scholarly journals International Corporate Tax Avoidance

2020 ◽  
pp. 81-128
Author(s):  
Alex Cobham ◽  
Petr Janský
Keyword(s):  
Tax Avoidance ◽  
Multinational Companies ◽  
Critical Survey ◽  
Lower Income ◽  
Corporate Tax ◽  
Profit Shifting ◽  
Methodological Innovation ◽  
Financial Flows ◽  
Illicit Financial Flows ◽  
Lower Income Countries

exy2Tax avoidance by multinational companies is the most widely recognised tax abuse, and also the most heavily researched aspect of illicit financial flows (IFF). This chapter provides a critical survey of the leading estimates, highlighting the range of methodological innovation and alternative data. While the global range of estimated revenue losses is wide (between around $200bn and $600bn a year), consistent findings include that it is only a handful of jurisdictions that benefit from profit shifting at the expense of all others; and that lower-income countries lose the highest share of current tax revenues. While there is no single, perfect estimate in the literature, it does point the way to a potential indicator for the UN target.

Addressing illicit financial flows in Africa

2016 ◽  
Vol 23 (4) ◽  
pp. 1074-1091 ◽  
Author(s):  
Bernd Otto Schlenther
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Tax Avoidance ◽  
Medium Term ◽  
Profit Shifting ◽  
Financial Flows ◽  
Content Type ◽  
Priority Areas ◽  
Long Run ◽  
Illicit Financial Flows

Purpose This paper aims to identify the underlying key components of illicit financial flows (IFFs) and highlights the priority areas where government resources should be pooled under a whole of government approach to mitigate the risks posed by IFFs. These areas are tax avoidance and tax evasion (specifically intra-company profit shifting, investment and profit shifting within the extractive sector, fraud and beneficial ownership), anti-corruption measures, governance and accountability measures, anti-money laundering effectiveness and effectiveness in the detection of falsified customs declarations. Design/methodology/approach The concept of IFFs is emerging as an umbrella term for bringing together seemingly disconnected issues. The concept is ill-defined, but there are various identifiable components supporting the term IFF such as capital flight, corruption, money laundering, tax avoidance, tax havens and transfer pricing practices. The author identifies the key areas of concern through a literature review and recommends prioritization of short- to medium-term risk areas and long-term policy imperatives. Findings In the short- to medium-term, an effective “whole-of-government” approach should be based on uniform risk identification and prioritization between mandated government agencies and in the long run, it should be focused on building responsive and effective institutions through a process of good governance and effective taxation. Originality/value A large body of literature deals with “IFFs” and the “whole-of-government approach” as separate concepts. This paper draws on the existing literature and identifies priority areas for addressing IFFs, and, for these to be successful, they are entirely dependent on a whole-of-government approach – both in the short and long run.

Curbing Illicit Financial Flows

2018 ◽  
Author(s):  
Xiaodon Liang
Keyword(s):  
Tax Evasion ◽  
Developing Economies ◽  
International System ◽  
Tax Avoidance ◽  
Incentive Structure ◽  
Global Finance ◽  
Tax Havens ◽  
Financial Flows ◽  
Playing Field ◽  
Illicit Financial Flows

Illicit financial flows (IFFs) drain state finances and economic vitality, with disproportionate impact on developing economies. IFFs—including money laundering, tax evasion, and tax avoidance—pose a transnational problem addressed so far through international regimes of coordination and cooperation. But meaningful reductions in IFFs require addressing the root of the problem: information asymmetries. Developed nations and tax havens know where money is hidden and profits are made, while developing nations do not. Since the international system of global finance creates the incentive structure and permissive environment for illicit flows, it is at this level that states must focus their policy-making attention. New information-sharing mechanisms, such as automatic exchange of tax information and public country-by-country tax reporting, can level the playing field and enable lower-income states to effectively address the IFF problem.

G20 countries will adopt new corporate tax accord

2015 ◽  
Keyword(s):  
National Level ◽  
Tax Avoidance ◽  
Tax Treaties ◽  
Corporate Tax ◽  
Profit Shifting ◽  
Content Type ◽  
Major Threat ◽  
The Eu

Significance The rulings come as the EU advances legislation to increase transparency on corporate tax rulings and after the G20 on October 9 endorsed the new OECD Base Erosion and Profit Shifting (BEPS) framework for countering corporate tax avoidance. Impacts These EU rulings suggest similar decisions are imminent involving Apple in Ireland and Amazon in Luxembourg. The rulings will inspire further challenges to similar arrangements; they are the major threat to similar policies. Most BEPS measures will require changes to bilateral tax treaties and could face national-level delays or rejections. Monitoring of BEPS implementation will commence, but compliance will be voluntary and thus limited.

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

2019 ◽  
Author(s):  
Alex Cobham ◽  
Tommaso Faccio ◽  
Valpy FitzGerald
Keyword(s):  
Tax Reform ◽  
Oecd Countries ◽  
Corporate Taxation ◽  
Lower Income ◽  
Corporate Tax ◽  
Early Evaluation ◽  
Public Evaluation ◽  
Independent Commission ◽  
Lower Income Countries

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.

