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An FDI-driven approach to measuring the scale and economic impact of BEPS

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  • Richard Bolwijn
  • Bruno Casella
  • Davide Rigo

Abstract

This paper explores the link between foreign direct investment (FDI) and the BEPS (base erosion and profit shifting) practices of multinationals (MNEs). It puts the spotlight on the outsize role of offshore investment hubs as major players in global corporate investment, a role that is largely due to MNEs’ tax planning, although other factors contribute. The paper shows that tax avoidance practices enabled by FDI through offshore hubs are responsible for significant leakage of development financing resources. In policy terms, these findings call for enhanced cooperation and synergies between international tax and investment policymaking.

Suggested Citation

  • Richard Bolwijn & Bruno Casella & Davide Rigo, . "An FDI-driven approach to measuring the scale and economic impact of BEPS," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
  • Handle: RePEc:unc:tncjou:18
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    References listed on IDEAS

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    2. Richard Bolwijn, & Bruno Casella & Davide Rigo, . "Establishing the baseline: estimating the fiscal contribution of multinational enterprises," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
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    13. Casella, Bruno, 2019. "FDI Statistics and International Production: Towards (Re-) Conciliation?," MPRA Paper 95203, University Library of Munich, Germany, revised 14 May 2019.
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    16. Cobham, Alex & Loretz, Simon, 2014. "International Distribution of the Corporate Tax Base: Implications of Different Apportionment Factors under Unitary Taxation," Working Papers 11176, Institute of Development Studies, International Centre for Tax and Development.
    17. Petr Janský & Miroslav Palanský, 2019. "Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1048-1103, October.
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    Cited by:

    1. Petr Janský & Miroslav Palanský, 2019. "Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1048-1103, October.
    2. David Bradbury, & Tibor Hanappi & Anne Moore, . "Estimating the fiscal effects of base erosion and profit shifting: data availability and analytical issues," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    3. I. P. Gurova, 2020. "Offshore Investment in the Russian Economy," Studies on Russian Economic Development, Springer, vol. 31(4), pages 449-456, July.
    4. Virginia Di Nino & Anna Ekstam, 2020. "What value added in the trade balances of euro area financial centres?," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Bridging measurement challenges and analytical needs of external statistics: evolution or revolution?, volume 52, Bank for International Settlements.
    5. Richard Bolwijn, & Bruno Casella & Davide Rigo, . "Establishing the baseline: estimating the fiscal contribution of multinational enterprises," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    6. Barbara Bratta & Vera Santomartino & Paolo Acciari, 2021. "Assessing profit shifting using Country-by-Country Reports: a non-linear response to tax rate differentials," Working Papers wp2021-11, Ministry of Economy and Finance, Department of Finance.
    7. Bruno Casella, . "Looking through conduit FDI in search of ultimate investors – a probabilistic approach," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    8. Petr Janský & Miroslav Palanský, 2019. "Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1048-1103, October.
    9. Casella, Bruno, 2019. "Looking through conduit FDI in search of ultimate investors – a probabilistic approach," MPRA Paper 95188, University Library of Munich, Germany.
    10. Fabian J. Baier, 2020. "Foreign Direct Investment and Tax: OECD Gravity Modelling in a World with International Financial Institutions," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 6(1), pages 45-72, October.
    11. Alex Cobham & Petr Janský & Chris Jones & Yama Temouri, . "An evaluation of the effects of the European Commission's proposals for the Common Consolidated Corporate Tax Base," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    12. Petr Janský & Jan Láznička & Miroslav Palanský, 2021. "Tax treaties worldwide: Estimating elasticities and revenue foregone," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 359-401, May.
    13. Thomas Torslov & Ludvig Wier & Gabriel Zucman, 2020. "The Missing Profits of Nations," Working Papers halshs-03022293, HAL.
    14. Ali Ahmed & Chris Jones & Yama Temouri, . "The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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