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Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals

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  • Cobham, Alex
  • Faccio, Tommaso
  • FitzGerald, Valpy

Abstract

The current OECD process to reform the international rules governing corporate tax, aimed to achieve a consensus solution by 2020, has finally recognised the need to introduce elements of formulary apportionment to allocate the profits of multinationals and is framed explicitly in terms of redistributing taxing rights between countries. In this paper we provide the first public evaluation of the redistribution of taxing rights associated with the leading proposals of the OECD, IMF and the Independent Commission for the Reform of International Corporate Taxation (ICRICT). The first key finding is that that reallocation of taxing rights towards “market jurisdictions”, as it is currently understood, is likely to be of little benefit to non-OECD countries. Indeed, the proposal is likely to reduce revenues for a range of lower-income countries. Second, all of the proposals deliver a much broader distribution of benefits if some element of taxing rights is apportioned according to the location of multinationals’ employment, and not only of sales.

Suggested Citation

  • Cobham, Alex & Faccio, Tommaso & FitzGerald, Valpy, 2019. "Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals," SocArXiv j3p48, Center for Open Science.
  • Handle: RePEc:osf:socarx:j3p48
    DOI: 10.31219/osf.io/j3p48
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    References listed on IDEAS

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    1. Alex Cobham, Petr Janský, and Markus Meinzer, 2015. "The Financial Secrecy Index: Shedding New Light on the Geography of Secrecy - Working Paper 404," Working Papers 404, Center for Global Development.
    2. Thomas Tørsløv & Ludvig Wier & Gabriel Zucman, 2023. "The Missing Profits of Nations," Review of Economic Studies, Oxford University Press, vol. 90(3), pages 1499-1534.
    3. Sebastian Beer & Ruud de Mooij & Shafik Hebous & Michael Keen & Li Liu, 2023. "Exploring Residual Profit Allocation," American Economic Journal: Economic Policy, American Economic Association, vol. 15(1), pages 70-109, February.
    4. Alex Cobham & Petr Janský, 2019. "Measuring misalignment: The location of US multinationals’ economic activity versus the location of their profits," Development Policy Review, Overseas Development Institute, vol. 37(1), pages 91-110, January.
    5. Prichard, Wilson & Cobham, Alex & Goodall, Andrew, 2014. "The ICTD Government Revenue Dataset," Working Papers 10250, Institute of Development Studies, International Centre for Tax and Development.
    6. Alex Cobham & Petr Janský & Markus Meinzer, 2015. "The Financial Secrecy Index: Shedding New Light on the Geography of Secrecy," Economic Geography, Taylor & Francis Journals, vol. 91(3), pages 281-303, July.
    7. Stiglitz, Joseph E., 1976. "The corporation tax," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 303-311.
    8. Katarzyna Anna Bilicka, 2019. "Comparing UK Tax Returns of Foreign Multinationals to Matched Domestic Firms," American Economic Review, American Economic Association, vol. 109(8), pages 2921-2953, August.
    9. James D. Hamilton, 2019. "Measuring Global Economic Activity," NBER Working Papers 25778, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Javier Garcia-Bernardo & Petr Janský & Thomas Tørsløv, 2021. "Multinational corporations and tax havens: evidence from country-by-country reporting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1519-1561, December.
    2. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    3. Murphy Richard & Janský Petr & Shah Atul, 2019. "BEPS Policy Failure—The Case of EU Country-By-Country Reporting," Nordic Tax Journal, Sciendo, vol. 2019(1), pages 63-86, January.

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