Tax incentives and the location of FDI: Evidence from a panel of German multinationals

Using a firm-level panel data set this paper investigates the impact of taxation on the decision of German multinationals to hold or establish a subsidiary in other European countries or abroad. Taking account of unobserved local characteristics as well as firm-specific preferences for potential locations, the results confirm significant effects of tax incentives, market size, and of labor cost on cross-border location decisions. In accordance with Devereux and Griffith (1998) we find that the marginal effective tax rate has no predictive power for location decisions. However, the results indicate a considerably weaker predictive power of the effective average tax rate as compared to the statutory tax rate. JEL Code:H25 ⋅ F23 ⋅ F21 ⋅ R38     

Why Did FDI Inflows of Pakistan Decline? From the Perspective of Terrorism,Energy Shortage,Financial Instability,and Political Instability

Foreign direct investment (FDI) inflows are important for economic development in all countries, especially developing ones. In many developing countries, FDI inflows have increased over the past two decades. However, in Pakistan FDI inflows declined over the past decade. This study examines the reasons for declining FDI inflows to Pakistan, considering the main issues, such as terrorism, energy shortages, financial instability, and political instability, with some macroeconomic indicators as control variables. These analyses are based on pre- and post-global financial crisis events, and we check the robustness by controlling for the global financial crisis. Our analyses are conducted using an autoregressive distributed lag model (ARDL) for co-integration among variables. The results show that energy shortages, financial instability, and political instability have adverse effects, and terrorism has insignificant effects on FDI inflows to Pakistan before the financial crisis in the long term. However, the post-financial crisis period indicates that terrorism and energy shortages are the main drivers of decline in FDI inflows to Pakistan. Market size, inflation, and exchange rates affect FDI inflows positively. The global financial crisis has an adverse impact on FDI inflows to Pakistan. This study is helpful for the Pakistani government as it attempts to design useful policies for attracting FDI.     

Corporate tax revenues in OECD countries

This paper studies variation among OECD countries in the size of corporate income tax revenues relative to GDP over the time period 1979–2002. A decomposition explains such variation as a function of the statutory tax rate, the breadth of the tax base, corporate profitability, and the share of the corporate sector in GDP. Empirical results indicate a parabolic relationship between tax rates and revenues, implying a revenue-maximizing corporate income tax rate of 33% for the whole sample. This revenue-maximizing rate is found to decrease as economies are smaller and more integrated with the world economy. JEL Classification H25, H87     

The quest for non-resource-based FDI: Do taxes matter?

Using manufacturing and services firm-level data for 30 African countries, we show that taxation is not a significant driver for the location of foreign firms in Africa, while other investment climate factors, such as infrastructure, human capital, and institutions, are. By analysing disaggregated foreign direct investment (FDI) data, we establish that, while there is considerable contrast in behaviour between vertical FDI and horizontal FDI, taxation is not a key determinant for either type of FDI. Horizontal FDI is affected more by financing and human capital constraints, and less by infrastructure and institutional constraints, than is vertical FDI.     

To Invest or not to Invest: A real options approach to FDIs and tax competition

Foreign investment decisions of firms are often characterized by investment irreversibility, uncertainty, and the ability to choose the optimal timing of foreign investments. We embed these characteristics into a real option theory framework to analyze international competition among countries to attract mobile investments when firms, after the investment is sunk, can shift profit to low tax countries by transfer pricing. We find that an increase in the uncertainty of profit income reduces the equilibrium tax rates, whilst lower investment costs or larger profits, counteracts the negative fiscal externality of tax competition leading to higher equilibrium tax rates. JEL Code H25     

Structuring a tax efficient international operation

International taxation is rapidly increasing in importance in the U.S. business environment. As a student preparing for a career in public accounting or industry, it is vital that you have familiarity with key international tax issues. In this case, you will participate in a detailed tax-planning exercise involving a multinational corporation that is restructuring its tax operations. In the process, you will be exposed to a wide-ranging array of real-world tax issues: tax theory, source of income, transfer pricing, foreign tax credits, the foreign earned income exclusion and Subpart F income. The case also incorporates questions designed to help you explore the financial accounting implications of tax planning. The case consists of three tax modules and each module emphasizes two to three specific tax issues. Two of the modules also contain a subset of tax-related financial accounting questions. To complete the case successfully, you will be required to understand basic international tax theory, to engage in the tax research process and to apply your theoretical knowledge in analyzing complex business scenarios.     

