Ruud A. de Mooij's Books

International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots

By: Sebastian Beer,Ruud A. de Mooij,Ms.Li Liu

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International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots

By: Sebastian Beer,Ruud A. de Mooij,Ms.Li Liu

This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, on average, a 1 percentage-point lower corporate tax rate will expand before-tax income by 1 percent—an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research.

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International Monetary Fund

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ISBN 10

148436399X

ISBN 13

9781484363997

At A Cost: the Real Effects of Transfer Pricing Regulations

By: Ruud A. de Mooij,Ms.Li Liu

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At A Cost: the Real Effects of Transfer Pricing Regulations

By: Ruud A. de Mooij,Ms.Li Liu

Unilateral adoption of transfer pricing regulations may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006-2014, to find that MNC affiliates reduce their investment by over 11 percent following the introduction of transfer pricing regulations. There is no significant reduction in total investment by the MNC group, suggesting that these investments are most likely shifted to affiliates in other countries. The impact of transfer pricing regulations corresponds to an increase in the ``TPR-adjusted'' corporate tax rate by almost one quarter.

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International Monetary Fund

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ISBN 10

1484347536

ISBN 13

9781484347539

Corporate Income Taxes under Pressure

Why Reform Is Needed and How It Could Be Designed

By: Ruud A. de Mooij,Mr.Alexander D Klemm,Ms.Victoria J Perry

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Corporate Income Taxes under Pressure

Why Reform Is Needed and How It Could Be Designed

By: Ruud A. de Mooij,Mr.Alexander D Klemm,Ms.Victoria J Perry

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.

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388

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International Monetary Fund

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ISBN 10

1513511777

ISBN 13

9781513511771

Debt, Taxes, and Banks

By: Mr.Michael Keen,Ruud A. de Mooij

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Debt, Taxes, and Banks

By: Mr.Michael Keen,Ruud A. de Mooij

Understanding the impact of the asymmetric tax treatment of debt and equity on the capital structures of financial institutions is critical to shaping and assessing responses to the problem of excessive leverage that underlay the 2009 financial crisis - but there is no empirical evidence to draw on. Guided by a simple model of banks? financing decisions in the presence of both regulatory constraints and tax asymmetries, this paper explores the impact of corporate tax bias on bank leverage, the use of hybrid instruments and regulatory capital ratios for a panel of over 14,000 commercial banks in 82 countries over nine years. On average, the sensitivity of banks? debt choices proves very similar to that of non-financial firms, consistent with rough offsetting of two opposing effects suggested by the theory. As the model predicts, somewhat counter-intuitively, the impact of tax on hybrids is generally weak or insignificant. Responsiveness to taxation varies significantly across banks, however: those holding smaller equity buffers, and larger banks, are noticeably less sensitive to tax.

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International Monetary Fund

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ISBN 10

1463937091

ISBN 13

9781463937096

Inequality and Fiscal Policy

By: Mr.Benedict J. Clements,Ruud A. de Mooij,Mr.Sanjeev Gupta,Mr.Michael Keen

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Inequality and Fiscal Policy

By: Mr.Benedict J. Clements,Ruud A. de Mooij,Mr.Sanjeev Gupta,Mr.Michael Keen

The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought distributional issues to the top of the policy agenda. The challenge for many governments is to address concerns over rising inequality while simultaneously promoting economic efficiency and more robust economic growth. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Fiscal policy is the government’s most powerful tool for addressing inequality. It affects households ‘consumption directly (through taxes and transfers) and indirectly (via incentives for work and production and the provision of public goods and individual services such as education and health). An important message of the book is that growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency. Country studies (on the Netherlands, China, India, Republic of Congo, and Brazil) demonstrate the diversity of challenges across countries and their differing capacity to use fiscal policy for redistribution. The analysis presented in the book builds on and extends work done at the IMF, and also includes contributions from leading academics.

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450

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International Monetary Fund

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ISBN 10

1513567756

ISBN 13

9781513567754

Taxation and Corporate Debt

Are Banks any Different?

By: Mr.Jost Heckemeyer,Ruud A. de Mooij

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Taxation and Corporate Debt

Are Banks any Different?

