Income-Related Minimum Taxation Concepts and Their Impact on Corporate Investment Decisions

In this paper we analyze the impact of various minimum taxation concepts on corporate investment decisions. These investments can be realized in the form of either a real or a financial investment. In a quantitative analysis we refer to the future values of the investments as an indicator of tax-favored and tax-discriminated projects. Varying the concept-specific loss-offset parameters and cash flow time structure and performing a Monte Carlo simulation reveals the impact of the particular minimum taxation concept. For the first time a comprehensive set of equations has been deduced to integrate different minimum tax concepts in a unique model. The resulting equations can be used as a basis for further analyses of group taxation, wealth taxation and asymmetric taxation and allows us to gain first insights into the direction and magnitude of tax distortions of possible competing concepts. Depending on the set of parameters, complex and ambiguous tax effects can be identified. The effect of minimum taxation depends on the existence and magnitude of a depreciation effect. Both effects run contrary to each other, and the depreciation effect is always greater. We find that all concepts distort in the same direction and that real investments with increasing cash flows are more likely to be discriminated by minimum taxation than financial investments or real investments with constant cash flows. However, in comparison to real investments with decreasing cash flows financial investments suffer more from income-related minimum taxation concepts. These results provide interesting information for corporate investors having to decide on the location of an investment, and for tax reform discussions

Cross-Border Group-Taxation and Loss-Offset in the EU - An Analysis for CCCTB (Common Consolidated Corporate Tax Base) and Etas (European Tax Allocation System)

The European Commission proposed to replace the currently existing Separate Accounting by an EU-wide tax system based on a Common Consolidated Corporate Tax Base (CCCTB). Besides the CCCTB, there is an alternative tax reform proposal, the European Tax Allocation System (ETAS). In a dynamic capital budgeting model we analyze the impacts of selected loss-offset limitations currently existing in the EU under both concepts on corporate crossborder real investments of MNE. The analyses show that replacing Separate Accounting by either concept can lead to increasing profitability due to cross-border loss compensation. However, if the profitability increases, the study indicates that the main criteria of decisions on location are the tax rate divergences within the EU Member States. High tax rate differentials in the Member States imply significant redistribution of tax payments under CCCTB and ETAS. The results clarify that in both reform proposals tax payment reallocations occur in favor of the holding. National loss-offset limitations and minimum taxation concepts in tendency lose their impact on the profitability under both proposals. However, we found scenarios in which national minimum taxation can encroach upon the group level, although in our model the minimum taxation's impacts seem to be slight. Moreover, we identify harmful paradoxes in ETAS due to the tax credit mechanism. Our results can contribute to the current discussion on corporate group tax harmonization within the EU and other economic zones, e.g. the US, and help to anticipate the tax effects of lossoffset restrictions under the respective tax systems

Country Concepts and the Rational Actor Trap: Limitations to Strategic Management of International NGOs

Growing criticism of inefficient development aid demanded new planning instruments of donors, including international NGOs (INGOs). A reorientation from isolated project-planning towards holistic country concepts and the increasing rationality of a result-orientated planning process were seen as answer. However, whether these country concepts - newly introduced by major INGOs too - have increased the efficiency of development cooperation is open to question. Firstly, there have been counteracting external factors, like the globalization of the aid business, that demanded structural changes in the composition of INGO portfolios towards growing short-term humanitarian aid; this was hardly compatible with the requirements of medium-term country planning. Secondly, the underlying vision of rationality as a remedy for the major ills of development aid was in itself a fallacy. A major change in the methodology of planning, closely connected with a shift of emphasis in the approach to development cooperation, away from project planning and service delivery, towards supporting the socio-cultural and political environment of the recipient communities, demands a reorientation of aid management: The most urgent change needed is by donors, away from the blinkers of result-orientated planning towards participative organizational cultures of learning.Des critiques croissantes de l'aide au développement inefficace exigent de nouveaux instruments de planification des bailleurs de fonds, y compris les ONG internationales (ONGI). Une réorientation de la planification des projets isolés vers des concepts holistiques de la planification de l’aide par pays ainsi que la rationalité croissante d'un processus de planification orientée vers les résultats ont été considérés comme réponse. Toutefois, si ces concepts de pays - nouvellement introduites par les grandes OING eux aussi - ont augmenté l'efficacité de la coopération au développement est ouvert à la question. Tout d'abord, il y a eu l’impact des facteurs externes, comme la mondialisation de l'entreprise de l'aide, qui a exigé des changements structurels dans la composition des portefeuilles des OING vers la croissance de l'aide humanitaire à court terme. Cela était difficilement compatible avec les exigences de l'aménagement du territoire à moyen terme. Deuxièmement, la vision sous-jacente de la rationalité accrue de la planification, concentré sur les resultats, comme un remède pour les grands maux de l'aide au développement était en soi une erreur. Un changement majeur dans la méthodologie de la planification, étroitement liée à un changement d'orientation dans l'approche de la coopération au développement, qui n’est pas concentrer sur planification du projet et la prestation de services, mais qui soutienne l'environnement socio-culturel et politique des communautés bénéficiaires, exige une réorientation de la gestion de l’aide: Le changement le plus urgent est un changement par les donateurs eux-mêmes, qui devrait implanter des cultures de collaboration étroit avec les partenaires et la population locale

Classical Macrodynamics and the Labor Theory of Value

This paper outlines a multisector dynamic model of the convergence of market prices to natural prices in conditions of fixed technology and composition of demand. Prices and quantities adjust in real-time in response to excess supplies and differential profit-rates. Finance capitalists earn interest income by supplying money-capital to fund production. Industrial capitalists, as the owners of firms, are liable for profits and losses. Market prices stabilize to profit-equalizing prices of production proportional to the total coexisting labor required to reproduce commodities. This result resolves the classical problem of the incommensurability between money and labor-value accounts in conditions of profits on stock, i.e. Marx's transformation problem

The Interest Rate and Credit Channels in Belgium: An Investigation with Micro-Level Firm Data

This paper investigates the effects of monetary policy on firms' investment behaviour. The analysis relies on a comprehensive database of Belgian firms covering all sectors of economic activity and firms of all sizes. We proceed in two steps. First, we estimate a reduced-form investment equation derived from the neo-classical model, augmented by cash flow. This equation is estimated by the Arellano and Bond (1991) GMM procedure. Second, we compute the elasticity of the user cost of capital and the cash flow/capital ratio to the policy-controlled interest rate. We estimate the model for various sample splits according to sectors and sizes. Our results indicate that small firms are more sensitive to monetary policy than large firms, and that services are almost unaffected. Since the impact differs across sectors and sizes, we can conclude that monetary policy produces distributional effects