inside the multinational firm abstract this paper provides the first theoretical and empirical analysis of how taxation shapes the joint allocation of risk and profits inside the multinational firm theoretically we identify three mechanisms through which corporate taxes may shape the within firm allocation of risk 1 transfer pricing rules requiring risk to be compensated with higher expected returns create incentives to shift risk to low tax jurisdictions as a means to shift profits 2 risk averse owners create incentives to allocate risk to high tax affiliates to maximize risk sharing with governments 3 limited loss offset creates incentives to shift risk to affiliates in other countries empirically we show that multinational firms disproportionately allocate risk to low tax countries and that the key mechanism is the nexus between risk and profits established by transfer pricing rules within firm differences in risk explain a significant fraction of the well established correlation between profits and tax rates suggesting that risk shifting is a quantitatively non negligible channel for profit shifting

what determines bits abstract similar to bilateral or regional preferential trade agreements ptas bilateral investment treaties bits have proliferated over the past 50 years the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of bits and of the likelihood of bits between pairs of countries using a qualitative choice model in a manner consistent with explaining ptas we develop the econometric specification for explaining the two based upon a general equilibrium model of world trade and foreign direct investment with three factors two products and trade and investment costs among multiple countries in the presence of national and multinational firms the empirical model for bits and ptas is bivariate in nature and supports a set of hypotheses drawn from the general equilibrium model using the preferred empirical model for a sample of 12 880 country pairs in the year 2000 we predict correctly 88 of all pairs with a bit and a pta 81 with a bit but no pta and 84 with a pta but no bit

challenges of responding to sustainability with implications for affordable housing abstract sustainability is one of the most contested ideologies of our time because everyone acknowledges that it must occur but no one can agree on what needs to change in response this is unsurprising because objecting to the goal of sustainability is like objecting to other inherently good goals like peace or freedom responses to sustainability exist on a long continuum with some interpreting sustainability to mean conservation at all costs and reduced economic growth while others suggest that the market will ensure sustainable outcomes eventually result further sustainability can be easily manipulated to justify predetermined outcomes there are indeed a multitude of conceptual and pragmatic challenges to operating on sustainability particularly when the scale shifts from a global goal to local action using the application of sustainability to affordable housing in australia as a case study this article argues that rather than limiting sustainable outcomes the existence of the sustainability debate which focuses on the many challenges is a positive indicator that sustainability may be attainable

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

earnings shocks and tax motivated income shifting evidence from european multinationals this paper presents a new approach to estimating the existence and magnitude of tax motivated income shifting within multinational corporations existing studies of income shifting use changes in corporate tax rates as a source of identification in contrast this paper exploits exogenous earnings shocks at the parent firm and investigates how these shocks propagate across low tax and high tax multinational subsidiaries this approach is implemented using a large panel of european multinational affiliates over the period 1995 2005 the central result is that parents positive earnings shocks are associated with a significantly positive increase in pretax profits at low tax affiliates relative to the effect on the pretax profits of high tax affiliates the result is robust to controlling for various other differences between low tax and high tax affiliates and for country pair year fixed effects additional tests suggest that the estimated effect is attributable primarily to the strategic use of debt across affiliates the magnitude of income shifting estimated using this approach is substantial but somewhat smaller than that found in the previous literature

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

foreign direct investment intra firm trade and ownership structure abstract asymmetric information about true opportunity cost in trade between a multinational and its foreign affiliate can alleviate the hold up problem in foreign direct investment selling shares in the affiliate to locals is also beneficial because it increases the parent multinational s information rent that is protected from a host government s confiscatory taxation

towards an operational sustainability criterion abstract this paper examines the concept of sustainability and its implications for environmental policy analysis it builds on the premise that present society holds a moral obligation to pass on a world of undiminished life opportunities to members of future generations maintaining life opportunities in turn can be achieved by maintaining or improving a diverse set of resources and capabilities that support a person s freedom to define and pursue her own conception of the good life on an operational level this framework points to the following guideline for environmental policy protecting the rights of future generations requires either the conservation of environmental resources or compensatory measures including the provision of substitute technologies that ensure the fair and proportionate sharing of net benefits over intergenerational time scales in this framework resource depletion is permissible only if with reasonable certainty it would generate a pareto improvement relative to a baseline scenario involving strict resource conservation

capital structure choice and company taxation a meta study this paper provides a quantitative review of the empirical literature on the tax impact on corporate debt financing synthesizing the evidence from 46 previous studies we find that this impact is substantial in particular the tax rate proxy determines the outcome of primary analyses measures like the simulated marginal tax rate graham 1996a avoid a downward bias in estimates for the debt response to tax moreover debt characteristics econometric specifications and the set of control variables affect tax effects accounting for misspecification biases by means of meta regressions we predict a marginal tax effect on the debt ratio of 0 3

