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on Accounting and Auditing |
| By: | Tomáš Boukal (Charles University); Petr JanskyÌ (Charles University); Miroslav PalanskyÌ (Charles University and Tax Justice Network) |
| Abstract: | We develop a methodology to decompose the tax revenue impact of the global minimum tax introduced in 2024 into several components and quantify its potential impact on profit shifting. We apply it to 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia. We find that the global minimum tax has the potential to decrease profit shifting by most multinationals, which are on average likely to pay higher effective tax rates in most countries worldwide post-reform. We find that Slovak corporate tax revenues will increase by 4%, with half of the increase due to its minimum top-up taxes. The other half of the increase is corporate income tax on profits that will no longer be shifted out of the country. We expect the global minimum tax to target 49% of previously shifted profits. |
| Keywords: | Global minimum tax, profit shifting, multinationals, tax avoidance |
| JEL: | H25 H26 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:025 |
| By: | Alessandro Ferrari (Department of Economics, University of Zurich & CEPR); Sébastien Laffitte (THEMA, CY Cergy Paris University); Mathieu Parenti (Paris School of Economics, INRAE, CESifo & CEPR); Farid Toubal (Université Paris-Dauphine, CEPII, CESifo & CEPR) |
| Abstract: | International taxation rules are widely regarded as outdated, enabling multinational corporations to exploit loopholes and shift profits to tax havens. This paper explores how international tax reforms can address profit shifting and shape real income and welfare across countries. We propose a model of corporate tax avoidance that separates profits generated by real economic activities from paper profits shifted to tax havens. The model introduces ’triangle identities’ to estimate bilateral profit-shifting flows. Using macro- and firm-level data, we estimate that the elasticity of paper profits is three times greater than that of the tax base. Applying the model to global minimum tax reforms, we find that these policies improve welfare in two ways: by increasing tax revenues to support public goods and by reducing incentives for tax competition. We identify the optimal minimum tax rate under different scenarios of taxing rights allocation. Finally, our analysis shows that unilateral destination-based cash-flow tax reforms can have either positive or negative welfare effects, with outcomes depending significantly on trade imbalances. |
| Keywords: | Profit Shifting; Tax Avoidance; Tax Havens, International Tax Reforms; Minimum taxation; DBCFT; Multinational firms |
| JEL: | F23 H25 H26 H32 H73 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:011 |
| By: | Zineb Khaless (FSJES Rabat) |
| Abstract: | This paper presents an in-depth theoretical analysis of the impact of International Financial Reporting Standard 9 (IFRS 9) on banking performance, focusing on its significant transition from the incurred loss model under IAS 39 to the forward-looking Expected Credit Loss (ECL) framework. IFRS 9 requires financial institutions to estimate potential credit losses at the time of loan origination, promoting a proactive approach to risk management and significantly enhancing financial stability and transparency. The study leverages insights from agency theory and financial transparency principles to explore IFRS 9's influence on critical banking performance indicators, including credit risk, profitability, and financial stability. The analysis delves into key variables such as Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD), elucidating their pivotal roles in shaping contemporary risk management strategies and overall banking outcomes. By examining the interconnected nature of these variables, the paper provides a nuanced understanding of the practical and theoretical implications of IFRS 9. Additionally, this research identifies notable gaps in the existing literature, particularly in the integration of macroeconomic factors and the development of holistic risk assessment models that incorporate IFRS 9's key components. To address these gaps, the study proposes robust theoretical frameworks and emphasizes the need for future empirical research to validate and refine these models. The paper also addresses the complexities and operational challenges faced by financial institutions in implementing IFRS 9, such as the increased volatility on loan loss allowances, model development intricacies, and regulatory capital requirements. It offers actionable insights for policymakers, regulators, and practitioners to navigate these challenges effectively. By offering a comprehensive foundation for understanding IFRS 9's broader implications, this research contributes to the ongoing discourse on financial stability and risk management in the banking sector, paving the way for more resilient and transparent financial systems. |
| Keywords: | IFRS 9 Expected Credit Loss (ECL) Banking Performance Financial Stability Credit Risk Management Probability of Default (PD) Loss Given Default (LGD) Exposure at Default (EAD). Paper type : Theoretical article JEL Classification : G21 M41 G28 IFRS 9 Pertes de Crédit Attendue (ECL) Performance Bancaire Stabilité Financière Gestion du Risque de Crédit Probabilité de Défaut (PD) Perte en Cas de Défaut (LGD) Exposition en Cas de Défaut (EAD). Type de papier : Article théorique Classification JEL : G21 M41 G28, IFRS 9, Expected Credit Loss (ECL), Banking Performance, Financial Stability, Credit Risk Management, Probability of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD). Paper type : Theoretical article JEL Classification : G21, M41, G28 IFRS 9, Pertes de Crédit Attendue (ECL), Performance Bancaire, Stabilité Financière, Gestion du Risque de Crédit, Probabilité de Défaut (PD), Perte en Cas de Défaut (LGD), Exposition en Cas de Défaut (EAD). Type de papier : Article théorique Classification JEL : G21, G28 |