Insiders’ perspectives of the effects of recent regulation on corporate taxation

Recent legislation and standard interpretations promulgated by governmental bodies and the Financial Accounting Standards Board (FASB) have attempted to address several issues related to corporate taxation. These issues include the lack of transparency regarding specific tax transactions, the difficulty in reconciling the corporate tax return with the corporate income statement, the relative lack of disclosure of tax contingencies in the financial statements, and the impact of internal control on the reliability of the corporate tax return. While the stated objectives of several recent regulations have included improvements in the areas of corporate tax compliance and transparency of financial statements, it is unclear whether these regulations have resulted in the desired effects. This study analyzes the perceptions of 223 corporate tax executives regarding the effects of Internal Revenue Announcement 2002-63, Schedule M-3 of IRS Form 1120, FASB Interpretation Number 48 (FIN 48), and Section 404 of the Sarbanes-Oxley Act. The findings indicate that the respondents perceive an overall increase in tax return transparency and corporate tax compliance as a result of Schedule M-3 and FIN 48; yet the ability of corporations to engage in tax planning has decreased as a result of FIN 48. The respondents also perceive that both FIN 48 and Section 404 of the Sarbanes-Oxley Act have increased their reliance on outside sources for tax compliance work.     

公司所得税改革的世界趋势:价值取向与具体措施

随着经济全球化的发展和国际间资本流动的加速,在追求公平、效率、收入的基础上,世界公司所得税改革的价值取向已进一步提升到提高本国税制竞争力、吸引国际投资的高度,降低税率、扩大税基、消除股息双重征税以及对现金流量税的理论推崇也成为实现这一价值理念的基本措施。     

The impact of nonprofit taxes on foreign direct investment: evidence from German multinationals

This paper provides an empirical analysis of the impact of taxes other than profit taxes on both investment and location decisions of multinationals. Besides effects of corporate income taxes, the results confirm significant adverse effects of nonprofit taxes such as property taxes, sales taxes and VAT, and import duties on the level of FDI. However, once country-specific fixed effects are included, most of the effects of nonprofit taxes vanish. This is supported by the analysis of location decisions, where taxes other than corporate income taxes are not found to exert any adverse effects on the location probability in a setting with country-specific fixed effects.      

宪政税收——一个从宪法视角分析税收的框架

宪政税收是宪法上对税收核心规则或最高原则的创设与运用之政法过程的制度性规范,这一过程要求税收的每一个核心要素都受制于宪政税收。理论上,一个符合中国现实的宪政税收模型是人民代表的一致同意。因为国家和人民的基本关系其实是税收关系,所以必须在宪法上界定国家与人民的权力与权利、责任与义务并使其基本关系宪法化。实践上,应以宪政税收为基本出发点,修改宪法的涉税条款,不必出台税收基本法,并以宪法理念或精神指导税收法律体系或制度的构建。     

基层税务机关纳税服务存在的问题与优化对策

纳税服务是近年来税务机关工作的重点,本文通过分析基层实际情况,指出纳税服务存在的问题,并提出了如何优化的对策。     

Optimal commodity taxation with duty-free shopping

International travellers are frequently offered the opportunity to purchase a certain quantity of goods duty-free. Individuals differ in their opportunities to benefit from duty-free shopping, and we focus on the implications of these differences for optimal commodity taxation within a version of the optimal tax model of Mirrlees (Review of Economic Studies, 38, 175–208, 1971). We show how duty-free alters the constraints on the use of commodity taxes to reduce the distortionary costs of income taxation or to reflect externalities. Beyond characterising optimal taxes in the duty-free regime, we discuss conditions under which allowing duty-free would increase or reduce social welfare.      

The Property Tax as a Tax on Value: Deadweight Loss

Consider an atomistic developer who decides when and at what density to develop his land, under a property value tax system characterized by three time-invariant tax rates: τ_V, the tax rate on pre-development land value; τ_S, the tax rate on post-development residual site value; and τ_K, the tax rate on structure value. Arnott (2005) identified the subset of property value tax systems that are neutral. This paper investigates the relative efficiency of four idealized, non-neutral property value tax systems [(i) “Canadian' property tax system: τ_V = 0, τ _S = τ_K; (ii) simple property tax system: τ_V = τ _S = τ_K; (iii) residual site value tax system: τ_K = 0,τ _V = τ_S; (iv) two-rate property tax system: τ_V = τ _S > τ_K > 0] under the assumption of a constant rental growth rate. JEL Code: H2     

Taxation of Interest Income

Why is interest income taxed so much more heavily than other forms of capital income? This differential tax treatment has generated substantial tax arbitrage, resulting in lower tax revenue, efficiency costs, and apparently net gains to rich borrowers and net losses to poor lenders, together suggesting that this tax treatment makes no sense on welfare grounds. In examining this argument more formally, this paper reveals two omitted considerations that can help explain the existing tax treatment. First, the forecasted increase in the market interest rate results in a redistribution from rich borrowers to poor lenders. Yet this redistribution comes at no marginal efficiency cost, starting from a situation with no distortions to portfolio choice, so at the margin dominates further redistribution through the income tax. In addition, information about an individual's portfolio choice reveals information about her earnings ability, even controlling for observed labor income, if those who are more able tend to be less risk averse. By making use of this extra information about earnings ability, the tax system can be better tailored to redistribute from able to less able, for any given efficiency cost.     

避免信托重复征税的基本原则

重复征税是我国信托税制中存在的最突出的问题。构建信托税制、避免重复征税,必须坚持税制的一般原理与信托制度独特的基本原理相结合,以信托导管原理为理论分析工具,确立以实质课税主义为核心的基本原则。