Taxing the Financially Integrated Multinational Firm

Johannesen, Niels

doi:10.1111/jpet.12192

Cited by 5 publications

(3 citation statements)

References 30 publications

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“…Third, we implicitly assume that the size of the corporate tax gap is the sole motivation behind corporate profit shifting, but this may not always be the case. Although there is strong evidence that corporate tax rate differences affect the geographical distribution of profits of multinational corporations, Johannesen (2016) observed that internal loans of German firms often flowed from high-tax countries to low-tax countries, which would not be expected if profit shifting to save tax was the only driving factor behind the loans. Profit shifting is also not the only method to reduce corporate tax.…”

Section: Discussionmentioning

confidence: 96%

Assessing the risk of profit shifting among the suppliers to Danish municipalities

Gislason,

Hvid,

Gøth

et al. 2024

JOPP

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Purpose An increasing number of Danish municipalities wish to minimize tax avoidance due to profit shifting in their public procurement. To facilitate this effort, this study aims to develop a firm-level indicator to assess the potential risk of profit shifting (PS-risk) from Danish subsidiaries of multinational corporations to subsidiaries in low-tax jurisdictions. Design/methodology/approach Drawing from previous research, PS-risk is assumed to depend on the maximum difference in the effective corporate tax rate between the Danish subsidiary and other subsidiaries under the global ultimate owner, in conjunction with the tax regulations relevant to profit shifting. The top 400 contractors in Danish municipalities from 2017 to 2019 are identified and their relative PS-risk is estimated by combining information about corporate ownership structure with country-specific information on corporate tax rates, tax regulations and profit shifting from three independent data sets. Findings The PS-risk estimates are highly significantly positively correlated across the data sets and show that 17%–23% of the total procurement sum of the Danish municipalities has been spent on contracts with corporations having a medium to high PS-risk. On average, PS-risk is highest for large non-Scandinavian multinational contractors in sectors such as construction, health and information processing. Social implications Danish public procurers may use the indicator to screen potential suppliers and, if procurement regulations permit, to ensure high-PS-risk bidders document their tax practices. Originality/value The PS-risk indicator is novel, and to the best of the authors’ knowledge, the analysis provides the first estimate of PS-risk in Danish public procurement.

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Section: Discussionmentioning

confidence: 96%

Assessing the risk of profit shifting among the suppliers to Danish municipalities

Gislason,

Hvid,

Gøth

et al. 2024

JOPP

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“…Regarding specific BEPS actions, Johannesen () studies tax avoidance with debt financing. Behrens, Peralt, and Picard () examine transfer pricing regulation.…”

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confidence: 99%

Equilibrium audit strategies against tax treaty shopping

Sung-Hwa

2019

J Public Economic Theory

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This paper examines game-theoretic models of tax treatyshopping. An investor can choose a direct or indirect investment route across countries to minimize tax. A tax agency can audit the investor. The audit is costly but it can give additional revenue to the tax agency. In simultaneous-move games, regardless of whether incomplete information exists and whether a home country allows foreign tax credits, there are mixedstrategy equilibria where the investor may choose taxminimizing indirect routes and the tax agency may audit the investor. This equilibrium random audit strategy helps the tax agency raise revenue and reduce treaty shopping. Comparative statics yields an implication consistent with empirical evidence. However, if the home country has a foreign tax credit system with a high tax rate, or if the tax agency observes the investor's action in a sequential-move game, the investor always chooses the direct route, and no treaty shopping occurs in equilibrium.

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“…Recently, Johannesen () finds an alternative explanation for the fact that most countries levy corporate taxes at fairly high rates. In the presence of multinational firms that finance investment in one country with loans from affiliates in another country, the burden of the corporate taxes levied in the latter partly falls on investment and thus workers in the former.…”

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confidence: 99%

Tax competition for foreign direct investments and the nature of the incumbent firm

Amerighi¹,

Feo

2017

J Public Economic Theory

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. December 2011 Terms of use: Documents in AbstractIn this paper we investigate tax/subsidy competition for FDI between countries of different size when a domestic firm is the incumbent in the largest market. We investigate how the nature (public or private) of the incumbent firm affects policy competition between the two governments seeking to attract FDI. We show that the country hosting the incumbent always benefits from FDI if the domestic firm is a public welfare-maximizing firm, while its welfare may decrease when it is a private firm, as already shown by Bjorvatn and Eckel (2006). We also show that, contrary to the case of a private domestic incumbent, a public firm acts as a disciplinary device for the foreign multinational that will always choose the efficient welfare-maximizer location. Finally, an efficiency-enhancing role of policy competition may only arise when the domestic incumbent is a private firm, while tax competition is always wasteful when the incumbent is a public firm.

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Taxing the Financially Integrated Multinational Firm

Cited by 5 publications

References 30 publications

Assessing the risk of profit shifting among the suppliers to Danish municipalities

Assessing the risk of profit shifting among the suppliers to Danish municipalities

Equilibrium audit strategies against tax treaty shopping

Tax competition for foreign direct investments and the nature of the incumbent firm

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