The book describes the difficulties of the current international corporate income tax system. It starts by describing its origins and how changes, such as the development of multinational enterprises and digitalization have created fundamental problems, not foreseen at its inception. These include tax competition—as governments try to attract tax bases through low tax rates or incentives, and profit shifting, as companies avoid tax by reporting profits in jurisdictions with lower tax rates. The book then discusses solutions, including both evolutionary changes to the current system and fundamental reform options. It covers both reform efforts already under way, for example under the Inclusive Framework at the OECD, and potential radical reform ideas developed by academics.

Title page


Why Reform Is Needed and How It Could Be Designed




Title page


Why Reform Is Needed and How It Could Be Designed




© 2021 International Monetary Fund

Cover design: Winking Fish

Cataloging-in-Publication Data

IMF Library

Names: Mooij, Ruud A. de. | Klemm, Alexander. | Perry, Victoria J. | International Monetary Fund, publisher.

Title: Corporate income taxes under pressure : why reform is needed and how it could be designed / Editors: Ruud de Mooij, Alexander Klemm, Victoria Perry.

Description: Washington, DC : International Monetary Fund, 2021. | Includes bibliographical references.

Identifiers: ISBN 9781513511771 (paper)

Subjects: LCSH: Corporations—Taxation. | International business enterprises—Taxation.

Classification: LCC HD2753.M66 2021

DISCLAIMER: The views expressed in this book are those of the authors and do not necessarily represent the views of the IMF’s Executive Directors, its management, or any of its members. The boundaries, colors, denominations, and any other information shown on the maps do not imply, on the part of the International Monetary Fund, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.

Recommended citation: De Mooij, Ruud, Alexander Klemm, and Victoria Perry, eds. 2021. Corporate Income Taxes under Pressure : Why Reform Is Needed and How It Could Be Designed. Washington, DC: International Monetary Fund.

ISBN: 978-1-51351-177-1 (paper) 978-1-51356-399-2 (ePub) 978-1-51356-397-8 (PDF)

Please send orders to:

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Internet: www.elibrary.imf.org


Table of Contents

  • Foreword

  • Preface

  • Contributors


  • 1 Introduction

    Ruud de Mooij, Alexander Klemm, and Victoria Perry

  • 2 Why and How to Tax Corporate Income

    Ruud de Mooij and Alexander Klemm

  • 3 The Current International Tax Architecture: A Short Primer

    Narine Nersesyan

  • 4 Global Firms, National Corporate Taxes: An Evolution of Incompatibility

    Shafik Hebous


  • 5 Difficulties in Determining and Enforcing Source-Based Taxes

    Roberto Schatan

  • 6 Has Tax Competition Become Less Harmful?

    Shafik Hebous

  • 7 Residence Based Taxation: A History and Current Issues

    Kiyoshi Nakayama and Victoria Perry

  • 8 Are Tax Treaties Worth It for Developing Economies?

    Sébastien Leduc and Geerten Michielse

  • 9 The Impact of Profit Shifting on Economic Activity and Tax Competition

    Alexander Klemm and Li Liu

  • 10 Taxing the Digital Economy

    Aqib Aslam and Alpa Shah


  • 11 Strengthening Source-Based Taxation

    Sebastian Beer and Geerten Michielse

  • 12 Residence-Based Taxation: Is There a Way Forward?

    Kiyoshi Nakayama, Victoria Perry, and Alexander Klemm

  • 13 Destination-Based Taxation: A Promising but Risky Destination

    Shafik Hebous and Alexander Klemm

  • 14 Formulary Apportionment in Theory and Practice

    Thornton Matheson, Sebastian Beer, Maria Coelho, Li Liu, and Oana Luca

  • 15 Resource-Rich Developing Countries and International Tax Reforms

    Thomas Baunsgaard and Dan Devlin

  • 16 The Evolution of Tax Law Design within an Increasingly Destabilized International Tax Law Framework

    Christophe Waerzeggers, Cory Hillier, and Irving Aw

  • Index


International corporate taxation has been a core element of the IMF’s tax work for decades.

In the IMF’s capacity development work, the tax treatment of multinational corporations has been a recurring theme covering wide-ranging topics, including advice on tax incentives intended to attract foreign direct investment, the tax treatment of companies in extractive industries, and the safeguarding of revenue against profit shifting. This work, especially in developing countries, has significantly intensified. International tax issues are also being analyzed more deeply as part of the IMF’s regular macroeconomic surveillance of members. Over the last few years, a diverse range of countries has undergone in-depth assessment of their international corporate taxation, prepared by or with Fiscal Affairs Department staff and published with the standard annual surveillance (Article IV) reports.

