This chapter draws on our two studies published by the International Centre for Tax and Development (ICTD), using the two
leading datasets on the global activity of multinational enterprises (MNEs). The approaches are complementary but necessarily
distinct, given the difference in available data. We summarise the approaches taken, and the specific findings that emerge
from each, and then highlight three major common results. First, notwithstanding uncertainty and data issues, this is a first-order
problem in relation to the world economy. Second, the overall effect of a switch to unitary taxation, almost regardless of
the actual apportionment formulas used, would be a substantial redistribution from MNEs towards most countries of the world.
Only a handful of jurisdictions would see significant revenue losses, and these are far outweighed by the gains of all others.
Third, there are significant differences in the extent of redistribution implied by a global apportionment approach relying
on different factors – with corresponding implications for the development impact of given global choices, and/or for unilateral
decisions at regional and national level. Overall, the findings confirm the critical importance of improving the available
data. In doing so, they underline the failure of the OECD base erosion and profit shifting (BEPS) process to deliver on commitments
in this area, but also highlight the potential of using the newly-required country-by-country reporting data of MNEs. A specific
proposal for a data registry is put forward.
This paper highlights the importance of different investment motives and to what extend they affect the responsiveness to
corporate taxation. In particular, we discuss how to classify investment as non-related, horizontal, vertical and complex
types using a combination of both firm-specific (ownership) information and sector-specific information from input-output
tables. Hereby, we point out to what extent the resulting classification depends on assumptions made by the researcher. Following
this, we examine the effects of host-country corporate taxation on the volume of investment within related firms (i.e., the
intensive margin). We are able to quantitatively replicate the average result in the empirical literature with an overall
tax semi-elasticity of approximately –1.5. Taking into account firm-heterogeneity we find that non-related investments react
stronger to corporate taxation whereas horizontal investments are less responsive, though, significant negative tax semi-elasticities
turn out for the subset of manufacturing industries where horizontal investment is much more prevalent. As the strict categorical
classification still yields ambiguous results for both vertical and complex investments we extend the methodology by defining
shares of investment and make the point that, by and large, stronger business motives reduce the tax responsiveness of investment.
Helmut Hofer, Raphaela Hyee (IHS), Simon Loretz, Sandra Müllbacher, Massimo Baldini, Giovanni Gallo, Izabela Styczyńska, Gokben Aydilek, Tarmo Valkonen, Stuart Adam, David Philips
During the last decade the beer market has been in the focus of the media, largely because of spectacular mergers among the
big players. The formation of Anheuser-Busch InBev created the world's largest brewing company with a global market share
of approximately 20 percent. This consolidation process in the beer market triggered substantial interest as to how concentrated
the market will eventually become and its key driving forces.
Die Situation des österreichischen Föderalismus ist geprägt durch ein starkes vertikales fiskalisches Ungleichgewicht, vor
allem die Länder haben kaum Autonomie über die Einnahmen. Diese Diskrepanz ist u. a. auf eine Angst vor ruinösem Steuerwettbewerb
zurückzuführen, führt aber gleichzeitig zu einem Mangel an Transparenz und verändert Anreize für die lokalen Entscheidungsträger.
Eine Umwandlung der Ertragsanteile von Lohn- und Einkommensteuer und Körperschaftsteuer in teilweise Steuerautonomie der Bundesländer
würde wesentlich zur Transparenz beitragen und könnte durch einsetzenden Steuerwettbewerb auch die Anreize für effiziente
lokale Verwaltung verbessern. Erfahrungen aus anderen föderalen Staaten zeigen auch, dass Steuerwettbewerb ein wesentlicher
Bestandteil des fiskalischen Föderalismus ist und dass die Rahmenbedingungen wie klare Aufgabentrennung zwischen den Gebietskörperschaften
und ein entsprechend ausgestalteter horizontaler Finanzausgleich den fiskalischen Wettbewerb in gesunde Bahnen lenken können.
This survey summarises the state and development of European tax policy, in particular discussing the harmonisation progress
in direct as well as indirect taxes. Based on an overview over the theoretical and empirical literature on tax competition,
we further ask whether increased tax coordination is necessary to prevent a race to the bottom. We show that theoretical predictions
on the outcome of tax competition are ambiguous, and the empirical evidence in this regard is inconclusive as well. This,
in turn, gives rise to an only limited scope of stronger tax harmonisation.
This paper contributes to the literature providing indirect evidence for profit shifting within multinational companies. In
contrast to the previous studies, we take account of the tax responsiveness of the capital stock and analyse the effect of
corporate taxes on both pre- and post-tax profitability. Evidence from a system of equations using a large panel data set
of European subsidiaries by and large supports the profit-shifting hypothesis. We find that a 10-percentage-point decrease
in the tax rate increases post-tax profitability by up to 0.6 percentage point, with a larger direct tax effect. Further,
our results suggest that financial profits and losses are particularly responsive to taxes, which indicates that a large part
of profit shifting takes place via debt shifting.
Over the last couple of years the beer industry has experienced an intense consolidation process resulting in an every declining
number of globally active brewing companies. At the same time, in some large beer markets the number of micro-breweries steadily
increased. While the former is often explained by prevailing economies of scale in this industry the latter is often associated
with demand side arguments including love-of-variety preferences. This chapter offers an additional explanation for these
tendencies observed in the beer markets. More precisely, we argue that a country's policy concerning the taxation of beer
products might have a direct impact on the emerging market structure. More precisely, our main finding supports the view that
EU's beer excise tax regulation which couples a minimum amount of beer excise taxes obliged to charge with the possibility
of reduced rates for small breweries has direct implications for the market structure in the brewing industry. More precisely,
this regulation tends to trigger a polarisation of the market in the sense that one observes a very small number of large
and globally active brewing companies while, at the same time, the number of micro-breweries increases. Medium-sized beer
producers tend to be forced out of the market by this regulation or choose to adjust their production level to a smaller amount.
Some of the (formerly) medium-scale beer producers also have been targets of mergers and acquisitions,which further fosters
an increase in market concentration among the global players in beer producing. This overall finding confirms that specific
tax rules might directly and indirectly affect market structures and in the medium-run might also have implications for customers.
Especially, the very small number of globally active brewing companies might increase the likelihood for collusive behaviour
and thus calls for a careful monitoring by competition authorities all over the world.
Under the current system of separate accounting, tax-motivated international profit shifting results in misalignment of profits
and real economic activity. While the OECD Base Erosion and Profit Shifting initiative aims to measure and curtail this, critics
claim serious progress is only possible with greater emphasis on formulary apportionment methods (Picciotto 2013), or other
methods outside the present international tax architecture (IMF 2014). In this paper we use the leading global database of
company balance sheets to compare the distribution of profit and potential apportionment factors. Although data coverage is
problematic for developing countries, we find that apportioning profit according to measures of actual economic activity would
result in a major redistribution of the tax base at the expense of a particular group of jurisdictions, and in most cases
towards the lower-income countries in the sample. International loss consolidation facilitated by a global switch to unitary
taxation would reduce the overall tax base by around 12 percent.