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

corporate taxes and the location of intangible assets within multinational firms intangible assets like patents and trademarks are increasingly seen as the key to competitive success and as the drivers of corporate profit moreover they constitute a major source of profit shifting opportunities in multinational enterprises mnes due to a highly intransparent transfer pricing process this paper argues that for both reasons mnes have an incentive to locate intangible property at affiliates with a relatively low corporate tax rate using panel data on european mnes and controlling for unobserved time constant heterogeneity between affiliates we find that the lower a subsidiary s corporate tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment this effect is statistically and economically significant even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern

the comparison between destination and origin principles under imperfect competition abstract especially but not only in the european union closer economic integration is putting increasing pressure on the destination principle under which goods entering international trade are normally taxed this has raised the possibility of switching to the origin principle which dispenses with problematic border tax adjustments this paper compares destination and origin principles under conditions of imperfect competition previous analyses which have considered only the competitive case have led to a qualified presumption in favour of the destination principle a series of results are established here for both cooperative and non cooperative tax setting which challenge that presumption under imperfect competition

repatriation taxes repatriation strategies and multinational financial policy abstract several investment repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low tax country and is limited to two alternatives repatriating taxable dividends to the parent or investing in its own real operations in our model affiliates can invest in passive assets which the parent can borrow against or in related affiliates which can be used as vehicles for tax favored repatriations we show analytically how the availability of alternative strategies can effect real investment throughout the worldwide corporation we use firm level data for us multinationals to test for the importance of alternative strategies the evidence is generally consistent with the theory particularly the strategies using related affiliates

a step beside the maximin path can we sustain the economy by following hartwick s investment rule si la durabilite est interpretee comme la necessite de soutenir le niveau de consommation ou d utilite alors l utilisation d un critere maximin est pertinente l economie soutenable est caracterisee par un niveau d investissement optimal qui satisfait la regle d investissement d hartwick cet article examine comment la durabilite d une economie basee sur une ressource non renouvelable est modifiee au voisinage du sentier maximin c est a dire lorsque la consommation ou les prix sont sous optimaux un indicateur de consommation soutenable est propose pour caracteriser la durabilite des sentiers de consommation constante definis comme des deviations au sentier maximin on decrit en particulier comment une sur consommation presente diminue la soutenabilite de l economie pour les generations futures

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

taxes and the division of foreign operating income among royalties interest dividends and retained earnings abstract how do taxes influence the way u s corporations divide foreign affiliate operating income among royalties dividends interest and retained earnings the paper goes beyond previous work that focused largely on dividend repatriation behavior and provides a comprehensive analysis of the disposition of foreign subsidiary operating income the empirical results show that taxes have a large and statistically significant effect on the composition of payments own tax prices discourage the payment of dividends royalties and interest but dividend and other repatriation taxes do not increase retained earnings they only alter the composition of payments the results are therefore consistent with a generalized hartman sinn model of the mature controlled foreign corporation that has various alternative repatriation vehicles finally this paper integrates the choice of payments with income shifting among countries because the latter may be part of a low tax strategy for repatriations in this general framework conventional composite tax prices are not appropriate because the response to a change in a composite tax price depends on which components changed

credit and deferral as international investment incentives abstract many governments tax the foreign income of their firms using a system that grants credits for foreign taxes paid and permits tax deferral for unrepatriated income this paper shows that such tax systems encourage firms to restrict their equity stakes in new foreign investments and to finance their new investments with considerable debt these incentives exist even when transfer price regulation effectively limits the profit rates foreign subsidiaries can earn the behavior of the foreign subsidiaries of us multinationals in 1984 appears to be consistent with these incentives

