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Business and Economics > Corporate Taxation

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Cover IMF Working Papers
Pareto-Improving Minimum Corporate Taxation
Mr. Shafik Hebous
and
Mr. Michael Keen
The recent international agreement on a minimum effective corporate tax rate marks a profound change in global tax arrangements. The appropriate level of that minimum, however, has been, and remains, extremely contentious. This paper explores the strategic responses to a minimum tax, which—the policy objective being to change the rules of tax competition game--—are critical for assessing the design and welfare impact of, and prospects for, this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low as well as high tax countries, over the uncoordinated equilibrium.
Keywords:
Tax Competition; Minimum Taxation; Corporate Tax Reform; International Taxation; competition game; policy objective; corporate tax reform; best response; country benefit; residence country; Corporate income tax; Competition; Tax avoidance; Global
Cover Departmental Papers
Taxing Multinationals in Europe
Ernesto Crivelli
,
Ruud A. de Mooij
,
J. E. J. De Vrijer
,
Mr. Shafik Hebous
, and
Mr. Alexander D Klemm
This paper aims to contribute to the European policy debate on corporate income tax reform in three ways. First, it takes a step back to review the performance of the CIT in Europe over the past several decades and the important role played by MNEs in European economies. Second, it analyses corporate tax spillovers in Europe with a focus on the channels and magnitudes of both profit shifting and CIT competition. Third, the paper examines the progress made in European CIT coordination and discusses reforms to strengthen the harmonization of corporate tax policies, in order to effectively reduce both tax competition and profit shifting.
Keywords:
Europe; International taxation; Corporate taxation; Multinational corporations; Corporate profits; Tax competition; MNE profits; revenue effect; EU code of conduct; effects of the CCCTB reform; profit shifting; Corporate income tax; Corporate taxes; Competition; Formula apportionment; Global
Cover IMF Working Papers
Coordinating Revenue Incentive Policies in the Caribbean
Ding Ding
,
Samira Kalla
,
Mr. Manuel Rosales Torres
, and
Abdoul Karim Sidibé
The pervasive use of tax incentives is costly for the Caribbean countries, yet the benefits seem limited. Better policy coordination at the regional level is needed to help overcome the collective action problems and generate more revenue to support the much-needed infrastructure investment. Using the region’s Citizenship-by-Investment (CBI) programs as an example, we also show that a price-quantity coordination mechanism can help achieve an efficient outcome with greater CBI incomes for member countries.
Keywords:
WP; revenue; ECCU country; price; country; foregone revenue; incentive policy; type country; tourism sector; regimes in the ECCU; Tax incentives; Corporate income tax; Foreign direct investment; Natural disasters; Competition; Caribbean; tax competition; tourism; citizenship-by-investment; regional policy coordination; competition model; ECCU member country; ECCU citizenship program
Cover IMF Working Papers
VAT Notches, Voluntary Registration, and Bunching: Theory and UK Evidence
Ms. Li Liu
,
Mr. Ben Lockwood
,
Miguel Almunia
, and
Eddy H.F. Tam
Using administrative tax records for UK businesses, we document both bunching in annual turnover below the VAT registration threshold and persistent voluntary registration by almost half of the firms below the threshold. We develop a conceptual framework that can simultaneously explain these two apparently conflicting facts. The framework also predicts that higher intermediate input shares, lower product-market competition and a lower share of business to consumer (B2C) sales lead to voluntary registration. The predictions are exactly the opposite for bunching. We test the theory using linked VAT and corporation tax records from 2004-2014, finding empirical support for these predictions.
Keywords:
WP; unit cost; standard deviation; Value‐Added Tax (VAT); Voluntary Registration; Bunching; year dummy; input cost ratio; account database; responses to notch; turnover net; Value-added tax; VAT registration thresholds; Compliance costs; Competition; Corporate income tax; value-added tax system; VAT threshold; H.F. tam; system in the UK
Cover IMF Working Papers
Zero Corporate Income Tax in Moldova: Tax Competition and Its Implications for Eastern Europe
Marcin Piatkowski
and
Mariusz Jarmuzek
Global economic integration intensified tax competition and raised concerns about the resulting "race to the bottom", which could undermine public investment and social spending. The aim of this paper is to test predictions that (i) there is interdependence in CIT rate setting in Eastern Europe and that (ii) the recent CIT cut in Moldova may intensify tax competition in the region. It finds that there is indeed evidence that during 1995-2006 countries in Eastern Europe strategically responded to changes in CIT rates in the region and that Moldovan zero CIT is likely to encourage further cuts in CIT. The paper also discusses implications of tax competition for Eastern Europe and finds that FDI flows will not be much affected, tax revenues are likely to decline, the shift in the composition in tax revenue may increase economic efficiency, but decrease equity. Tax coordination, while difficult politically, could help stem further decline in corporate taxation, but any gains might be modest and not certain to exceed the costs of tax coordination. Without tax coordination, however, it is unclear what exactly could stop corporate taxes from falling further.
Keywords:
WP; CIT rate; rate; tax rate; tax; tax revenue
Cover IMF Working Papers
Globalization, Tax Competition and the Future of Tax Systems
Mr. Vito Tanzi
This paper discusses the implications for tax systems of globalization of capital markets and of economies. It shows the extent to which particular taxes are affected by the globalization process. It speculates on future developments in this area and on tax competition.
Keywords:
WP; enterprise; country; tax rate; tax competition; tax-haven country; multinational enterprise; tax authorities; net effect; closed economy; enterprise's branch; intra-firm trade; Income and capital gains taxes; Income tax systems; Competition; Corporate income tax; Global