This handbook is one of the first of its kind to focus attention on effectively administering revenues from extractive industries. It provides policymakers and officials in developing and emerging market economies with practical guidelines to establish a robust legal framework, organization, and procedures for administering revenue from these industries. It discusses transparency and how to promote it in the face of increasing demands for clarity and how developing countries can strengthen their managerial and technical capacity to administer these revenues.
L’administration des recettes fiscales tirées de ressources naturelles présente des difficultés particulières. Ce manuel est l’un des premiers ouvrages à s’intéresser de près à l’efficacité de l’administration des recettes issues des industries extractives. Il fournit aux décideurs politiques et aux agents des pays en développement et émergents des instructions pratiques pour mettre en place un cadre juridique, une organisation et des procédures solides pour gérer les recettes issues de ces industries. Il aborde le thème de la transparence et de sa promotion face une demande croissante des parties prenantes nationales et internationales pour plus de clarté et de responsabilité dans l’administration des recettes publiques tirées des ressources naturelles. Il approfondit également les solutions pour que les pays en développement parviennent à renforcer leurs capacités techniques et managériales pour mieux administrer ces recettes.
Ruud de Mooij, Mr. Alexander D Klemm, and Ms. Victoria J Perry
In recent years, newspaper headlines have featured terms such as “digital service taxes,” “paradise papers,” and “tax wars,” all referring to various issues in international taxation. These and related topics have long been discussed among tax experts from academia, businesses and policy circles. Recently, increased strains on government budgets after the global financial crisis and information that journalists have revealed about the very low global taxation of some large and profitable multinational corporations have triggered political and popular upheaval going far beyond the small group of tax insiders.
This report overviews countries fiscal actions in response to COVID-19 and discusses how governments policies should adapt to get ahead of the pandemic and set the stage for a greener, fairer, and more durable recovery. Global vaccination should be scaled up as it can save lives and will eventually pay for itself with stronger employment and economic activity. Until the pandemic is brought under control globally, fiscal policies must remain flexible and supportive, while keeping debt at a manageable level over the long term. Governments also need to adopt comprehensive policies, embedded in medium-term frameworks, to tackle inequalities—especially in access to basic public services—that were exacerbated by the COVID-19 pandemic and may cause income gaps to persist. Investing in education, healthcare and early childhood development and strengthening social safety nets financed through improved tax capacity and higher progressivity, can strengthen lifetime opportunities, improve trust, and contribute to more social cohesion.
Technology is being harnessed to redefine traditional business models and provide new ways for buyers and sellers to interact both locally and globally. The result has been the emergence of a handful of firms—the so-called tech giants—that are capitalizing on first mover advantages and network externalities to boost profitability, capture market share, and turn themselves into the world’s most highly valued companies. They have inevitably captured the attention of policymakers, and in the realm of international taxation, the debate has coalesced around a number of issues that are driving the debate over whether and how countries should be able to tax the returns to highly digitalized multinational businesses (IMF 2014, 2019). More generally, an increasing number of firms are digitaliz-ing, leading to several issues that raise or intensify challenges for the international tax system.
Source-based taxation lies at the heart of the current international tax architecture (see Chapter 3), and its importance has further risen with the abolition of worldwide taxation of active business income by essentially all of the major capital exporting economies, including now the United States, the United Kingdom, and Japan.1 Notwithstanding its importance, defining the source of income is increasingly problematic, as discussed in Chapter 5. It has been made more difficult by the increasing importance of intrafirm cross-border trade and complex production chains, the increasing contribution of hard-to-value and easily mobile intangible assets to value added, and the increasing digitalization of the economy—and this increasing digitalization means that the old idea of physical presence as the main criterion for source is outmoded (see Chapter 10).
Kiyoshi Nakayama, Ms. Victoria J Perry, and Mr. Alexander D Klemm
The world is in a state of fairly deep confusion regarding whether the international tax system is to be moved toward or away from residence-based corporate taxation. Chapter 7 outlined the parameters of that confusion and described the historical and recent steps that have been taken to strengthen the application of the residence basis; these steps have included combatting both the erosion of the tax base and the practice of shifting taxable profits. This chapter explores ways in which those efforts could be, and are being, strengthened still further. Yet, at the same time, as also described in Chapter 7, most advanced economies—the primary capital exporters—have now moved away from worldwide taxation toward territorial systems that in theory tax active business income at the source only, by one mechanism or another, largely for reasons of tax competition.
Country-specific origin-based profit taxes are marked by profit shifting and tax competition (see Chapter 6). Incentives for profit shifting can be mitigated, but not eliminated, by stricter rules and strengthening tax administration, while coordination can reduce the scope of tax competition but is hard to agree on (Chapter 11). Moreover, tighter anti-tax-avoidance rules often raise compliance and administrative costs and may intensify tax competition (Chapter 9).
Ms. Thornton Matheson, Sebastian Beer, Maria Delgado Coelho, Ms. Li Liu, and Ms. Oana Luca
The current international tax system, which is based on separate accounting for corporate affiliates trading at arm’s length prices, is increasingly viewed as prone to abuse, as noted in Chapters 5 and 6. Multinational enterprises have become adept at manipulating the rules of the current system to shift profits from high-tax to low-tax (or no-tax) jurisdictions. Several recent studies of worldwide revenue losses due to profit shifting suggest that short-term losses range from 5 to 10 percent of total corporate income tax revenues (Cobham and Janský 2018; Crivelli, De Mooij, and Keen 2016; OECD 2015; Tørsløv, Wier, and Zucman 2018; UNCTAD 2015).1 On average, revenue losses in OECD countries are found to be about twice as high as those in developing countries; however, revenue losses as a share of GDP are about one-third higher for developing countries (Crivelli, De Mooij, and Keen 2016).
Resource-rich countries can collect revenues from natural resources to support economic development and structural transformation, although often the revenue potential is not fully realized. Profit shifting often poses a challenge undermining the ability to effectively apply the fiscal regime.1 Multinational enterprises through tax planning and transfer pricing may shift profits away from the source country, conflicting with the government’s objective of collecting a fair share of economic rents realized from the resource extraction. Further complicating this, the concept of where value is added as natural resources are extracted is not always straightforward to establish.