foreign owned firms around the world a comparative analysis of wages and employment at the micro level abstract this paper provides the first microeconomic cross country analysis of the effects of foreign ownership on wages employment and worker turnover rates using firm level and linked worker firm data we apply a standardised methodology for three developed germany portugal uk and two emerging economies brazil indonesia we find that wage effects are larger in developing countries and that for each country the largest effect on wages comes from workers who move from domestic to foreign firms employment growth after foreign takeover is concentrated in high skill jobs in contrast to widespread fears there is no evidence that wage gains come at the expense of greater job insecurity separation rates actually fall slightly after takeover we conclude that the positive effect of foreign ownership on wages is not primarily driven by its impact on incumbent wages but by its impact on the creation of high wage jobs

taxing across borders tracking personal wealth and corporate profits globalization is making it increasingly easy for corporations to shift profits to low tax countries modern technology has also made it simpler for wealthy individuals to move funds to undeclared bank accounts in offshore tax havens both issues have featured prominently in the news and global economic debates since the financial crisis but the arguments tend to be based on relatively little empirical evidence measuring the costs of tax havens to foreign governments is fraught with difficulties however balance of payments data and corporate filings show that us companies are shifting profits to bermuda luxembourg and similar countries on a large and growing scale about 20 percent of all us corporate profits are now booked in such havens a tenfold increase since the 1980s this profit shifting is typically done within the letter of the law and thus would be best described as tax avoidance rather than fraud i attempt to quantify its cost for government coffers by taking a fresh look at the most recent macroeconomic evidence and combining it in a systematic manner over the last 15 years the effective corporate tax rate of us companies has declined from 30 to 20 percent and about two thirds of this decline can be attributed to increased profit shifting to low tax jurisdictions wealthy individuals too use tax havens sometimes legally to benefit from banking services not available in their home country and sometimes illegally to evade taxes a number of changes have sought with some success to curb that form of tax evasion over the last years yet the available evidence from switzerland and

on the taxation of multinational corporate investment when the deferral method is used by the capital exporting country abstract the user cost of capital for a subsidiary is derived when the capital exporter uses the deferral method for the taxation of the parent s foreign source income the hartman sinn result implying that the capital exporter s tax on remitted dividends is irrelevant to a subsidiary using retentions to finance investment is shown to be correct only when host and home countries have similar corporate income tax bases otherwise both the home and host country corporate tax provisions influence the cost of capital it is also shown that a cash flow tax by the capital importer is not neutral owing to interactions with the capital exporter s tax regime

taxing foreign profits with international mergers and acquisitions a large part of border crossing investment takes the form of international mergers and acquisitions in this article we ask how optimal repatriation tax systems look like in a world where investment involves a change of ownership instead of a reallocation of real capital we find that the standard results of international taxation do not carry over to the case of international mergers and acquisitions the deduction system is no longer optimal from a national perspective and the foreign tax credit system fails to ensure global optimality the tax exemption system is optimal if ownership advantage is a public good within the multinational firm however the cross border cash flow tax system dominates the exemption system in terms of optimality properties

luxury or lock in an exploration of unsustainable consumption in the uk 1968 to 2000 abstract sustainable consumption demands the ability to understand the patterns of resource consumption associated with changing lifestyles this paper explores changes in resource consumption patterns in the uk between 1968 and 2000 using an environmental input output model the paper tracks the fossil resource requirements attributable to 8 high level functional purposes and finds that overall fossil resource consumption increased 35 over the 32 year period the four functional purposes most closely related to the provision of basic material needs showed little change over the period the bulk of the increase in fossil resource requirements was attributable to two specific functional purposes 1 recreation and entertainment 2 commuting and business travel the authors discuss the relevance of these findings for the continuing debate over the question whether rising consumption is being driven by expanding social aspirations luxury or whether it is the result of structural lock in

tax competition when firms choose their organizational form should tax loopholes for multinationals be closed we analyze a sequential game between two symmetric countries when firms can invest in a multinational structure that confers tax savings governments are able to commit to long run tax discrimination policies before firms decisions are made and before statutory capital tax rates are chosen non cooperatively whether a coordinated reduction in the tax preferences granted to mobile firms is beneficial or harmful for the competing countries depends critically on the elasticity with which the firms organizational structure responds to tax discrimination incentives a model extension with countries of different size shows that small countries are likely to grant more tax preferences than larger ones along with having lower effective tax rates

