How large is the corporate tax base erosion and profit shifting? A general equilibrium approach

Alvarez-Martinez, Maria Teresa; Barrios, Salvador; d’Andria, Diego; Gesualdo, Maria; Nicodème, Gaëtan; Pycroft, Jonathan

doi:10.1080/09535314.2020.1865882

Cited by 19 publications

(9 citation statements)

References 36 publications

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“…In line with multinational companies, tax haven countries have lower and even zero tax rates lower tax expenses. Operating a subsidiary in a tax haven country leads to an operational tax risk due to increased government scrutiny of possible reallocation of income from tax haven operations (Álvarez-Martínez et al, 2021). Another proxy used is operational volatility, directly related to the uncertainty in measuring a firm's annual taxable income and tax payment, which involves higher tax risks (Artemenko et al, 2017).…”

Section: Sample Selectionmentioning

confidence: 99%

The Effect of Tax Risk on Tax Avoidance

Mangoting

Yuliana

Effendy

et al. 2021

J. Keuang. dan Perbank.

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This research intends to investigate whether tax risk is associated with tax avoidance, which is proxied by Cash Effective Tax Rate (CETR). Tax risk is measured by six tax risk components: transactional risk, compliance risk, operational risk, financial accounting risk, managerial risk, and reputational risk. The samples in this research are manufacturing companies listed on the Indonesian Stock Exchange (IDX). With a purposive sampling method, there are 168 firm years which we analyzed with OLS regression. The result in this study showed that tax risk is positively associated with CETR. It implied that choices of tax strategies and activities are involved in high tax risk, but firms still choose to comply with tax regulations, which can be seen in high CETR values. This research found that firms need tax risk management to ensure that tax strategies do not impact the firms’ future losses from additional tax payments and fines. Other than that, this research gives a new option for future researchers to measure tax risk using scoring methods and indicators that are engaged in each of the tax risk components.DOI: 10.26905/jkdp.v25i3.5629

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Section: Sample Selectionmentioning

confidence: 99%

The Effect of Tax Risk on Tax Avoidance

Mangoting

Yuliana

Effendy

et al. 2021

J. Keuang. dan Perbank.

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“…We support the opinion of these NGOs that tax avoidance should be kept within the concept of illicit financial flows. There are at least two routes by which tax avoidance can be associated with illicit financial flows, namely: The shifting of profit/resource to tax havens; and The erosion of tax obligations (Alm et al , 2022; Álvarez-Martínez et al , 2022; Hearson, 2014; Ginevra, 2017; Temouri et al , 2022; Ahrens and Bothner, 2020; Mayer and Gendron, 2022; Forstater, 2018; Peng, 2016; Ylönen and Laine, 2015). …”

Section: Developing the Mechanics Of The Embezzler Testmentioning

confidence: 99%

How to identify norms, laws, and regulations that facilitate illicit financial flows and related financial crimes

Cardao-Pito

2023

JMLC

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Purpose Illicit financial flows are targeted by the United Nations’ (UN) sustainable development goals (SDGs). However, these illicit flows are not entirely understood. Furthermore, they can benefit from economic norms, laws and regulations that lack mechanisms to detect and penalize them. This paper aims to investigate whether a recent test, the embezzler test, can be used to identify regulatory architectures that facilitate illicit financial flows and related financial crimes. Design/methodology/approach This paper develops a more advanced version of the embezzler test in terms of definitions and practical implementation methodology. Findings In this test, the definition of embezzlement can be understood to be the occurrence of illicit financial flows crossing the boundaries of organizations and/or countries. This is a multistage test, which intentionally simulates illicit financial flows to observe how well equipped is the regulatory architecture to deal with other financial offences that are related with these flows, such as theft, money laundering, fraud, corruption, market manipulation and tax evasion. Research limitations/implications Future research can use the version of this test to stress test a large range of economic norms, laws and regulations. Social implications This test’s new version can assist achieve the UN SDGs’ illicit financial flow reduction target. Furthermore, it can be used to study both existing and proposed norms, laws and regulation. Originality/value To the best of the author’s knowledge, this is the first explicit test that has been presented to identify norms, laws and regulations that facilitate illicit financial flows and related financial crimes.

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“…The practice of Base Erosion and Profit Shifting (BEPS) itself is calculated to result in annual losses amounting to USD 100-240 billion (OECD, 2023). Estimations show that the fiscal losses incurred due to BEPS practices in the European Union amount to EUR 36 billion, EUR 24 billion in Japan, and EUR 100.8 billion in the United States each year (Álvarez-Martínez et al, 2022). Indonesia is estimated to lose USD 4.7 million annually due to corporate tax abuse (O'Hare, 2020).…”

Section: Introductionmentioning

confidence: 99%

Do Tax Rates Encourage Profit Shifts By Multinational Companies In Indonesia?

Setiawan

2024

Ecombis. Rev. J. Ilm. Eco. and Bussines.

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Due to the COVID-19 pandemic, many companies have experienced a decline in financial performance which has the potential to cause financial difficulties. While the government has provided stimulus to help, there are concerns about increasing tax avoidance efforts and profit-shifting practices with businesses transitioning to digital models. However, there is a view that companies may prefer ethical behavior to safeguard their reputation in the midst of a crisis. This study analyses profit-shifting behaviour by multinational companies in Indonesia before and during the COVID-19 pandemic, focusing primarily on the effect of differences in Indonesia's income tax rates on average rates in countries where the group of companies operates. Descriptive analysis is used in this study to provide an overview and general information about the data obtained in the field which is a research variable and will be used as analysis material to answer research questions. The research sample involved 163 companies listed on the Indonesia Stock Exchange and met certain criteria, such as the calculation of corporate income tax according to the Income Tax Law and the exclusion of certain sectors. Data was analyzed for the period 2017-2022, covering the period before and during the COVID-19 pandemic, as well as changes in tax rates in Indonesia. The results show that the difference in Indonesia's corporate income tax rate with the average tax rate in the country where multinational companies operate has a negative and significant effect on profit before tax.

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How large is the corporate tax base erosion and profit shifting? A general equilibrium approach

Cited by 19 publications

References 36 publications

The Effect of Tax Risk on Tax Avoidance

The Effect of Tax Risk on Tax Avoidance

How to identify norms, laws, and regulations that facilitate illicit financial flows and related financial crimes

Do Tax Rates Encourage Profit Shifts By Multinational Companies In Indonesia?

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