Papers & Reports

Geringer’s paper seeks to explore treaty anti-abuse provisions specifically from an equality perspective. The significance of differing concepts for the assessment of tax avoidance and tax abuse in different double tax conventions has not yet been specifically evaluated through the lens of equality, and no previous studies have particularly focused on the question as to whether, to what extent, and on the basis of which concepts or principles, equal treatment for similar and possibly abusive situations ought (not) be realized at the treaty, EU or national levels. Geringer’s paper aims to rectify this, and questions the impact of unequal tax treatment in treaty application as a product of variances in anti-abuse provisions. It is based on a comparative analysis and demonstrates that these effects are likely to specifically materialize in smaller economies and developing countries.

The authors used data from the IRS to analyse the significant contributions of the IRS, corporate executives, accountants, external accounting firms and individual tax preparers on corporate tax outcomes. The paper concludes that all these parties collectively shape corporate tax outcomes, but lack of data affects the understanding of the contributions of the various parties. However, from the limited data from IRS which the authors analyzed, they found that non-C suite executives and individual tax preparers play very important roles.

Paul in this paper considers the argument that the European Commission apparently ignored the protocol it had granted to Ireland under which (in exchange for Ireland’s vote in favor of the Treaty of Lisbon), Ireland was not required to obtain EC approval when granting State Aid (to Apple or any other company). The EC’s insistence that Ireland collect an additional tax of €13 billion Euros in tax underpayments from Apple for the 2003 to 2014 period could be viewed as a breach of this protocol. Paul opines that the decision was justified given that the EC did not claim that Apple broke any specific Irish or EU laws but that its “sweet” deal with Ireland was illegal because the arrangement meant unfair competition and was therefore State Aid.

Fetter examines the possibility of an internationally coordinated climate wealth tax, to fund a just transition globally. According to Fetter, a global climate wealth tax will provide the strongest protection against wealthy individuals leaving countries for tax purposes, creating wealth leakage; and could be used to curb wealth inequality directly correlated to higher greenhouse gas emissions. She argues that the global climate wealth tax would not replace the need for a carbon tax but would simply provide another incentive targeting high-net worth individuals, who bear a greater responsibility for greenhouse gas emissions.

Mintz in this paper examines the intersection between the corporate income tax base and the proposed global corporate minimum tax. Mintz notes that the aim of the global minimum tax is to reduce the incentive for profit shifting by putting a floor on corporate tax rates so that they do not fall below 15 percent of adjusted accounting profits. However, the global minimum tax itself will introduce new capital market inefficiencies as a result of which foreign-owned capital will be subject to tax more heavily than domestic capital. He notes further that the minimum tax distorts capital allocation by favoring labor-intensive projects over capital-intensive projects. Mintz also argues that it distorts the accounting decisions of corporations when they seek to avoid paying the tax. Overall, it is not clear that the global minimum tax will work any better than other policies aimed at reducing corporate profit shifting.

According to Wilkie and Eden, there are three underlying reasons for the current lack of confidence in the international rules for taxing the global profits of multinational enterprises (MNEs), to wit: (1) tax rules are not universal or natural; (2) taxes must be practical, administrable, and collectible; and (3) tax policy is a domain where national sovereignty and multilateralism are both important and conflictual. The authors use Transfer Pricing as a case study because it affects how an MNEs global profits are allocated among countries. Wilkie and Eden then make proposals for an alternative to the arm’s length principle with inspiration from the distinction made by the International Centre for Settlement of Investment Disputes between investment and trade that underlies the four-factor Salini test: contribution, assets, risk, and duration. They argue that the Salini test provides useful insights into the conundrum of “source” and a way out of the current lack of confidence in the international tax system.

Hanna and Wilson’s paper seeks to address a gap in existing proposals for U.S. international tax reform by discussing Corporate America’s focus on the interaction between financial accounting and tax accounting. The authors propose a U.S. international tax system that could have the support of tax scholars, policymakers, and Corporate America, all without sacrificing revenue. This paper is written on the backdrop of recent proposals by the Biden administration to raise revenue by bringing the United States closer to a worldwide no deferral system and raising the corporate tax rate from 21 percent to 28 percent. The authors argue that these changes are unlikely to become law and that the administration simply does not have the support of moderate Democrats, Republicans, and, especially, Corporate America. The Article aims to resolve the Biden Administration’s conundrum by proposing a worldwide no deferral system with a corporate tax rate in the mid to high teens, and argues that the proposal already exists in the 15 percent corporate alternative minimum tax, but few recognize this new tax system as a worldwide no deferral system because it is imposed on financial accounting income and applies only to the largest corporations.

Inefficiencies from tax competition may result in governments seeking to limit fiscal competition via tax treaties, harmonization, minimum tax rates, or interjurisdictional cooperation. This paper proposes a general model applicable to studying many types of taxing instruments, which allows for the comparison of various policy responses to promote jurisdictional cooperation. Comparing across policies, the model suggests a clear revenue dominance of partial harmonization among a subset of jurisdictions. Minimum tax rates revenue-dominate complete harmonization but fail to raise revenues as much as partial harmonization.

This paper uses micro data from country-by-country reporting of more than 3600 large multinational companies operating in 238 jurisdictions to analyze global profit shifting to avoid taxes. These companies report 7% of their global profits in jurisdictions with effective average tax rates below 5%, but only 0.4% of their employees and 3% of their tangible assets are located there. The paper also found that globally, these companies reduce their tax burden by EUR 53 billion (15% of their overall tax payments) by shifting profits to low-tax countries. The paper further investigated profit shifting channels and provided evidence suggesting that the location of IP and equity in low tax countries as well as the provision of loans to entities in high tax countries play a key role for tax planning.

The paper builds a model of tax policy and investment that incorporates unobserved heterogeneity in MNEs’ profit shifting capability and different costs of setting up a tax minimization network. The model matches the distribution of taxable profit and investment in detailed UK tax returns data. The authors use the model to quantify the policy tradeoff between raising tax revenue by combating tax avoidance via a Global Minimum Tax and attracting investment.