the economics of joint ventures in less developed countries the paper examines the microeconomic partial equilibrium behavior of joint ventures established between transnational corporations and domestic partners in less developed countries it focuses on issues relating to resource allocation and profit distribution under various institutional scenarios the analysis places special emphasis on the role of bargaining power transfer pricing stock ownership and profit shares of the parties and the responsiveness of joint ventures to national development goals some of the results apply to wholly owned subsidiaries of transnational corporations local firms and licensing arrangements which emerge as special cases

determinants of target capital structure the case of dual debt and equity issues abstract we examine whether market and operating performance affect corporate financing behavior because they are related to target leverage our focus on firms that issue both debt and equity enhances our ability to draw inferences consistent with dynamic trade off theories dual issuers offset the deviation from the target resulting from accumulation of earnings and losses our results also imply that high market to book firms have low target debt ratios on the other hand consistent with market timing high stock returns increase the probability of equity issuance but have no effect on target leverage

capital income and profit taxation with foreign ownership of firms abstract this paper establishes optimal rules for capital income and profits taxation in the open economy with or without foreign ownership of domestic firms we show that if there are constraints on the feasibility of profits taxation both saving and investment taxes generally enter the optimal tax package if instead profits can be fully taxed then source based investment taxes vanish if domestic firms are in part owned by foreigners then source based investment taxes can be used to shift income away from these to domestic citizens and they may even be used to finance lump sum transfers to domestic residents

taxes institutions and foreign diversification opportunities abstract investors can access foreign diversification opportunities through either foreign portfolio investment fpi or foreign direct investment fdi the worldwide tax regime employed by the us potentially distorts this choice by penalizing fdi relative to fpi in low tax countries on the other hand weak investor protections in foreign countries may increase the value of control creating an incentive to use fdi rather than fpi by combining data on us outbound fpi and fdi this paper analyzes whether the composition of us outbound capital flows reflects these incentives to bypass home and host country institutional regimes the results suggest that the residual tax on us multinational firms foreign earnings skews the composition of outbound capital flows a 10 decrease in a foreign country s corporate tax rate increases us investors equity fpi holdings by approximately 10 controlling for effects on fdi investor protections also seem to shape portfolio choices though these results are not robust when only within country variation is employed

relocation of headquarters and international taxation about 6 of multinationals relocated their headquarters to another country in the 1997 2007 period this paper presents empirical evidence on the role of taxes in these relocation decisions it considers a sample of 140 multinationals that relocated their headquarters over the past decade and compares them to a control group of 1943 multinationals that did not relocate it is found that the additional tax due in the home country upon repatriation of foreign profits has a positive effect on the probability of relocation the empirical results suggest that an increase in the repatriation tax by 10 percentage points would raise the share of relocating multinationals by 2 2 percentage points equivalent to an increase in the number of relocations by more than one third furthermore the presence of controlled foreign corporation legislation also has a positive effect on the number of relocations

competition for firms in an oligopolistic industry the impact of economic integration we set up a model of generalised oligopoly where two countries of different size compete for an exogenous but variable number of identical firms the model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed as economic integration proceeds equilibrium taxes initially decline but then rise again as trade costs fall even further a range of trade costs is identified where economic integration raises the welfare of the small country but lowers welfare in the large country

do swedish multinationals pay less in taxes than domestic firms in recent years there has been growing concern that multinational enterprises mnes engage in strategic tax planning in order to shift profits to low tax jurisdictions this common perception is generally confirmed by empirical evidence which is foremost provided for countries with high corporate taxes and relatively complex tax systems we investigate whether multinational firms in a country with a comparatively more competitive tax system undertake profit shifting we do this by using detailed census data from corporate income statements and balance sheets filed by swedish manufacturing firms between 1997 and 2007 many previous studies have used tax rate differences to identify profit shifting these studies however run the risk of overestimating the amount of tax shifting as this method entangles tax planning activities with the effect a lower corporate tax rate has on resulting profits we avoid this by comparing mnes with domestic firms unable to benefit from other tax jurisdictions in particular we identify systematic differences in tax payments earnings before interest and taxes and equity ratios between multinational and comparable domestic firms based on propensity score matching in addition we examine the tax behavioral impact of acquiring multinational status using difference in differences estimations and or propensity score matching our results reveal that the extent to which multinational firms have lower tax payments than their domestic counterparts depends on their production characteristics and foreign market outreach in particular we find evidence indicating that firms operating in few foreign markets and firms that become multinational engage in profit shifting from sweden less

