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Business and Economics > Corporate Taxation

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Cover Technical Assistance Reports
Libya: Technical Assistance Report-Redesign of Income Tax Forms
International Monetary Fund. Middle East and Central Asia Dept.
METAC assisted the Libyan Tax Authority in reviewing tax forms to enhance taxpayer data collection. The proposed data set will significantly expand existing information, improving the completeness of taxpayer records and greatly aiding the risk assessment process.
Keywords:
Registration application; Annual Tax declaration for unincorporated taxpayers; Annual Corporate Income Tax; Data; Risk assessment; Industry classification; Business community; Libya.; declaration reporting; LTA staff; LTA income tax operation; income tax registration; request of the Libyan Tax Authority; Income tax systems; Income; Corporate income tax; Tax administration core functions; Taxpayer registration
Cover Technical Assistance Reports
Republic of Armenia: Technical Assistance Report-Corporate Income Tax Gap Estimation Based on Operational Audits
International Monetary Fund. Fiscal Affairs Dept.
This report presents estimates of the Corporate Income Tax (CIT) gap for Armenia for the period 2020–2022. The CIT gap is based on a bottom-up approach using operational audits. The average CIT gap in Armenia is estimated at 26.4-35.2 percent of potential CIT liability.
Keywords:
Republic of Armenia; Corporate Income Tax Gap; Bottom-up approach; Operational audits; Heckman Sample Selection model; Machine learning model; Select cases for future audits.; CIT Gap; CIT gap estimate; A. CIT gap result; CIT gap; Corporate income tax; Auditing; Income; Tax audit performance measurement; Business enterprises
Cover IMF Working Papers
Personal Income Taxes in the Middle East and North Africa: Prospects and Possibilities
Mario Mansour
and
Eric M. Zolt
Personal income taxes (PITs) play little or no role in the Middle East and North Africa, often yielding less than 2 percent of GDP in revenue—with the exception of few North African countries. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Top marginal tax rates on labor and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue intake from this source remains low throughout the region (less than 1 percent of GDP on average and concentrated in oil-importing non-fragile states). Social security contributions (SSC) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increase of SSC, have resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT/SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance the revenue and equity objectives against effciency objectives (in particular labor market incentives and infromality). Countries with no PITs will have to weigh whether a consumption tax/SSC system that mimic a flat tax on labor income is sufficient to diversify revenue away from oil and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, who face more political volatility and weaker fiscal institutions, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
Keywords:
Personal income taxes; social security contributions; payroll taxes; fragile and conflict states; Middle East and North Africa; Gulf-Cooperation Council; SSC reform; SSC system; revenue performance; PIT objective; PIT revenue; Personal income tax; Income tax systems; Income; Income and capital gains taxes; Corporate income tax; North Africa; Middle East; East Africa; Global
Cover IMF Working Papers
Home or Away? Profit Shifting with Territorial Taxation
Dominika Langenmayr
and
Ms. Li Liu
In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
Keywords:
profit shifting; territorial tax system; multinational firms; shifted profit; UK multinational; UK subsidiary; difference-in-differences research design; Total factor productivity; Transnational corporations; Corporate income tax; Income; Wages; Global
Cover IMF Staff Country Reports
Ireland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper on Ireland focuses on ensuring an inclusive and growth-enhancing fiscal policy mix. It assesses the scope for improving the tax system toward a more growth-friendly structure, and for achieving efficiency gains in public expenditure. It also discusses upcoming impediments to long term fiscal sustainability and proposes options to achieve a more growth friendly and equity-enhancing revenue and expenditure policy mix. Under the 2021 National Development Plan, the government plans to significantly expand investment to historically high levels over the medium term. Good progress has been achieved in raising public spending efficiency but there is scope for further improvement. The stylized facts highlight the need for reforms to broaden the tax base and find new and stable sources of revenues as well as improving public expenditure efficiency. Public spending should focus on growth-friendly spending and reducing efficiency gaps. Decisive reforms are needed to ensure the future sustainability of the pension system and safeguard long term fiscal sustainability.
Keywords:
expenditure needs; GROWTH-ENHANCING fiscal policy mix; disparity in Ireland; spending pressure; OECD housing affordability database; Income inequality; Income; Corporate income tax; Europe
Cover IMF Staff Country Reports
Kingdom of the Netherlands—Sint Maarten: Technical Assistance Report—Sustainable Tax Reforms
International Monetary Fund. Fiscal Affairs Dept.
Sint Maarten’s economy has been hit hard over the last 4 years. In 2017, two major hurricanes struck the island causing significant damage. While reconstruction was largely financed by insurance proceeds and grants from The Netherlands, economic recovery from the hurricane damage was slow and in early 2020 the coronavirus pandemic shut down most of Sint Maarten’s tourism sector. As a result, fiscal revenue declined by 15 percent since 2016; payroll tax revenue declined by only 4.5 percent, whereas the turnover tax revenue declined by 23 percent. Since April 2020, The Netherlands has provided immediate financial support to cushion the economic shock of the pandemic. In December 2020, Sint Maarten concluded an agreement with The Netherlands to receive more substantial financial support for recovery and ensuring long-term fiscal sustainability. In return, the authorities committed to make structural changes to their tax system, making it more growth-friendly and equitable, while optimizing and ensuring its revenue mobilization capacity.
Keywords:
capacity development mission; authorities of Sint Maarten; Sint Maarten's authorities; bank transaction; E. profit Tax; personal property; Income; Income and capital gains taxes; Personal income tax; Property tax; Income tax systems; Caribbean; Global
Cover IMF Working Papers
A Firm Lower Bound: Characteristics and Impact of Corporate Minimum Taxation
Aqib Aslam
and
Maria Delgado Coelho
This paper examines the role of minimum taxes and attempts to quantify their impact on economic activity. Minimum taxes can be effective at shoring up the corporate tax base and enhancing the perceived equity of the tax system, potentially motivating broader taxpayer compliance. Where political and administrative constraints prevent reforms to the standard corporate income tax, a minimum tax can help mitigate base erosion from excessive tax incentives and avoidance. Using a new panel dataset that catalogues changes in minimum tax regimes over time around the world, firm-level analysis suggests that the introduction or reform of a minimum tax is associated with an increase in the average effective tax rate of just over 1.5 percentage points with respect to turnover and of around 10 percent with respect to operating income. Minimum taxes based on modified corporate income lead to the largest increases in effective tax rates, followed by those based on assets and turnover.
Keywords:
firm Lower Bound; MT reform; minimum tax; level data; profit margins; Corporate income tax; Income; Effective tax rate; Income tax systems; Average effective tax rate; Global
Cover Corporate Income Taxes under Pressure
Corporate Income Taxes under Pressure
Why Reform Is Needed and How It Could Be Designed
Ruud A. de Mooij
,
Mr. Alexander D Klemm
, and
Ms. Victoria J Perry