By: Mr.Jost Heckemeyer,Ruud A. de Mooij

This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds that there is no significant difference. The marginal tax effect for both banks and non-banks is close to 0.2. However, the responsiveness differs considerably across the size distribution and the conditional leverage distribution. For nonbanks, we find a U-shaped relationship between asset size and tax responsiveness, although this pattern does not hold universally across the conditional leverage distribution. For banks, in contrast, the tax responsiveness declines linearly in asset size. Quantile regressions show further that capitaltight banks are significantly less responsive than are capital-abundant banks; the same pattern holds for the largest non-banks. Still, even the largest banks with high conditional leverage ratios feature a significant, positive tax response.

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International Monetary Fund

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ISBN 10

1484366794

ISBN 13

9781484366790

Taxing Multinationals in Europe

By: Ernesto Crivelli,Ruud A. de Mooij,J. E. J. De Vrijer,Mr. Shafik Hebous,Mr. Alexander D Klemm

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Taxing Multinationals in Europe

By: Ernesto Crivelli,Ruud A. de Mooij,J. E. J. De Vrijer,Mr. Shafik Hebous,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.

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International Monetary Fund

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ISBN 10

1513570765

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9781513570761

Japan’s Corporate Income Tax

Facts, Issues and Reform Options

By: Ruud A. de Mooij,Ikuo Saito

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Japan’s Corporate Income Tax

Facts, Issues and Reform Options

By: Ruud A. de Mooij,Ikuo Saito

This paper explores how corporate income tax reform can help Japan increase investment and boost potential growth. Using international and Japan-specific empirical estimates of corporate tax elasticities, investment is predicted to expand by around 0.4 percent for each point of rate reduction. International consensus estimates suggest further that between 10 and 30 percent of the static revenue loss could be recovered in the long run through dynamic scoring, although Japan’s offset may be closer to the lower bound. Compensating fiscal measures are necessary in light of Japan’s tight fiscal constraints. The scope for base broadening in the corporate income tax is found to be limited and some forms of base broadening will undo positive investment effects of a rate cut. Alternative revenue sources include higher consumption and property taxes. A gradual approach toward lowering tax rates mitigates windfall gains and reduces short-run revenue costs. An incremental allowance-for-corporate-equity system could boost investment with limited fiscal costs in the short run.

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International Monetary Fund

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ISBN 10

1498336809

ISBN 13

9781498336802

Curbing Corporate Debt Bias

By: Ruud A. de Mooij,Shafik Hebous

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Curbing Corporate Debt Bias

By: Ruud A. de Mooij,Shafik Hebous

Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.

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International Monetary Fund

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ISBN 10

1475578296

ISBN 13

9781475578294

Base Erosion, Profit Shifting and Developing Countries

By: Ernesto Crivelli,Ruud A. de Mooij,Mr.Michael Keen

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Base Erosion, Profit Shifting and Developing Countries

By: Ernesto Crivelli,Ruud A. de Mooij,Mr.Michael Keen

International corporate tax issues are prominent in public debate, notably with the G20-OECD project addressing Base Erosion and Profit Shifting (‘BEPS’). But while there is considerable empirical evidence for advanced countries on the cross-country fiscal externalities at the heart of these issues, there is almost none for developing countries. This paper uses panel data for 173 countries over 33 years to explore their magnitude and nature, focusing particularly on developing countries and applying a new method to distinguish between spillover effects through real decisions and through avoidance —and quantify the revenue impact of the latter. The results suggest that spillover effects on the tax base are if anything a greater concern for developing countries than for advanced—and a significant one.

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ISBN 10

1513567624

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9781513567624

An Assessment of Global Formula Apportionment

By: Ruud A. de Mooij,Ms.Li Liu,Dinar Prihardini

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An Assessment of Global Formula Apportionment

By: Ruud A. de Mooij,Ms.Li Liu,Dinar Prihardini

Formula apportionment as a way to attribute taxable profits of multinationals across jurisdictions is receiving increased attention. This paper reviews existing literature and discusses experiences in selective federal states to evaluate the economic properties of formula apportionment relative to the current international tax regime that is based on separate accounting. It highlights major advantages, such as the elimination of profit shifting within multinational groups; and it discusses new distortions and the impact on tax competition. The analysis exploits different datasets to assess the direct revenue implications for individual countries under alternative formulas. The distributional effects across countries are found to be large, reflecting major discrepancies between where profits are currently attributed and where factors of production are located or sales take place. The largest losses appear in investment hubs (i.e. countries with a disproportionate ratio of foreign direct investment to GDP), while several large advanced countries are likely to gain. Developing countries gain most likely if employment receives a large weight in the formula; they also tend to benefit, on average, from a formula based on sales by destination.