bidding for firms recently toyota sought a plant location in the united states the 800 million plant will employ 3000 workers and numerous states offered toyota generous investment incentives hoping this would induce toyota to select their state the commonwealth of kentucky won this competition but the price was high the present value of the payments exceeds 125 million the payment of investment incentives for the toyota plant is not unique in 1976 pennsylvania paid 75 million to attract a volkswagen plan nissan honda and mazda received generous investment incentives when locating plants in the united states and this bidding is not limited to states to attract the headquarters of the presbyterian church usa with its 1300 jobs and 38 million annual payroll civic leaders in louisville kentucky offered the church a warehouse and 6 2 million for renovation of the structure bidding the church away from kansas city missouri in this paper we contend that this competition may result from the average cost pricing of publicly provided goods and services 2 when the marginal cost of providing a firm and its workers with public services is less than the tax revenue they generate a government may offer the firm subsidies that reduce the distortions the average cost pricing of the public service creates thus this competition for industry is not a zero sum game where the subsidies are only transfers from the government to the firm rather these subsidies may facilitate the efficient location of industry

taxation and capital structure choice evidence from a panel of german multinationals this paper analyzes the impact of taxes and lending conditions on the financial structure of multinationals foreign affiliates the empirical analysis employs a large panel of affiliates of german multinationals in 26 countries in the period from 1996 until 2003 in accordance with the theoretical predictions the effect of local taxes on leverage is positive for both types of debt moreover while adverse local credit market conditions are found to reduce external borrowing internal debt is increasing supporting the view that the two channels of debt finance are substitutes

critical natural capital revisited ecological resilience and sustainable development abstract the maintenance of critical natural capital is an important objective of sustainable development critical natural capital represents a multidimensional concept as it mirrors the different frameworks of various scientific disciplines and social groups in valuing nature this article revisits the concept of critical natural capital and examines its relation to the concept of ecological resilience i propose that ecological resilience can help a great deal in specifying the ecological criticality of specific renewable parts of the natural capital more specifically i suggest that the degree of ecological resilience is inversely related to the degree of threat ecosystems are prone to the concept of ecological resilience may complement other measures such as integrity or vulnerability in estimating the degree of threat specific ecosystems are exposed to the empirical estimates of ecological resilience add a further criterion in order to build a comprehensive and clear conception of critical natural capital

corporate taxation debt financing and foreign plant ownership this paper compares domestically and foreign owned plants with respect to their debt to assets ratio and analyzes to which extent the difference is systematically affected by corporate taxation to derive hypotheses about influence of corporate taxation on a firm s debt financing we adapt a standard model of taxation and financing decisions of firms for the case of international debt shifting activities of foreign owned firms we estimate the average difference between a foreign owned and a domestically owned firm s debt ratio treating the mode of ownership as endogenous using data from 32 067 european firms we find that foreign owned firms on average exhibit a significantly higher debt ratio than their domestically owned counterparts in the host country moreover this gap in the debt ratio increases with the host country s statutory corporate tax rate

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

american taxation of multinational firms publisher summary this chapter discusses the american taxation of multinational firms it is assumed that a multinational firm starts with an existing stock of foreign and domestic investment and seeks the optimal change in its position over the next year as the earnings generated by existing investments are an important source of capital for new investment one cannot ignore the role of the past in shaping the present the chapter presents an analysis that focuses not only on the levels of foreign and domestic investment but also on the financing of that investment it is also assumed that the foreign subsidiary can deduct from its taxable income interest on intrafirm debt as well as royalties head office charges and other such payments for intrafirm services

