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on Public Finance |
| By: | Katarzyna A. Bilicka; Michael P. Devereux; İrem Güçeri |
| Abstract: | Many multinational firms (MNEs) pay low or no corporation tax in high-tax countries because they shift taxable income to tax havens. We incorporate nonconvex costs of profit shifting and unobserved heterogeneity in profit-shifting ability in the MNEs' value maximization problem to study responses of firms to tax policies. We estimate our model using UK corporate tax returns data and quantify: (i) the elasticities of tax base and capital stock with respect to tax rates, (ii) the fixed and variable components of profit-shifting costs for different firm types, and (iii) the government's trade-off between raising tax revenue by reducing profit shifting and attracting investment. Accounting for extensive margin profit-reporting decisions, we reconcile most of the discrepancies between previous micro- and macro-level estimates of tax base elasticities. We test the predictions of the model using a quasi-natural experiment that restricted profit-shifting by Italian MNEs that operated in the UK and evaluate two types of tax policies that can be analyzed using our approach. |
| JEL: | H25 H26 H32 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33132 |
| By: | Aaberge, Rolf (Statistics Norway); Modalsli, Jorgen Heibo (Oslo Metropolitan University); Francesconi, Marco (University of Essex); Vestad, Ola L. (Statistics Norway) |
| Abstract: | This paper presents estimates of income concentration and inequality for Norway using a new comprehensive measure of income, which identifies business income as it is earned by companies rather than when it is paid out as dividends to owners. We assemble several sources of high quality register data that allow us to account for multiple layers of business ownership across all companies between 2001 and 2018. Compared to official statistics, the new measure implies that the share of income attributable to the top 1% of the distribution more than doubles and the Gini coefficient estimates increase by about 40%. Our new measure identifies substantial tax regressivity for individuals in the top percentile, a feature that cannot be detected by standard income measures. For instance, while the share of gross income paid in taxes by individuals at the 99th percentile is about 36% in 2016, the corresponding share paid by individuals in the top 1% is 19%. |
| Keywords: | income distribution, top income shares, Gini coefficient, dividends, retained earnings, tax burden |
| JEL: | D31 D63 E01 H24 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17458 |
| By: | Beuselinck, Christof; Karavitis, Panagiotis; Kazakis, Pantelis; Mouna, Niswatil |
| Abstract: | This study examines the impact of e-government advancements on corporate tax planning activities. We define e-government as the readiness and capacity of national institutions to use information and communications technologies to deliver public services. Using over 82, 000 worldwide firm-level data from 10, 936 unique firms in 56 countries over the period 2008-2021, we observe a negative association between a country’s e-government advancement and the overall tax avoidance practices of firms. Via path analysis we identify the underlying mechanisms through which e-government affects corporate tax avoidance and document that the total tax enforcement budget but also specific technological features such as AI-machine learning, and robotic process automation explains a sizeable fraction of the negative relationship between e-government advancements and corporate tax avoidance. Additionally, our cross-sectional analysis reveals that the impact of e-government on curbing tax planning is particularly pronounced in environments where firms traditionally accrue tax benefits via investments into organizational capital. Our main findings remain robust after implementing an instrumental variables strategy and conducting various robustness tests. Collectively, our findings indicate that e-government investments can help raise a nation’s tax revenue collection, as such investments are linked to reduced corporate tax avoidance activities. |
| Keywords: | tax avoidance, tax planning, digitalization, e-government, digital governments |
| JEL: | G30 G38 H26 L1 M41 M48 |
| Date: | 2024–11–18 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122742 |
| By: | Aristiyaningrum, Umi Laila; , Falikhatun |
| Abstract: | This research aims to provide empirical evidence regarding thin capitalisation, transfer pricing, and tax avoidance, with political connections serving as moderating variables. The research employs a purposive sampling technique, resulting in a sample of 31 mining companies listed on the Indonesia Stock Exchange from 2013 to 2022. The technique used for hypothesis testing is panel data analysis through the Ordinary Least Squares (OLS) approach. The results of this research indicate that thin capitalisation and transfer pricing have a significant effect on tax avoidance. Additionally, this research reveals that the role of political connections can strengthen the impact of transfer pricing on tax avoidance but does not demonstrate that political connections can reinforce the effect of thin capitalisation on tax avoidance. The findings of this research are expected to serve as a basis for government considerations in establishing tax-related regulations. This study recommends that future research utilise different research subjects for comparison, add other independent variables outside the current model that may influence tax avoidance, and apply alternative tax avoidance measures, such as book-tax differences and tax shelters. |
| Date: | 2024–11–11 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:ykfph |