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International Monetary Fund

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ISBN 10

1513516256

ISBN 13

9781513516257

Fiscal Devaluation and Fiscal Consolidation

The VAT in Troubled Times

By: Ruud A. de Mooij,Mr.Michael Keen

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Fiscal Devaluation and Fiscal Consolidation

The VAT in Troubled Times

By: Ruud A. de Mooij,Mr.Michael Keen

This paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a "fiscal devaluation": shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate.

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International Monetary Fund

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ISBN 10

147557066X

ISBN 13

9781475570663

Taxation and Leverage in International Banking

By: Ms.Grace Weishi Gu,Ruud A. de Mooij,Mr.Tigran Poghosyan

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Taxation and Leverage in International Banking

By: Ms.Grace Weishi Gu,Ruud A. de Mooij,Mr.Tigran Poghosyan

This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and (ii) whether international corporate tax differentials vis-a-vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting. Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, we find that taxes matter significantly, through both the traditional debt bias channel and the international debt shifting that is due to the international tax differentials. The latter channel is more robust and tends to be quantitatively more important. Our results imply that taxation causes significant international debt spillovers through multinational banks, which has potentially important implications for tax policy.

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International Monetary Fund

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ISBN 10

1475572204

ISBN 13

9781475572209

The Tax Elasticity of Corporate Debt

A Synthesis of Size and Variations

By: Ruud A. de Mooij

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The Tax Elasticity of Corporate Debt

A Synthesis of Size and Variations

By: Ruud A. de Mooij

Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

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International Monetary Fund

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ISBN 10

1455253340

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9781455253340

At A Cost: The Real Effects of Thin Capitalization Rules

By: Ruud A. de Mooij,Ms.Li Liu

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At A Cost: The Real Effects of Thin Capitalization Rules

By: Ruud A. de Mooij,Ms.Li Liu

Thin capitalization rules (TCRs) aim to mitigate profit shifting by multinational corporations (MNCs) but, by raising the cost of capital for affected affiliates, can also negatively affect real investment. Exploiting unique panel data on multinational companies in 34 countries during 2006-2014, we estimate that the size of this adverse investment effect can be large, and dependent on the statutory corporate tax rate and the tightness of the safe-haven ratio. Negative investment effects are more pronounced for highly-levered firms for which TCRs are more likely to be binding.

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International Monetary Fund

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1513568558

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9781513568553

Fiscal Policy to Mitigate Climate Change

A Guide for Policymakers

By: Ruud A. de Mooij,Mr.Michael Keen,Ian W.H. Parry

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Fiscal Policy to Mitigate Climate Change

A Guide for Policymakers

By: Ruud A. de Mooij,Mr.Michael Keen,Ian W.H. Parry

Efforts to control atmospheric accumulations of greenhouse gases that threaten to heat up the planet are in their infancy. Although the IMF is not an environmental organization, environmental issues matter for its mission when they have major implications for macroeconomic performance and fiscal policy. Climate change clearly passes both these tests.

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218

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International Monetary Fund

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ISBN 10

1616353937

ISBN 13

9781616353933

Coming Clean on Your Taxes

By: Sebastian Beer,Ruud A. de Mooij

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Coming Clean on Your Taxes

By: Sebastian Beer,Ruud A. de Mooij

This paper develops a simple model to explore whether a higher detection probability for offshore tax evaders—e.g. because of improved exchange of information between countries and/or due to digitalization of tax administrations—renders it optimal for governments to introduce a voluntary disclosure program (VDP) and, if so, under what terms. We find that if the VDP is unanticipated, it is likely to be optimal for a revenue-maximizing government to introduce a VDP with relatively generous terms, i.e. a low or even negative penalty. When anticipated, however, the VDP is neither incentive compatible nor optimal, as it induces otherwise compliant taxpayers to evade tax. A VDP can then only be beneficial if tax evasion induces an external social cost beyond the direct revenue foregone, e.g., due to adverse effects on overall tax morale. In contrast to the common view that VDPs should come along with additional enforcement effort, we find that governments should relax enforcement if the VDP itself provides more powerful incentives to come clean.