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

foreign subsidiary transfer pricing and tariffs in the transfer pricing literature horst 12 concludes that the multinational firm mnf will generally charge a low transfer price ltp while other authors are ambivalent on this question this paper shows that less than whole ownership over the subsidiary generally makes the mnf change its transfer pricing strategy from desiring a ltp to wanting a high transfer price htp the conditions for an htp are fairly broad so that we are more likely to observe it than has been suggested in the literature the mnf literature also presumes that the host country loses revenue due to an htp however this view ignores the effects of tariffs on a government s revenue if tariff revenue is included an htp can increase the host country s revenue

corporate tax elasticities a reader s guide to empirical findings corporate taxes exert a variety of effects on business behaviour a wealth of empirical evidence assesses the magnitude of these behavioural margins of taxation this article offers an up to date review and aims to provide common ground by computing for each distortion the semi elasticity of the corporate tax base we pay particular attention to international investment where it is not a priory clear whether marginal investment decisions or discrete locations are most important using anextension of the meta analysis of de mooij and ederveen 2003 we explore the extent to which existing studies reveal differences in effect size between the intensive and extensive margins of international investment

saving taxes through foreign plant ownership this paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership we employ a model of endogenous foreign subsidiary ownership to derive a set of empirically testable hypotheses about the differential taxation of foreign and domestically owned subsidiaries we assess these hypotheses in a data set of 33 577 european foreign and domestically owned manufacturing plants we identify a significant tax saving of endogenous foreign owner ship on average foreign owners pay 594 euros per employee or about 56 percent less than domestic owners of similar subsidiaries this effect is larger in thinner markets with fewer plants in markets with a greater relative presence of foreign owners and for foreign owners of larger plants

the effect of the tax reform act of 1986 on the location of assets in financial services firms this paper examines the effects of the tax reform act of 1986 on the international location decisions of u s financial services firms the act included rule changes that made it substantially more difficult for u s firms to defer u s taxes on overseas financial services income held in low tax jurisdictions we use information from the tax returns of u s corporations to examine how local taxes affect the allocation of financial assets held abroad by financial services firms we find that before the act the location of reported assets in financial subsidiaries was responsive to differences in host country tax rates across jurisdictions however after the act differences in host country tax rates no longer explain the distribution of assets held in financial services subsidiaries abroad our results suggest that the tightening of the anti deferral provisions applicable to financial services companies has been successful in diminishing the effect of host country income taxes on asset location decisions

post keynesianism without modernity a robust and critical post keynesianism can be specified on the basis of time uncertainty and the investigation of the institutions that structure material life without presupposing what those institutions are this paper criticises the inclusion in influential presentations of the axiomatic foundation of post keynesianism of propositions about government and money that presuppose a particular ensemble of institutions that ensemble corresponds to the ideal type called modernity without modernity post keynesianism gains logical parsimony and breadth of application the paper discusses non modernist writers in the tradition that includes j m keynes k n raj celso furtado and juan noyola

immobilizing corporate income shifting should it be safe to strip in the harbor abstract many subsidiaries can deduct interest payments on internal debt from their taxable income by issuing internal debt from a tax haven multinationals can shift income out of host countries through the interest rates they charge and the amount of internal debt they issue we show that from a welfare perspective thin capitalization rules that restrict the amount of debt for which interest is tax deductible safe harbor rules are inferior to rules that limit the ratio of debt interest to pre tax earnings earnings stripping rules even if a safe harbor rule is used in conjunction with an earnings stripping rule

asymmetric tax competition abstract the paper analyzes nash equilibrium when two jurisdictions set tax rates on a tax base which is mobile between them population differences imply tax differences the smaller jurisdiction levies a lower tax rate in equilibrium and its residents are better off than those in the larger jurisdiction the nash equilibrium is inefficient if the two jurisdictions merged the resulting allocation would be efficient however if differences in population are great enough residents of the small jurisdiction would be made worse off by such a merger

the taxation of passive foreign investment lessons from german experience the paper evaluates the working of german cfc rules that restrict the use of foreign subsidiaries located in low tax countries to shelter passive investment income from home taxation while passive investments make up a significant fraction of german outbound fdi we find that german cfc rules are quite effective in restricting investments in low tax jurisdictions we find evidence that the german 2001 tax reform which unilaterally introduced exemption of passive income in medium and high tax countries has led to some shifting of passive assets into countries for which the exemption was previously limited ce texte evalue l impact des regles imposees aux succursales a l etranger des societes allemandes regles qui limitent l usage de filiales etrangeres localisees dans des pays a fiscalite legere pour mettre les revenus d investissement passif a l abri de la fiscalite dans le pays d origine ces investissements passifs constituent une fraction significative de l investissement direct a l etranger des allemands et on decouvre que les regles allemandes sont tres efficaces pour restreindre les investissements dans des economies a fiscalite legere les resultats montrent que la reforme fiscale allemande de 2001 qui a unilateralement introduit une exemption du revenu passif dans les pays a fiscalite medium or lourde a entraine un deplacement des actifs passifs vers les pays pour lesquels l exemption etait limitee auparavant

