International Trade and Finance
FDI, the global crisis and sustainable recovery
Estimating the fiscal effects of base erosion and profit shifting: data availability and analytical issues
The multilateral efforts led by the Organisation for Economic Cooperation and Development (OECD) to address base erosion and profit shifting (BEPS) have attracted much attention from tax policy makers practitioners and academics. In 2012 the OECD/G20 BEPS Project was launched to address BEPS through a range of international tax policy measures. A key part of the BEPS package was the Action 11 report which considered the fiscal and economic impacts of BEPS and produced an empirical estimate of the global corporate income tax (CIT) revenue losses arising from BEPS of between 4 per cent and 10 per cent of global CIT revenues. This research note highlights some of the data-related and methodological challenges facing researchers attempting to estimate the fiscal impacts of BEPS discusses some of the methodological approaches that have recently been applied to this end and provides a preview of the forthcoming release of the first edition of the OECD Corporate Tax Statistics.
Transfer pricing and state aid: The unintended consequences of advance pricing agreements
An advance pricing agreement (APA) is a formal arrangement between a tax authority and a multinational enterprise (MNE) in which the parties jointly agree on the MNE’s transfer pricing methodology estimated taxable income and tax payments for a fixed period thus reducing the likelihood of an income tax dispute. We argue that APAs which were developed by governments to solve MNE-state problems in one realm (international taxation of related party transactions) have had unintended consequences for both parties due to the spillover impacts of APAs into other policy realms. We explore this argument in the European Union state aid cases where in the context of competition policy APAs can be viewed as hidden discretionary policies that can be misused by lower-tier governments to attract or retain inward foreign direct investment by offering individual MNEs preferential tax treatment. Our paper contributes to this literature by analyzing the unintended consequences of APAs and recommending policy changes to reduce these negative spillovers.