nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2024‒03‒11
four papers chosen by

  1. The BEPS Project: Achievements and remaining challenges By Laudage, Sabine
  2. E-tax System Adoption and Tax Compliance in Ethiopia: Large and Medium Taxpayers' Experience By Yimam, Seid; Lidetu, Kebede; Belete, Tihtina
  3. The global corporate minimum tax and MNE home countries By Avi-Yonah, Reuven S.
  4. The Italian Banking System During the 1907 Financial Crisis and the Role of the Bank of Italy By Francesco Vercelli

  1. By: Laudage, Sabine
    Abstract: The Base Erosion and Profit Shifting (BEPS) Project of the Organisation for Economic Co-operation and Development (OECD) and the G20 aims to reduce harmful tax avoidance and evasion by multinational enterprises (MNEs), which creates large losses in governments' revenues. In times of multiple crises, many governments urgently seek additional revenue sources to finance public expenditures for sustainable development. In particular, many low- and lower-middle-income countries have tax-to-GDP ratios of less than 15 per cent, which is insufficient to provide basic public goods such as health, education and infrastructure for their populations. This policy brief evaluates the achievements and remaining challenges of the BEPS Project to mobilise more domestic revenues, in particular in low- and middle-income countries (LMICs). After the financial crisis of 2009, the G20 mandated the OECD with the design and implementation of the BEPS Project. The goal was to identify and tackle the most pressing issues that led to the erosion of corporate tax bases in their member countries. A key issue is the phenomenon that MNEs avoid large amounts of tax by shifting their profits from affiliates in high-tax countries to affiliates in low-tax countries. In 2013, the OECD presented its 15-point agenda to tackle BEPS in OECD member states. However, global tax avoidance and profit shifting can only be effectively addressed if a large number of countries is on board. Thus, in 2016, the Project opened for non-OECD/G20 countries to join the Inclusive Framework on BEPS and the implementation process of the BEPS Action Plan. However, tax administrations of many LMICs complain about the highly complex rules designed under the BEPS Action Plan that are not adapted to their context-specific capacities and needs. Today, the Inclusive Framework on BEPS has 145 member countries, and the implementation of the BEPS Action Plan is almost finished. Preliminary academic evidence shows that the overall impact of the BEPS Project in reducing global tax avoidance and profit shifting is indeed limited. According to recent estimates, tax revenue losses due to profit shifting even increased from 9 to 10 per cent in the first years when anti-BEPS measures were implemented (see Wier & Zucman, 2022). Since there is no counterfactual world in which the BEPS Project did not take place, we can only assume that tax avoidance would have increased even more in the absence of the Project. However, the BEPS Project is still considered the biggest overhaul of global tax rules since the last century. Positive achievements include increased awareness of MNEs' profit shifting behaviour, as well as the agreement on a global minimum tax. To tackle BEPS challenges more successfully - globally and in particular in LMICs - international tax cooperation needs to become more effective in three dimensions: Inclusive decision-making process: Countries should show more political will to combat tax avoidance and stop blocking more comprehensive international tax reforms. Truly inclusive cooperation between OECD and non-OECD countries is needed. Mandatory implementation: Many BEPS Actions were voluntary standards and, thus, not many countries introduced them into their domestic tax laws. To fight BEPS effectively, more mandatory tax rules need to be included in future reform packages. Simplified rules: Several BEPS Actions were watered down and became highly complex because individual countries bargained for carve-outs. Future international tax rules need to be more ambitious and simplified in this regard. Bilateral and multilateral development cooperation agencies should provide low-income countries with capacity building and assistance in implementing tax rules.
    Keywords: Domestic revenue mobilisation, tax avoidance, BEPS, Inclusive Framework, tax cooperation, mutinational enterprises
    Date: 2023
  2. By: Yimam, Seid; Lidetu, Kebede; Belete, Tihtina
    Abstract: In the last decade, tax administrations in developing countries have been introducing technological innovations such as e-filing and e-payment platforms. The main aim of introducing these technologies is to improve tax compliance and boost revenue collection by increasing convenience and flexibility for taxpayers and reducing their compliance costs. E-filing and e-payment could save taxpayers time preparing and returning taxes and reduce errors and opportunities for corruption. However, the adoption of these technologies and their effectiveness in improving tax compliance could be undermined by several factors. Using tax administrative records, we examined the adoption rate trend of the e-filing system and the correlation between e-filing adoption and tax compliance of large and medium taxpayers in Ethiopia. The timeliness of value-added tax (VAT) and corporate income tax (CIT) return filing and the amount of tax declared are the two main compliance indicators used in this study. Furthermore, we explored the existing challenges and the way forward to improve the adoption of the e-tax system using focus group discussions (FGDs).
    Keywords: Economic Development,
    Date: 2024
  3. By: Avi-Yonah, Reuven S.
    Abstract: This Perspective explores the implications for the home countries of large MNEs of the agreement reached by over 140 countries in 2021 to enact a corporate minimum tax of 15%. It argues that the corporate minimum tax complements the trend to reduce the negative impact of unfettered globalization on labor, and it protects the ability of home countries to finance a robust social safety net. Home countries should adopt the corporate minimum tax, and that includes the US, which last year failed to adapt its Global Intangible Low-Taxed Income approach to the corporate minimum tax.
    Date: 2024
  4. By: Francesco Vercelli (Bank of Italy)
    Abstract: This paper examines the Italian banking system during the 1907 financial crisis, from start to finish. Using bank balance sheet data from the Historical Archive of Credit in Italy, we analyse the developments of the banking system in the run-up to the crisis. We show that the four Italian mixed banks, which registered a rapid growth at the beginning of the 20th century, were little engaged in the traditional activity of bill discounting and largely involved in ‘repurchase agreements’ on stocks and in correspondent current accounts. Because of this business model, the mixed banks – and in particular the Società Bancaria Italiana – turned out to be fragile when the international crisis hit the country. Then we analyse the complex interactions between the major financial institutions and the government in order to face the crisis. We focus on the role of the Bank of Italy, which acted as a modern central bank for the first time since its creation.
    Keywords: financial crisis, history of banking
    JEL: C81 G21 N23 N24
    Date: 2022–06

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