| Date: | 2025–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05052796 |
| By: | Cardinaels, Eddy (Tilburg University, School of Economics and Management); Künneke, Judith (Tilburg University, School of Economics and Management) |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:612b506a-1d8c-40bb-9e61-91b95baa4d77 |
| By: | Jules Ducept (EU Tax Observatory, Center for Economics at Paris-Saclay); Evangelos Koumanakos (Hellenic Open University); Panayiotis Nicolaides (EU Tax Observatory, Paris School of Economics) |
| Abstract: | Using a quasi-experimental setting, we document that corporations decrease declared profits and corporate income taxes in response to an increase in the VAT rate. In an attempt to raise tax revenue during the Greek economic crisis, a 16% VAT rate, which existed for historicopolitical reasons in Greek islands, was harmonised to the national 24% rate. We combine tax filings with Orbis and ICAP data that enable us to geolocate corporations and to construct comparable groups based on locations in or out of the preferential rate. Counteracting the reform’s intended effect, declared profits decreased by 28% and corporate income taxes by 34% on a permanent basis. Macroeconomic factors and a fall in reported revenue cannot fully explain this decrease. Pervasive tax evasion in the Greek islands, where corporations might have an opportunity to adjust profits, offers a plausible explanation of the magnitude of responses. |
| Keywords: | Value-Added Tax; Corporate Income Tax; Greek Islands; Tax Evasion |
| JEL: | H25 H26 H32 H61 L83 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:020 |
| By: | Rishi R. Sharma; Joel Slemrod; Michael Stimmelmayr; John D. Wilson; Peter Choi |
| Abstract: | Dual-regime business tax systems typically subject smaller firms to an output (turnover) tax and larger firms to a profit (corporate) tax. Despite their prevalence, there is little formal analysis of their optimal design. This paper addresses this gap by developing a theoretical framework to analyze the optimal tax parameters and the relative performance of two types of dual-regime systems: threshold and minimum tax systems. We show that either type of dual regime system can yield lower social costs than a single regime system. Using parameter values from recent empirical studies, we also show that a generalized minimum tax system we propose would outperform other dual regime systems under most parameter values. These findings carry important policy implications, particularly as many countries currently employ either threshold or minimum tax systems, but none have yet implemented a generalized minimum tax. |
| Keywords: | dual-regime tax system, output tax, profit tax, bunching |
| JEL: | H25 H21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11962 |
| By: | Sarah Clifford; Jakob Miethe; Camille Semelet |
| Abstract: | This paper characterizes profit shifting behavior across the size distribution of multinational enterprises (MNEs) to evaluate the targeting of the recently introduced Global Minimum Tax (GMT). Using German microeconomic administrative data with no reporting gaps for tax havens, we first document reductions in tax payments after tax haven subsidiaries are added to a group and confirm their outsized productivity. As group size increases, so does the likelihood of including tax haven subsidiaries. Second, we introduce a new methodology to estimate shifted profits at the group level and find an exponential group size gradient in profits shifted to tax havens. A total of EUR 19 billion was shifted to tax havens by German MNEs in 2022. Large groups targeted by the GMT account for 95% of this amount. While this is mainly a function of their size, we also document a positive gradient in profit shifting aggressiveness relative to employment. Third, we relate revenue potential from taxing excess profits in low-tax jurisdictions to compliance costs of the GMT, using a 15% benchmark rate. For groups currently covered by the GMT, revenue gains significantly dominate costs, while extending coverage to additional groups yields only modest net gains. Our results support policy consistency of the GMT in the face of recent unilateral challenges. |
| Keywords: | global minimum tax, multinational enterprises, profit shifting |
| JEL: | H26 G38 F34 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11975 |
| By: | Mori, Misato |
| Abstract: | Financial intelligence functions operate under complex regulatory frameworks, demanding substantial resources for Anti-Money Laundering (AML) and Know-Your-Customer (KYC) compliance. Traditional document review processes rely heavily on manual effort and rule-based systems, resulting in scalability and accuracy limitations, particularly given the predominance of unstructured data. This study examines the integration of artificial intelligence (AI) techniques—such as natural language processing (NLP), machine learning, and deep learning—in automating financial document analysis and compliance workflows. The focus includes document classification, named entity recognition, and content summarization, which enhance operational efficiency and regulatory adherence. Empirical evidence indicates that AI-driven solutions reduce processing time, improve data extraction accuracy, and enable continuous transaction monitoring for fraud detection and risk assessment. Challenges related to model interpretability, data privacy, and legacy system integration remain critical considerations. The research contributes a framework for deploying explainable, scalable AI architectures to support financial intelligence and compliance operations, with implications for regulatory reporting, audit readiness, and institutional risk management. |
| Date: | 2025–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:g7p8t_v1 |
| By: | Delis, Manthos D.; Laeven, Luc; Ongena, Steven; Delis, Fotis |