On the analytical front, international tax issues came into increased prominence after the global financial crisis of 2009, and IMF staff have contributed to the global tax discussions. The IMF published two policy papers in 2014 and 2019 that directly addressed issues in the international tax debates—based upon several underlying research papers. In 2015 a book about international tax issues in extractive industries was published, and in 2017 another on the implications of digitalization for the public finances.

While much work was embodied in the 2019 IMF Policy Paper “Corporate Taxation in the Global Economy,” space constraints did not allow for a deep explanation of core concepts and issues, nor to completely exhibit the underlying research and analysis. This volume therefore complements the 2019 IMF Policy Paper, providing additional background and detailed research. Of course, it does not mark the end of the IMF’s work in this area. On the contrary, we expect the field to be very busy for many years to come. For example, we expect and hope that 2021 will be the year of deepening of international cooperation. International taxation is crucial for this agenda.

Vitor Gaspar

Director, Fiscal Affairs Department

International Monetary Fund


This book complements the 2019 IMF Policy Paper “Corporate Taxation in the Global Economy,” providing additional background and detailed research. It is organized so as to guide readers in a structural manner through the issues in international taxation. Apart from readers who go through the entire book, however, each of the chapter is self-contained to facilitate reading of selected chapters. While the book was mostly prepared prior to the COVID-19 crisis, the topics covered are likely only to have increased in importance. Notably, the need for globally coordinated efforts to further reduce profit shifting and tax competition is likely to be greater in a world in which many countries will want to raise revenues to cover the cost of the crisis in a progressive manner. And the desire of many countries to shift the long-standing allocation of the international tax base has likewise intensified.

We are grateful to the many contributing authors of this book for sharing their deep knowledge of the issues and their enthusiasm and efforts to put in significant work during a time of already heavy work pressures. Many other IMF staff members have contributed to its completion by reviewing and commenting on chapters, sharing ideas in brainstorming meetings, and formatting tables and figures, among many other tasks. While they are too many to name, we are indebted to them.

We would like to thank the management of the Fiscal Affairs Department, notably Vitor Gaspar and Michael Keen, for their support of this book. It has also benefited greatly from the expertise and advice of colleagues in the Communications Department, including our primary counterparts Joe Procopio and Gemma Diaz.



Ruud de Mooij is an Advisor in the IMF’s Fiscal Affairs Department. Before that, he was Division Chief of the IMF’s Tax Policy Division. He has published extensively on tax issues in leading academic journals, including in the American Economic Review and the Journal of Public Economics.

Alexander Klemm is Deputy Division Chief of the IMF’s Tax Policy Division, leading capacity development and research on tax policy. He holds a PhD from University College London and has work experience at the Institute for Fiscal Studies and the European Central Bank. He has published on tax policy and other public finance issues, investment, and the balance of payments.

Victoria Perry is Deputy Director of the Fiscal Affairs Department of the IMF, where she previously headed the Revenue Administration and Tax Policy Divisions. She was formerly President of the National Tax Association and the American Tax Policy Institute, was past Chair of the VAT Committee of the American Bar Association Section of Taxation, and currently serves on the Board of the International Institute of Public Finance. She received her JD from Harvard Law School.


Aqib Aslam is Deputy Division Chief of the Regional Studies Division in the African Department of the IMF. Prior to joining the IMF, he studied for a PhD at the University of Cambridge and worked at Goldman Sachs International, the Bank of England, and the UK Government Economic Service.

Irving Aw was Counsel (Tax Law) of the IMF’s Financial and Fiscal Law Unit, Legal Department, and currently works as a tax law expert with the IMF. He holds a JD from Columbia Law School and an LLB (Hons.) from the London School of Economics and Political Science. His publications include books and articles on tax laws, commercial transactions, and investment funds.

Thomas Baunsgaard is a Deputy Division Chief in the IMF’s Tax Policy Division, leading capacity development and analytical work on natural resource taxation. He previously served as IMF Resident Representative to Tanzania and Malawi, and prior to joining the IMF worked in Papua New Guinea and the West Bank and Gaza.

Sebastian Beer is an Economist in the IMF’s Tax Policy Division. He conducts research on a broad range of tax-related issues and provides technical assistance to member countries. Before joining the IMF, Sebastian worked at the Austrian central bank and at the Vienna University of Economics and Business.

