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on Accounting and Auditing |
| By: | BRUN Lidia (European Commission - JRC); PYCROFT Jonathan; SPEITMANN Raffael (European Commission - JRC); STASIO Andrzej Leszek (European Commission - JRC); STOEHLKER Daniel (European Commission - JRC) |
| Abstract: | Most Member States have already transposed the EU Minimum Corporate Tax Directive that implements the so-called "Pillar Two" of the global agreement to address the tax challenges arising from the digitalisation of the economy. The Directive ensures a 15% global minimum level of taxation of for multinational enterprise groups and large-scale domestic groups in the Union that have an effective tax rate below 15%. The new top-up tax is expected to reduce profit shifting. While previous estimates have been produced by the IMF, OECD and EU Tax observatory, we bring complementary evidence by considering also the long-term and economy-wide impact of Pillar Two for the EU. Our empirical estimates, based on the 2017-2021 country-by-country reporting (CbCR) data collected by the OECD, suggest that Corporate Income Tax (CIT) revenues in the EU would increase on average by 7.1% or EUR 26 billion annually from the implementation of the Global Minimum Tax Rules by all EU countries in the short run. These calculations take into account the recent policy developments in the US concerning the opt-out from the Pillar Two agreement. Our long-term fiscal projections, once the impact of Pillar Two implementation on business investment is factored in, indicate that CIT revenues would increase annually by 7.0% (EUR 25.7 billion) for the EU as a whole. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc141119 |
| By: | Ge\`orgia Escaram\'is (Universitat de Girona, Research Group on Statistics, Econometrics and Health); Anna Arbuss\`a (Universitat de Girona) |
| Abstract: | Most empirical works that study the financing decisions of family businesses use financial ratios. These data present asymmetry, non-normality, non-linearity and even dependence on the results of the choice of which accounting figure goes to the numerator and denominator of the ratio. This article uses compositional data analysis (CoDa) as well as classical analysis strategies to compare the structure of balance sheet liabilities between family and non-family businesses, showing the sensitivity of the results to the methodology used. The results prove the need to use appropriate methodologies to advance the academic discipline. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.16793 |
| By: | Enea Baselgia |
| Abstract: | This paper studies the effects of the 2017 multilateral automatic exchange of information (AEoI) on tax compliance in Switzerland. Using detailed administrative tax data and difference-in-differences designs, I find significant positive compliance effects. The AEoI prompted 107k taxpayers (2% of all) to participate in the amnesty, disclosing CHF 42.3 billion—over 6% of GDP. At the micro level, once evaders participate in the amnesty, their reported wealth increases by approximately 50% on average, with compliance effects persisting in the medium run. Furthermore, I document that tax evasion in Switzerland is widespread and significantly more evenly distributed than in other countries. |
| Keywords: | tax evasion, AEoI, compliance, enforcement, CRS, tax amnesty, inequality |
| JEL: | D31 F38 F42 H24 H26 K34 K42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11615 |
| By: | Maarten van 't Riet; Arjan Lejour; Arjan M. Lejour |
| Abstract: | Analysis of the international network of double tax treaties reveals a large potential for tax avoidance. Developing countries are, on average, not more likely to suffer from tax revenue losses than other countries. Yet, this average masks the fact that several countries, such as Bangladesh, Egypt, Indonesia, Kenya, Uganda and Zambia, are vulnerable to substantial potential losses of withholding tax revenue by treaty shopping. The analysis combines tax parameters of more than a hundred countries with an algorithm from network theory, which simulates the tax minimizing behaviour of multinational enterprises. We introduce the notion of potentially aggressive tax treaties. These are the key treaties in treaty shopping routes, that may lead to substantial tax revenue losses in developing countries. Moreover, the treaty partners are often in a prime position to top-up tax undertaxed profits of developing countries that offer tax incentives to attract investment, thus nullifying the incentive effects. |
| Keywords: | tax treaties, treaty shopping, developing countries, network analysis, withholding taxes, aggressive tax treaties, global minimum tax |
| JEL: | F23 H25 H26 O10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11641 |
| By: | Shigeo Morita (Fukuoka University); Yukihiro Nishimura (Osaka University and CESifo); Hirofumi Okoshi (Okayama University) |
| Abstract: | As development of online market brings ongoing concerns that foreign app suppliers avoid value-added tax (VAT) in a domestic country, some countries design a tax reform which makes platform pay VAT instead of app suppliers (platform taxation). In the market where the monopoly platformer determines the prices of the network good and the commission fee of the platform services (with online apps as a representative example), this study investigates whether the prevention of tax leaks by platform tax improves the welfare of the host country, as well as the extent of the cross-market incidence of the two-sided market. We find that the tax reform reduces foreign app suppliers and consumption of a network good such as smartphones, with substantial extent of cross-market pass-through. The effect of the tax reform on home app suppliers crucially depends on the responsiveness of the app supplies from the number of users, which we call entry elasticity. Platform tax also increases the tax burden laid on the network product, but the monopoly seller let the increase of the tax burden born entirely by consumers. We also show that digitalization reduces the loss of welfare as well as tax planning by the platformer. |
| Keywords: | Value-added tax; Tax reform; Digital economy; Platform; Network externality |
| JEL: | F23 H26 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2502 |
| By: | David R. Agrawal; Adib Bagh; Mohammed Mardan |
| Abstract: | The conventional wisdom is that a big jurisdiction sets a higher tax rate than a small jurisdiction. We show this result arises due to simplifying assumptions that imply tax-base sensitivities are equal across jurisdictions. When more than two jurisdictions compete in commodity taxes, tax-base sensitivities need not be equal across jurisdictions and a small jurisdiction can set a higher tax rate than a big jurisdiction. Our analysis extends to capital and profit taxes, and, more generally, to various types of multi-player asymmetric competition. |
| Keywords: | Ramsey rule, inverse elasticity, fiscal competition, optimal taxation, spatial price competition, sales tax |
| JEL: | C70 D40 H20 H70 L10 R50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11616 |
| By: | Philip Moreira Tomei; Rupal Jain; Matija Franklin |
| Abstract: | This paper argues that market governance mechanisms should be considered a key approach in the governance of artificial intelligence (AI), alongside traditional regulatory frameworks. While current governance approaches have predominantly focused on regulation, we contend that market-based mechanisms offer effective incentives for responsible AI development. We examine four emerging vectors of market governance: insurance, auditing, procurement, and due diligence, demonstrating how these mechanisms can affirm the relationship between AI risk and financial risk while addressing capital allocation inefficiencies. While we do not claim that market forces alone can adequately protect societal interests, we maintain that standardised AI disclosures and market mechanisms can create powerful incentives for safe and responsible AI development. This paper urges regulators, economists, and machine learning researchers to investigate and implement market-based approaches to AI governance. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.17755 |