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International Monetary Fund

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ISBN 13

9798400230011

Taxation, Bank Leverage, and Financial Crises

By: Ruud A. de Mooij,Mr.Michael Keen,Mr.Masanori Orihara

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Taxation, Bank Leverage, and Financial Crises

By: Ruud A. de Mooij,Mr.Michael Keen,Mr.Masanori Orihara

That most corporate tax systems favor debt over equity finance is now widely recognized as, potentially, amplifying risks to financial stability. This paper makes a first attempt to explore, empirically, the link between this tax bias and the probability of financial crisis. It finds that greater tax bias is associated with significantly higher aggregate bank leverage, and that this in turn is associated with a significantly greater chance of crisis. The implication is that tax bias makes crises much more likely, and, conversely, that the welfare gains from policies to alleviate it can be substantial—far greater than previous studies, which have ignored financial stability considerations, suggest.

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ISBN 10

1475550278

ISBN 13

9781475550276

Excerpt: Inequality and Fiscal Policy

By: Mr.Benedict J. Clements,Ruud A. de Mooij,Mr.Sanjeev Gupta,Mr.Michael Keen

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Excerpt: Inequality and Fiscal Policy

By: Mr.Benedict J. Clements,Ruud A. de Mooij,Mr.Sanjeev Gupta,Mr.Michael Keen

This paper is an excerpt from Inequality and Fiscal Policy. The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought issues on equity and distribution to the top of the policy agenda. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Fiscal policy is the government’s most powerful tool for addressing inequality. It affects household consumption directly and indirectly. An important message of the book is that growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency. Country case studies demonstrate the diversity of challenges and the diverging ways to use fiscal policy for redistribution. The analysis presented in the book builds on work by IMF economists and leading academics.

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International Monetary Fund

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ISBN 10

1513521543

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9781513521541

Exploring Residual Profit Allocation

By: Sebastian Beer,Ruud A. de Mooij,Shafik Hebous,Mr.Michael Keen,Ms.Li Liu

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Exploring Residual Profit Allocation

By: Sebastian Beer,Ruud A. de Mooij,Shafik Hebous,Mr.Michael Keen,Ms.Li Liu

Schemes of residual profit allocation (RPA) tax multinationals by allocating their ‘routine’ profits to countries in which their activities take place and sharing their remaining ‘residual’ profit across countries on some formulaic basis. They have recently and rapidly come to prominence in policy discussions, yet almost nothing is known about their impact on revenue, investment and efficiency. This paper explores these issues, conceptually and empirically. It finds residual profits to be substantial, but concentrated in a relatively few MNEs, headquartered in few countries. The impact on tax revenue of reallocating excess profits under RPA, while adverse for investment hubs, appears beneficial for lower income countries even when the formula allocates by destination-based sales. The impact on investment incentives is ambiguous and specific both to countries and MNE groups; only if the rate of tax on routine profits is low does aggregate efficiency seem likely to increase.

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International Monetary Fund

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ISBN 10

1513528327

ISBN 13

9781513528328

Taxing Multinationals in Europe

By: Ernesto Crivelli,Ruud A. de Mooij,J. E. J. De Vrijer,Mr. Shafik Hebous,Mr. Alexander D Klemm

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Taxing Multinationals in Europe

By: Ernesto Crivelli,Ruud A. de Mooij,J. E. J. De Vrijer,Mr. Shafik Hebous,Mr. Alexander D Klemm

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1513570765

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9781513570761

The Tax Elasticity of Corporate Debt

A Synthesis of Size and Variations

By: Ruud A. de Mooij

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The Tax Elasticity of Corporate Debt

A Synthesis of Size and Variations

By: Ruud A. de Mooij

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1455253340

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9781455253340

Tax Buoyancy in OECD Countries

By: Vincent Belinga,Ms.Dora Benedek,Ruud A. de Mooij,Mr.John Norregaard

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Tax Buoyancy in OECD Countries

By: Vincent Belinga,Ms.Dora Benedek,Ruud A. de Mooij,Mr.John Norregaard

By how much will faster economic growth boost government revenue? This paper estimates short- and long-run tax buoyancy in OECD countries between 1965 and 2012. We find that, for aggregate tax revenues, short-run tax buoyancy does not significantly differ from one in the majority of countries; yet, it has increased since the late 1980s so that tax systems have generally become better automatic stabilizers. Long-run buoyancy exceeds one in about half of the OECD countries, implying that GDP growth has helped improve structural fiscal deficit ratios. Corporate taxes are by far the most buoyant, while excises and property taxes are the least buoyant. For personal income taxes and social contributions, short- and long-run buoyancies have declined since the late 1980s and have, on average, become lower than one.

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