Enrico Rubolino, Daniel Waldenström, 29 April 2017

The responsiveness of high-income earners to taxation is a central aspect of tax system design. This column presents patterns in the tax elasticity of top earners for up to 30 countries over a period of 115 years. Tax elasticities vary tremendously over time, space, and income, with a J-shaped pattern emerging over the past century. Tax avoidance behaviour strongly influences the elasticity of the very top earners, while there is less support for the role of labour supply responses across earners.

Enrico Rubolino, Daniel Waldenström, 13 April 2017

The link between tax progressivity and the income distribution is the subject of intense debate. This column presents new evidence from tax reforms during the 1980s and 1990s to examine how reduced progressivity affects top income shares. Reduced progressivity boosted top incomes, particularly for those in the top 0.1% of earners. Income tax changes are therefore a plausible candidate for explaining the recent surge in income inequality.

Anna Gumpert, James Hines, Monika Schnitzer, 05 October 2016

Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. This column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance does appear to be a motive, particularly for manufacturing firms. Policies that raise the costs of reallocating profits maybe be effective in attenuating firms’ use of tax havens.

Valeria Pellegrini, Alessandra Sanelli, Enrico Tosti, 14 March 2016

Balance of payments statistics suggest that assets held abroad are greatly underestimated – particularly for mutual fund shares and bank deposits. This column looks into the role played by tax havens and estimates that unreported financial assets amount to between $6 and $7 trillion. On this figure, the related tax evasion is between $19 and $38 billion a year on capital income, and between $2 and $2.6 trillion on personal income. Recent policy initiatives such as automatic information exchanges constitute real progress, but some critical aspects might jeopardise their effectiveness. 

Michael Best, Anne Brockmeyer, Henrik Kleven, Johannes Spinnewijn, Mazhar Waseem, 05 January 2016

Developing economies are characterised by low tax revenue and widespread tax evasion. This column assesses what tax policy instruments governments should use to raise revenue. Optimal tax policy in developing countries may diverge from what is prescribed in standard textbook models. A turnover tax, for instance, is known to distort production decisions but may also to be more difficult to evade than a profit tax, and so can be optimal in high-evasion contexts.

Peter Egger, Georg Wamser, 07 October 2015

Controlled foreign company rules are implemented by countries to prevent adverse profit-shifting activities by multinationals. This column suggests there are unintended consequences of such rules for real investment activity. Using the case of German legislation, the authors find that fixed assets at foreign subsidiaries decline by about €7 million per subsidiary in response to controlled foreign company treatment.

Maarten van ’t Riet, Arjan Lejour, 05 January 2015

The recent actions of the US Treasury to rein in corporate tax inversions leave their rationale largely intact. This column discusses new evidence suggesting that the potential tax benefits of inversions are still huge. The recent Treasury measures raised legal obstacles, but the heart of the problem remains unaddressed. At some point a new technique is likely to be found to circumvent the new measures – just as happened with earlier measures. This is a worldwide problem.

Ronald Davies, Julien Martin, Mathieu Parenti, Farid Toubal, 05 January 2015

Allegations of tax-avoiding transfer pricing by multinational firms are common, but economic evidence is scarce. This column discusses detailed price data for intra-firm and arm’s length transactions that reveals tax-driven transfer pricing, and suggests that it may be reduced by focusing on a small number of large firms in a small number of tax havens. 

Ruud de Mooij, Michael Keen, Victoria Perry, 14 September 2014

Multinational companies’ ability to pay little corporate income tax has grabbed headlines recently. This column argues that the details of international tax rules matter for macroeconomic performance – especially in low-income countries. This emphasises the importance of the G20–OECD Action Plan on Base Erosion and Profit Shifting. However, dealing properly with tax spillovers will require a deeper global debate about the international tax architecture itself.

Agnès Bénassy-Quéré, Alain Trannoy, Guntram Wolff, 22 July 2014

Tax harmonisation has been controversial since the establishment of the European Economic Community, and corporation tax proposals are currently on the table in the EU. Although tax competition can be beneficial, tax harmonisation could curb tax competition that leads to the under-provision of public goods or to burden-shifting from mobile to immobile tax bases. As yet, no agreement has been reached on any ambitious harmonisation plan for mobile tax bases. This column explores the possibility of implementing partial tax harmonisation for corporate taxation and the taxation of the banking sector.

Tullio Jappelli, Mario Padula, Giovanni Pica, 26 February 2010

What are the effects of inheritance tax on bequests and tax avoidance? This column examines data from Italy suggesting that the abolition of transfer taxes increased real estate inheritance by around 2 percentage points. Given that the ratio of real estate to total wealth exceeds 85% for the over 60s in Italy, it is likely that at least part of this increase is a genuine effect.