Maria Coelho is an Economist in the IMF’s Tax Policy Division. She holds a PhD in Economics from UC Berkeley, and her research focuses primarily on optimal tax design and the impact of fiscal policy on financial markets and macroeconomic activity.

Dan Devlin is part of the IMF’s Tax Policy Division, specializing in providing support to developing countries on extractive industries, fiscal modeling, and international profit shifting. Previously, Dan worked in tax and public policy at the OECD, Australian Treasury, and the United Nations. He has an MA in Economic Policy from the Australian National University.

Shafik Hebous is a Senior Economist in the IMF’s Tax Policy Division. Shafik has provided tax policy advice in countries in Asia, Africa, and Europe. His research covers various fiscal issues and has been published in academic peer-reviewed journals. Shafik was Adjunct Professor at Oslo Fiscal Studies at the University of Oslo and Assistant Professor at the Economics Department at the Goethe University Frankfurt, where he obtained his PhD in Economics.

Cory Hillier is a Tax Lawyer and Senior Counsel in the IMF’s Legal Department. He provides legal advice on, and drafts legal instruments in, all major areas of tax law, including domestic direct and indirect taxes, tax administration and procedures, and international taxation. He is also extensively involved in the IMF’s legal and international tax policy work.

Sébastien Leduc is an Economist in the IMF’s Tax Policy Division, which he joined in 2016 after serving as Senior International Tax Policy Economist in the Department of Finance Canada. He leads multiple technical assistance activities, undertakes analytical work, and contributes to the various outputs from the Platform of Collaboration on Tax.

Li Liu is a Senior Economist in the IMF’s Tax Policy Division. Previously, she was Senior Research Fellow at Oxford University Centre for Business Taxation. Her research focuses on public economics and development economics. Li is also a Research Fellow at the University of Oxford and the Leibniz Centre for European Economic Research (ZEW) in Mannheim, and an Associate Editor of International Tax and Public Finance.

Oana Luca is an Economist in the IMF’s European Department and has extensive experience in capacity development, policy advice, and macroeconomic surveillance in over 20 member countries. She is a graduate of the Johns Hopkins University’s School of Advanced International Studies, and her publications cover the taxation of extractive industries, financial sector debt bias, and capital flows to developing countries.

Thornton Matheson is a Senior Fellow at the Urban-Brookings Tax Policy Center, where she specializes in business and environmental taxation. She holds a PhD from the University of Maryland, College Park, and has published on international corporate taxation, financial transaction taxes, and natural resource taxation.

Geerten Michielse is a Senior Economist in the Tax Policy Division at the IMF and formerly a university Professor of international tax law. He has published extensively on corporate and international tax issues.

Kiyoshi Nakayama is an Advisor in the Fiscal Affairs Department of the IMF. He has led many technical assistance missions on tax policy and tax administration to Asian and African countries. Before joining the IMF, he was Professor of Tax Law at the Graduate School of Business Science, University of Tsukuba, Tokyo. He also worked for the National Tax Agency and the Ministry of Finance in Japan.

Narine Nersesyan is a Senior Economist at the Tax Policy Division of the IMF, with over 20 years of experience in tax policy capacity development and applied economic analysis. Previously, she served as a Senior Economist at the OECD and as a Senior Manager at Deloitte Consulting/US.

Roberto Schatan is a Senior Economist in the IMF’s Tax Policy Division. He holds a PhD from the National University of Mexico and worked for many years at the Ministry of Finance and the Tax Administration Service in Mexico. He was a delegate to the OECD’s working party on the taxation of multinational enterprises and later joined the OECD as a Senior Advisor.

Alpa Shah is an Economist in the IMF’s Tax Policy Division. Her work encompasses a range of technical assistance, research, and analysis on income, consumption, and natural resource tax policy issues. She holds an MA in Economics from the University of Cambridge and an MSc from the School of Oriental and African Studies, University of London.

Christophe Waerzeggers is a Senior Counsel in the Financial and Fiscal Law Unit of the IMF’s Legal Department. Previously he was a Lecturer in tax and comparative tax law at Utrecht University. He started his career as a tax lawyer in Brussels consecutively with the Belgian firms de Bandt, van Hecke & Lagae (Linklaters in Belgium), and the US firm Hogan & Hartson. He holds LLMs in law and tax law from the Katholieke Universiteit Leuven.

Why Reform Is Needed and How It Could Be Designed