Developing economies will struggle to rebound solidly

2021 ◽  
Keyword(s):  
Developing Economies ◽  
The United States ◽  
Lower Income ◽  
Corporate Tax ◽  
Content Type ◽  
Special Drawing ◽  
Special Drawing Rights ◽  
Lower Income Countries ◽  
Global Growth ◽  
Economic Outlook

Significance Although the Fund upgraded its forecast for global growth this year to 6%, the recovery is becoming more uneven. Decisions were taken on global corporate tax, extended debt relief for developing states and a large disbursement of Special Drawing Rights (SDRs). Whether these measures are wide or deep enough to support lower-income countries is debatable. Impacts Led by the United States, support for corporate tax reform is rising, but benefits will not come soon enough for fiscally distressed states. The firm global recovery relies on China’s GDP gaining more than 8% and India’s more than 10%; India faces greater immediate downside risks. The economic outlook is brighter for developing nations with robust public finances and limited tourism reliance where COVID-19 is in check. COVAX delivery timings may be optimistic, and the WTO is unlikely to waive intellectual property rights to production capability transfers.

scholarly journals Illicit financial flows and the Global South: A review of methods and evidence

2020 ◽  
Author(s):  
Kasper Brandt
Keyword(s):  
Multinational Enterprises ◽  
The United States ◽  
Global South ◽  
Financial Assets ◽  
Profit Shifting ◽  
Tax Havens ◽  
Financial Flows ◽  
Illicit Flows ◽  
Illicit Financial Flows ◽  
Domestic Resource

Illicit financial flows (IFFs) constitute a major challenge for development in the Global South, as domestic resource mobilization is imperative for providing crucial public services. While several methods offer to measure the extent of IFFs, each has its benefits and drawbacks. Critically, methods based on the balance of payments identity may capture licit as well as illicit flows, and a method based on macroeconomic trade discrepancies suffers from doubtful assumptions. The most convincing estimate to date demonstrates that individuals hold financial assets worth around ten per cent of global GDP in tax havens. Evidence further indicates that countries in the Global South are more exposed to individuals and multinational enterprises illicitly transferring money out of the country. Further research is warranted on profit shifting out of countries in the Global South and the effectiveness of anti-IFF policies in countries outside Europe and the United States.

scholarly journals Tax justice and the challenges of measuring illicit financial flows

2019 ◽  
pp. 103-114
Author(s):  
Richard Murphy
Keyword(s):  
Multinational Corporations ◽  
Multinational Corporation ◽  
Tax Avoidance ◽  
Accounting Standards ◽  
Tax Havens ◽  
Financial Flows ◽  
Corporation Tax ◽  
Illicit Financial Flows ◽  
Large Corporations ◽  
The Way

Multinational corporation tax avoidance is primarily about tax avoidance. That is, recording transactions in ways that are legal but which might not meet with the approval of the all the tax authorities who might be impacted by the way in which transactions are recorded are reported. This is most especially true of many transactions involving tax havens. The problem with tracing transactions recorded in these places has, however, been locating any data on them because if the accounting opacity that they create, which is also permitted by existing accounting standards for multinational corporations. Country-by-country reporting was created to tackle this opacity head-on by requiring that all large corporations report all their transactions wherever they might arise. The result could be far greater information on the illicit financial flows of major companies, or their potential elimination.

scholarly journals Trade Estimates

2020 ◽  
pp. 27-60
Author(s):  
Alex Cobham ◽  
Petr Janský
Keyword(s):  
Future Development ◽  
Step Change ◽  
Data Availability ◽  
Critical Survey ◽  
Financial Flows ◽  
Trade Off ◽  
Current State ◽  
Trade Offs ◽  
Illicit Financial Flows

International trade plays an important role in some of the most prominent studies aimed at estimating the scale of illicit financial flows (IFF). This chapter provides a critical survey of the leading estimates of trade-based IFF, addressing separately the strengths and weaknesses of methodologies that rely on data at the country, commodity and transaction level. The current state of data availability makes a trade-off between coverage and quality of estimation inevitable, and at present no approach in this area yields sufficiently a strong, global series. There are a number of promising areas for future development, but unfortunate trade-offs will remain unless there is a step change in data availability.

scholarly journals New Proposals for IFF Indicators in the Sustainable Development Goals

2020 ◽  
pp. 144-171
Author(s):  
Alex Cobham ◽  
Petr Janský
Keyword(s):  
Economic Activity ◽  
National Level ◽  
Multinational Companies ◽  
Data Availability ◽  
Financial Flows ◽  
The Sustainable Development ◽  
First Case ◽  
Development Goals ◽  
Two Measures ◽  
Illicit Financial Flows

The search for indicators for the UN target to reduce illicit financial flows (IFF) is complicated by data issues and the difficulties of estimating what is deliberately hidden. In this chapter, we propose our two preferred indicators, that address instead the measurable consequences of IFF. In this chapter we lay out the two measures, and evaluate their strengths and weaknesses including in respect of data availability and potential work-arounds at national level. Both measures use relatively newly available data to establish scale: in the first case, the scale of the misalignment between where multinational companies carry out their economic activity, and where they are ultimately able to declare the resulting profit; and in the second case, the scale of offshore wealth which is undeclared to tax authorities.

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