| Abstract: | We provide estimates of profit shifting for over 2 million firm-year observations in 100 countries over the period 2009–2020. Employing nonparametric estimation techniques within a mainstay model of profit shifting, we examine how the profits of both parent and subsidiary firms within a multinational group respond to marginal changes in the composite tax indicator. The key advantage of this approach is that it yields firm-year estimates of profit shifting. Multinational firms engage in extensive profit shifting by maintaining affiliates in low-tax countries and zero-tax havens. Multinational groups with an ultimate tax-haven owner exhibit the largest profit response to tax incentives. Our new database opens important avenues for analyzing the sources and effects of profit shifting. JEL Classification: F23, H25, H26, H32, M41 |
| Keywords: | global sample, multinational enterprises, nonparametric estimation, profit shifting, tax arbitrage |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253071 |
| By: | Rabah Arezki; Frederick van der Ploeg; Gregoire Rota-Graziosi; Văn Đạo Lê; Rick van der Ploeg |
| Abstract: | The introduction of the Value Added Tax (VAT) has been widely perceived as a successful instrument, boosting government revenue and stimulating industrialization. However, in countries that are heavily dependent on exports of natural resources the introduction of the VAT has led on average to lower tax revenues and did not stimulate industrialization. The VAT thus did not help these countries to diversify away from the natural resource sector contrary to its promise. The results indicate a novel channel for the resource curse hinging on the interaction between economic structure and the design of tax systems. |
| Keywords: | natural resource, tax, industrialization, value added tax |
| JEL: | H25 O13 O14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11967 |
| By: | Ozili, Peterson K |
| Abstract: | Artificial intelligence is a branch of computer science that develop intelligent machines to perform human tasks. Recently, there is growing interest in AI applications in professions that have many processes that can be easily automated. There is widespread optimism that AI systems can lead to new innovations or improve existing processes. This study focuses on some applications of artificial intelligence in the accounting, finance, economics, business, and management profession. The study provides a basic understanding of how AI will be useful in the accounting, finance, economics, business and management professions. The study also offered some insights into the risks posed by the use of artificial intelligence. |
| Keywords: | Artificial intelligence, AI, machine learning, accounting, finance, economics, business, management. |
| JEL: | M1 M2 M5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125036 |
| By: | Kang, Jong Woo (Asian Development Bank); Tolin, Lovely (Asian Development Bank) |
| Abstract: | How well raising tax rates can succeed for an economy intent on increasing tax revenue and narrowing the tax-to-GDP-ratio gap with other economies depends on its ability to meet certain conditions. This paper investigates these conditions and demonstrates that expanding the tax base as a proportion of GDP, either through a tax rate increase or rationalizing loopholes and tax expenditure, is crucial if efforts to increase tax revenues are to be effective. We test this theoretical finding through empirical analysis, including the Instrumental Variables—Two-Stage Least Squares (IV-2SLS) approach, and show how broadening the tax base is critical not only for increasing tax revenues but also for ensuring that an increase in the tax rate expands fiscal revenue. The findings highlight the importance of a balanced approach in tax policy design to achieve revenue goals while maintaining economic efficiency. |
| Keywords: | tax rate; tax revenue; tax base ratio; direct tax |
| JEL: | H20 H24 H26 |
| Date: | 2025–07–11 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0790 |
| By: | d'Avernas, Adrien; Vandeweyer, Quentin; Petersen, Damon |
| Abstract: | This paper studies how Treasury market dynamics depend on adjustments to the central bank balance sheet. We introduce a dynamic model of Treasury bonds with traditional and shadow banks. In the model, both Treasury and repo market disruptions arise as a joint consequence of three frictions: (i) balance sheet costs, (ii) intraday reserves requirements, and (iii) imperfect substitutability between repo and bank deposits. Our model highlights the critical role of both sides of the central bank’s balance sheet as well as agents’ anticipation of shocks and policy interventions in matching observed market dynamics. JEL Classification: E43, E44, E52, G12 |
| Keywords: | basis trade, hedge funds, liquidity risk, repo, reserves, shadow banks |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253066 |
| By: | Winter, Richard (University of Mannheim); Doerrenberg, Philipp (University of Mannheim); Eble, Fabian (University of Mannheim); Rostam-Afschar, Davud (University of Mannheim); Voget, Johannes (University of Mannheim) |
| Abstract: | We provide novel evidence on the incidence of business taxes using comprehensive survey and experimental data from German firms. Leveraging randomized variation in hypothetical tax changes, we find that the incidence of profit taxes is highly asymmetric. Tax decreases are more likely to benefit workers and stimulate investment, whereas tax increases tend to be passed on to consumers through higher prices and absorbed by firm owners through reduced profit distributions. Moreover, by varying the magnitude of the tax changes, we demonstrate that worker incidence increases with the absolute size of the tax change, partially offsetting the burden on firm owners. |
| Keywords: | investment, firm behavior, tax incidence, corporate tax, payout, wages |
| JEL: | D22 H00 H22 H25 J23 J30 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17983 |