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Real effects of an international tax reform for MNEs

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  • Ortmann, Regina
  • Simons, Dirk
  • Voeller, Dennis

Abstract

With multinational enterprises (MNEs) centralizing production facilities, market countries claim not to receive their fair share of taxes. A reform of international business taxation that includes new profit allocation rules as well as the introduction of minimum taxation is being considered as a problem mitigating mechanism. We analyze theoretically the real effects of the aforementioned tax reform, i.e., MNEs' adjustments of production and sales decisions. Our findings show that the effects of an international tax reform on sales quantities depend on the properties of the underlying product markets. If national demand resembles characteristics of traditional industries, sales quantities remain unchanged. However, sales quantities are affected if specific demand characteristics of modern business models are assumed. For traditional industries a reformed tax regime increases tax revenues in high-tax market countries and even attracts production. In contrast, for modern business models tax revenues of high-tax countries can even decrease.

Suggested Citation

  • Ortmann, Regina & Simons, Dirk & Voeller, Dennis, 2021. "Real effects of an international tax reform for MNEs," arqus Discussion Papers in Quantitative Tax Research 265, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:265
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    Cited by:

    1. Alex A. T. Rathke & Amaury J. Rezende & Christoph Watrin & Rafael M. Antônio, 2023. "Profit shifting and the attractiveness of Advance Pricing Agreements," Journal of Business Economics, Springer, vol. 93(5), pages 817-857, July.

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    More about this item

    Keywords

    BEPS; corporate taxation; minimum taxation; profit shifting; tax avoidance;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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