u s worldwide taxation and domestic mergers and acquisitions a discussion abstract harris and o brien 2018 investigate whether u s tax policy distorts u s multinationals mncs investment they find that mncs facing higher repatriation tax costs engage in fewer domestic acquisitions the study re examines the results in two prior studies that found no effect hanlon et al 2015 and a positive effect martin et al 2015 by introducing a new proxy for repatriation tax costs a binary variable for whether the mnc uses the double irish structure we critique the theory underlying the prediction as well as the proxy we conclude that caution should be exercised in taking the results at face value

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

why countries differ in thin capitalization rules the role of financial development abstract the purpose of thin capitalization rules is to limit multinational firms possibilities of engaging in tax planning via debt shifting this paper analyzes the optimal design of thin capitalization rules in the presence of financial frictions when a host country in the first stage chooses the type of thin capitalization rule and then in the second stage decides about the strictness we show that welfare under a safe haven rule is higher than under an earnings stripping rule if firms are not able to manipulate the interest rate on internal loans welfare however can be higher under an earnings stripping rule if firms are able to manipulate the interest rate on internal loans we also show that the optimal level of internal interest deductions decreases with the financial development of the host country our results are consistent with countries actual policy choice

income shifting investment and tax competition theory and evidence from provincial taxation in canada abstract we study corporate income taxation when firms operating in multiple jurisdictions can shift income using tax planning strategies because income of corporate groups is not consolidated for tax purposes in canada firms may use financial techniques such as lending among affiliates to reduce subnational corporate taxes a simple theoretical model shows how income shifting affects real investment government revenues and tax base elasticities depending on whether firms must allocate income to provinces or not we then analyze data from administrative tax records to compare the behavior of corporate subsidiaries that may engage in income shifting to comparable firms that must use the statutory allocation formula to determine their taxable income in each province the evidence suggests that income shifting has pronounced effects on provincial tax bases according to our preferred estimate the elasticity of taxable income with respect to tax rates for income shifting firms is 4 9 compared with 2 3 for other comparable firms

effects of corporate tax reforms on smes investment decisions under the particular consideration of inflation corporate tax reforms carried out in eu countries since 1980 entail lower statutory tax rates and reductions in generous tax depreciation provisions several countries including the uk have reduced tax rates for small and medium sized enterprises smes this study compares incentive effects of such reforms on the smes investment decisions adopting a simple present value model ceteris paribus tax rates and depreciation rules vary in the model simulation while the application of historical cost accounting method in inflationary phases leads to fictitious increases in nominal net present value apart from the construction of international ranking country specific patterns of reform effects are also illustrated

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

real effects of accounting rules evidence from multinational firms investment location and profit repatriation decisions we analyze survey responses from nearly 600 tax executives to better understand corporate decisions about real investment location and profit repatriation our evidence indicates that avoiding financial accounting income tax expense is as important as avoiding cash income taxes when corporations decide where to locate operations and whether to repatriate foreign earnings this result is important in light of the recent research about whether financial accounting affects investment and in light of the decades of research on foreign investment that examines the role of cash income taxes but heretofore has not investigated the importance of financial reporting effects our analysis suggests that financial reporting is an important factor to be considered in the policy debates focused on bringing investment to the united states

internal versus external capital markets this paper presents a framework for analyzing the costs and benefits of internal versus external capital allocation we focus pritnarily on comparing an internal capital market with bank lending while both represent centralized forms of financing in the former case the financing is owner provided while in the latter ceise it is not we argue that the ownership aspect of internal capital allocation has three important consequences 1 it leads to more monitoring than bank lending 2 it reduces managers entrepreneurial incentives and 3 it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management

