Thomas Tørsløv, Ludvig Wier, Gabriel Zucman, 21 April 2020

Despite the legal frameworks and large amounts of lost tax revenue, profit-shifting practices persist around the world. This column argues that fiscal authorities of high-tax countries face an incentive problem in combatting profit shifting to tax havens. Enforcement efforts are focused on relocating profits booked in other high-tax countries rather than those in tax havens. This can ultimately result in lower global tax payments of multinational companies. The results call for a global corporate tax reform in order to save resources that currently go to wasteful and inconsequential tax enforcement.

Sébastien Laffitte, Julien Martin, Mathieu Parenti, Baptiste Souillard, Farid Toubal, 14 April 2020

National healthcare and other public services, currently under increasing pressure due to the COVID-19 pandemic, have been underfunded in many countries, an issue that has likely been exacerbated by corporate tax avoidance. Some multinationals that have been avoiding corporate taxes for years are about to be bailed out by national governments, arousing a public sentiment of unfairness. This column argues that setting a minimum effective tax rate on the global profit of multinational companies would tackle these concerns.

Jozef Konings, Cathy Lecocq, Bruno Merlevede, 17 October 2018

Many countries have reduced their corporate income tax rates or introduced tax deductions, exclusions, and credits to attract foreign direct investment. This column discusses the introduction of the Notional Interest Deduction in Belgium, which allows companies to deduct from their taxable income an interest that is calculated based on the company’s equity. The deduction has increased employment in Belgian affiliates of multinational enterprises by between 6% and 8%.

Sven Langedijk, Gaëtan Nicodème, Andrea Pagano, Alessandro Rossi, 04 July 2015

Strengthening the banking sector through higher equity capital is one of the key elements of policies aiming to reduce the probability of crises. However, the ‘corporate debt bias’ – the tendency of corporate tax systems to favour debt over equity – is at odds with this objective. This column estimates the benefits for financial stability of eliminating the corporate debt bias. Fully removing the debt bias is estimated to reduce potential public finance losses by between 25 and 55% for the six large EU countries sampled. 

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.

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