Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform
AbstractThis paper discusses the issue of profit shifting and 'aggressive' tax planning by multinational firms. The paper makes two contributions. Firstly, we provide some background information to the debate by giving a brief overview over existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Secondly, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-044.
Date of creation: 2013
Date of revision:
tax avoidance; profit shifting; multinational firms; intellectual property; tax policy; tax reform;
Find related papers by JEL classification:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-08-23 (Accounting & Auditing)
- NEP-ALL-2013-08-23 (All new papers)
- NEP-IPR-2013-08-23 (Intellectual Property Rights)
- NEP-IUE-2013-08-23 (Informal & Underground Economics)
- NEP-PBE-2013-08-23 (Public Economics)
- NEP-PUB-2013-08-23 (Public Finance)
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