8 research outputs found
Indirect Access to Intellectual Property Regimes - Effects on Austrian and German Affiliates
This paper assesses the spillover effect of European Patent Boxes on affiliates of MNEs operating in Austria and Germany. I divide firms in a control and treatment group, the latter having affiliates in countries where preferential
regimes for patent and other IP income have been introduced between 2005-2011. My findings suggest that Austrian and German firms, which have gained indirect access to preferential IP regimes via their affiliates, reduce
their reported profit levels. I do not observe, however, an effect on the level of intangible assets owned by these firms. (author's abstract)Series: WU International Taxation Research Paper Serie
Taxing Income in the Oil and Gas Sector - Challenges of International and Domestic Profit Shifting
This paper provides specific estimates on the scale of profit shifting among hydrocarbon MNEs. We estimate a lower-bound semi-elasticity of reported profits to sector specific income taxation of -1.88. To assess the importance of domestic profit-shifting channels, we take advantage of domestic tax differentials among hydrocarbon producers facing additional rent taxes and find that domestic profit shifting accounts for about one third of total income concealed. Overall, we estimate revenue losses in the sector due to profit-shifting amount to 12% - 35% of the income tax base, depending on the characteristics of a
country's tax regime. We also observe a higher vulnerability of non-OECD economies to profit shifting in our sample, which consists of 294 domestic and
multinational parents and subsidiaries during the period from 2004-2012. Finally, our analysis confirms the mitigation effect of documentation requirements for internal transactions. However, we also find that increased enforcement prompts MNEs in the Oil and Gas sector to rely more heavily on the reallocation of profits at the domestic level. (authors' abstract)Series: WU International Taxation Research Paper Serie
Small Business Tax Policy, Informality, and Tax Evasion - Evidence from Georgia
Using a panel of administrative data and regression discontinuity analysis, this paper examines how the
introduction of preferential tax regimes for Georgian micro and small businesses in 2010 affects formal
firm creation and tax compliance. The results show that the new tax regime for micro businesses
increased the number of newly registered formal firms by 18-30 percent below the eligibility threshold
during the first year of the reform, but not in subsequent years. The analysis does not find an effect of
the new tax regime for small businesses on formal firm creation in any year. Policy makers are often
concerned about abuse risks stemming from differentiated tax treatment of micro and small businesses.
The analysis in this paper reveals reduced tax compliance in 2010 around the micro business eligibility
threshold, but does not find significant evidence of reduced compliance by Georgian firms in later years.
The results also do not show any significant evidence of strategic sorting around the regime eligibility
thresholds. (authors' abstract)Series: WU International Taxation Research Paper Serie
Profit Shifting: Drivers and Potential Countermeasures
In trying to explain the drivers of global profit shifting by MNEs we investigate
industry-specific variation in profit shifting and identify determinants thereof. Using
the ORBIS database we show that intangible asset endowment of subsidiaries and the
complexity of MNE groups explain aggregate profit shifting trends and tend to drive
industry specific results. We find that subsidiaries with a high intangible to total
asset ratio have a semi-elasticity of 1.2 compared to 0.78 for low intangible affiliates,
suggesting a significantly larger sensitivity to CIT rate changes. Similarly, subsidiaries
belonging to more complex MNE groups have a higher semi-elasticity (1.11) than those
that are part of less complex entities (0.81). Moreover, we incorporate country-specific
transfer pricing mitigation measures (documentation requirements) into our analysis.
We find significant non-linear mitigation effects, which vary depending on the intangible
endowment of subsidiaries and complexity of MNE groups. On average, the estimated
profit shifting among MNE subsidiaries in our sample is reduced by 60 percent four
years after the introduction of mandatory documentation requirements. The findings of
our research provide initial insights on the relative profit-shifting risk associated with
different sectors of MNE activities which may support the design of anti-avoidance
approaches and the allocation of scarce analytical and enforcement resources. (authors' abstract)Series: WU International Taxation Research Paper Serie