sustainable development in a post brundtland world not yet two decades after the publication of our common future the world s political and environmental landscape has changed significantly nonetheless we argue that the concept and practice of sustainable development sd as guiding institutional principle as concrete policy goal and as focus of political struggle remains salient in confronting the multiple challenges of this new global order yet how sd is conceptualized and practiced hinges crucially on the willingness of scholars and practitioners to embrace a plurality of epistemological and normative perspectives on sustainability the multiple interpretations and practices associated with the evolving concept of development and efforts to open up a continuum of local to global public spaces to debate and enact a politics of sustainability embracing pluralism provides a way out of the ideological and epistemological straightjackets that deter more cohesive and politically effective interpretations of sd using pluralism as a starting point for the analysis and normative construction of sustainable development we pay particular attention to how an amalgam of ideas from recent work in ecological economics political ecology and the development as freedom literature might advance the sd debate beyond its post brundtland quagmire enhanced levels of ecological degradation vast inequalities in economic opportunities both within and across societies and a fractured set of institutional arrangements for global environmental governance all represent seemingly insurmountable obstacles to a move towards sustainability while these obstacles are significant we suggest how they might be overcome through a reinvigorated set of notions and practices associated with sustainable development one that explicitly examines the linkages between sustainability policies and sustainability politics

the prospects for caring economic theory and policy analysis this paper examines three distinguishing features of caring that it involves the development of a relationship that caring responsibilities and needs are unequally distributed and that social norms influence the allocation of care and caring responsibilities to draw out their implications for analysing caring and its movement between unpaid and paid economies rising opportunity costs of caring are found to produce pressures experienced in different ways across different sectors of the economy these coupled with inequalities in care responsibilities and labour market opportunities influence the movement of care between paid and unpaid economies this analysis is then used to examine the likely evolution of caring norms and practices and how policy might intervene to avoid an uncaring future

double tax discrimination to attract fdi and fight profit shifting the role of cfc rules abstract governments worldwide use targeted tax policies to trade off the gains from increased fdi against the cost of excessive profit shifting by multinational firms we show that nationally optimal tax systems generally incorporate both thin capitalization rules which tax discriminate between purely national and multinational firms and controlled foreign company cfc rules which discriminate between home based and foreign based multinationals in the non cooperative policy equilibrium both thin capitalization rules and cfc rules are set more lenient than if tax policies were chosen cooperatively implying an excessive tax discrimination in favor of multinationals we also analyze the effects of reduced transaction costs for fdi and reduced costs for debt shifting on the optimal policy mix our results correspond to the observed developments of anti avoidance rules in oecd countries

evaluating the effects of ace systems on multinational debt financing and investment abstract theory recommends aligning the tax treatment of debt and equity a few countries notably belgium have introduced an allowance for corporate equity ace to achieve tax neutrality we study the effects of adopting an ace on debt financing passive investment and active investment of multinational firms using high quality administrative data on virtually all german based multinationals we use two main identification strategies based on 1 synthetic control methods and 2 variations across affiliates within the multinational group our results suggest that an ace reduces the corporate debt ratio of multinational affiliates additionally an ace increases intra group lending and other forms of passive investment but has no effects on production investment of multinational affiliates the findings indicate that a unilateral implementation of an ace system generates a tax planning opportunity using a structure combining the benefits from the ace with interest deductions

debt shifting and ownership structure abstract previous theoretical studies on the debt shifting behavior of multinationals have assumed affiliates of multinationals to be wholly owned we develop a model that allows a multinational firm to determine both the leverage and ownership structure in affiliates endogenously a main finding is that affiliates with minority owners have less debt than wholly owned affiliates and therefore a less tax efficient financing structure this is due to an externality that arises endogenously in our model where costs and benefits of debt shifting are shared asymmetrically between minority and majority owners our findings provide a theory framework for recent empirical findings

sustainable development the ethics support the economics within their value chains of suppliers through customers many businesses are becoming more aware of the environmental aspects and impacts of their organizations viewed as a continuum of behavior business environmentalism can range from simply complying with the law to accepting and pursuing a goal of sustainable development the point on the continuum at which an organization chooses to operate is reflected in its environmental mission policies and actions attributes of the various levels of behavior and classification of some organizational mission statements are examined in this paper

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

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

interdependence through time relationships in post keynesian thought and the care literature does hyman minsky s general interdependence through time have anything to do with carol gilligan s narrative of relationships that extends over time both post keynesian theory and the feminist care literature embrace calendar time and fundamental uncertainty both investigate the properties of networks of wittingly formed forward commitments between actors if some prominent writers in the care literature are right these networks merit their own social ontological status because they are reducible neither to individual behaviour nor structure