Abstract

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.

Keywords:
Profit shifting; tax competition; tax avoidance; international cooperation; tax reform; multinationals; digitalization; multinational enterprise; tax treaty; passive income; Corporate income tax; Double taxation; Income; Foreign direct investment; Corporate taxes; Global; Sub-Saharan Africa; Europe
Cover IMF Working Papers
Tax Policy and Inclusive Growth
Ruud A. de Mooij
This paper discusses the theory and practice of tax design to achieve an efficient and equitable outcome, i.e. in support of inclusive growth. It starts with a discussion of the key principles from tax theory to guide practical tax design. Then, it elaborates on more granular tax policy, discussing key choices in the structure of the personal income tax on labor and capital income, taxes on wealth, the corporate income tax, and consumption taxes. The paper concludes by highlighting the political economy considerations of the issues with concrete recommedtions as to how to implement tax reform.
Keywords:
tax policy; inclusive growth; inequality; poverty; income distribution; WP; economic rent; personal income; tax liability; cost of capital; external cost; public finance; rate of return; low income; take-home pay; Income; Capital income tax; Income and capital gains taxes; Corporate income tax; Income tax systems; Europe; Global
Cover IMF Working Papers
International Taxation and Luxembourg’s Economy
Ruud A. de Mooij
,
Dinar Prihardini
, and
Mr. Emil Stavrev
Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.
Keywords:
Luxembourg; International Tax; Foreign Direct Investment; Special Purpose Entities.; WP; Luxembourg economy; Luxembourg government; tax system; CbCR datum; climate change commitment; energy efficiency target; Luxembourg driver; Luxembourg headquartered MNEs; Luxembourg MNEs; Special Purpose Entities; property tax; Corporate income tax; Special purpose vehicle; Income; Environmental taxes; Global; Europe