274 research outputs found
European banks and tax havens: Evidence from country-by-country reporting
No full textBanks in the European Union recently started publicly reporting data on profit, number of employees, turnover and tax on a country-by-country basis. I introduce the largest, hand-collected data set of its kind, which covers almost 50 banks for up to 5 years between 2013 and 2017. I identify the main locations of European bank's profits, which include the largest European economies as well as tax havens. I focus on answering the question of how geographically aligned these profits are with economic activity. I find that some of the tax havens have maintained high shares of profits in contrast with their much lower shares of employees. These results indicate that banks are likely shifting their profits to tax havens, but for the profit shifting to be directly observed, regulators will need to ask banks to publish even better data
Consumer demand system estimation and value added tax reforms in the Czech Republic
No full textThe rates of value added tax (VAT) have recently changed in the Czech Republic, and I simulate the impact of these reforms. They are an example of changes in indirect taxes that change the prices of goods and services, to which households can respond by adjusting their expenditures. I first estimate the behavioural response of consumers to price changes in the Czech Republic by applying a consumer demand model of the quadratic almost ideal system (QUAIDS) on the basis of the Czech Statistical Office household expenditure and price data for the period from 2001 to 2011. I derive estimates of own- and cross-price and income elasticities for individual households. I then use these elasticities to estimate the impact of the changes in VAT rates that were proposed or implemented between 2011 and 2013, on households' quantity demanded and government revenues. One of the main findings is that the estimated increases in government revenues that take the consumer responses into account are more than a quarter lower than the estimates that use the static simulation
Estimating the Costs of International Corporate Tax Avoidance: The Case of the Czech Republic
No full textInternational corporate tax avoidance by multinational enterprises likely lowers the Czech Republic's corporate income tax revenue, but it is not clear by how much. To clarify this I first review existing estimates of the costs of international corporate tax avoidance to government revenue worldwide. I then discuss research and revenue estimates relevant for the Czech Republic and develop a few new ones, albeit only illustrative. None of the existing research focused on the Czech Republic nor the five recent international studies I examine provide reliable estimates for the Czech Republic. The extrapolations from these studies result into a range from 6 to 57 billion CZK (4-38 % of current corporate income tax revenue) with a median of 15 billion CZK (10 %) in annual corporate income tax revenue loss. This scale is comparable with the responses of 35 Czech experts with a median of 20 billion CZK (13 %). I conclude with a discussion of these rough estimates as well as questions for further research and policy recommendations
Corporate Effective Tax Rates for Research and Policy
No full textHow much companies pay in corporate income taxes is often better captured by effective tax rates (ETRs) rather than by statutory ones. Economists further distinguish between those modelled using the law - forward-looking ETRs - and those estimated from actual data on companies' profits and taxes - backward-looking ETRs. Moving beyond this binary distinction, I present a spectrum where backward-looking ETRs are further broken down by the type of data used to estimate them and where all ETRs may be located along with applicable statutory rates. Within that spectrum, I focus on backward-looking ETRs and, specifically, on those estimated using companies' balance sheet databases. Based on my review of recent findings, I argue that backward-looking ETRs - of multinational corporations in particular - have become more frequently estimated thanks to advances in data availability while also becoming more relevant as a result of ongoing global corporate tax reform debates. Ultimately, I argue that the full range of various ETRs can play a useful role in both research and policy
Rising unit values of Central and Eastern European exports: Rising quality in transition?
No full textThis paper observes rising unit values, prices per kilogram, of Central and Eastern European exports and argues that it is an evidence of actual rising product quality during the transition period. We arrive at this conclusion by applying a number of methods on a best available dataset for the ten countries from 1995 to 2005. On this dataset we also apply two new methods to assess within-product sophistication and both support the results. We further apply methods for estimation of across-product sophistication, which have never been used in this context before and these reinforce our main results.international trade; CEE exports; product quality; unit values; competitiveness; transition; Central and Eastern Europe; European Union; prices per kilogram; emerging economies.
Estimating the revenue costs of tax treaties in developing countries
No full textTax treaties between countries influence how much tax revenues governments receive from multinational enterprises. These treaties often reduce the withholding tax rates on outgoing dividend and interest payments. We provide illustrative estimates of costs for these two taxes for 14 developing countries in sub-Saharan Africa and Asia in a first multi-country comparison of this kind. These might be overestimates because we assume that foreign direct investments are not influenced by the tax treaties. We estimate that the highest potential tax revenue losses are within hundreds of millions USD and around 0.1% of GDP, with Philippines incurring the highest losses both in USD and relative to GDP. We also find that around 95% of the losses is due to dividends and that only four investor countries - Japan, Netherlands, Switzerland, and Singapore - are together responsible for more than half of the losses. We discuss the limitations of these estimates and how future research could improve their quality as well as coverage
Improving the Corruption Perceptions Index: Additional Data Sources and Their Effects
No full textCorruption is notoriously hard to measure directly, and cross-country corruption indices thus often rely on indirect information such as country experts' or international businessmen's perceptions. Transparency International's Corruption Perception Index (CPI) is one such indicator that is often used by policy makers and researchers. The CPI is a composite index that, in its 2019 version, draws on 13 different data sources for calculation, with a threshold of at least three available sources for a country to qualify for a ranking. Until now, however, it has not been clear whether the data sources it uses are the only suitable ones. To assess this, we revisit the choice of these data sources and propose several improvements to the CPI methodology. Specifically, we identify up to five new data sources as potential candidates for inclusion. We examine the effects of including these additional data sources in two simulations: including all five data sources or only the four most suitable ones. Our results are mixed: the inclusion of new data sources would lower the standard errors of the CPI, but we identify a lack of correlation between the CPI and some of the data sources. We conclude by discussing trade-offs involved in including additional data sources in the CPI that may provide lessons for other composite policy indices
How do regional price levels affect income inequality? Household-level evidence from 21 countries
No full textRegional differences in prices levels are substantial in many countries, but little is known about how important they are for income inequality and relative poverty. To bridge this gap, we provide new evidence on the basis of the best available data and a novel two-step approach. First, we collect the largest cross-country dataset of regional price level estimates from 12 countries and use it to predict regional price levels in other countries. We then combine all these regional prices levels with household-level data from the Luxembourg Income Study, which gives us results for a final sample of 21 countries. We find that for some countries Gini coefficients and headcount poverty ratios are statistically significantly different when adjusted for regional price levels. For example, we show that adjusting for regional price levels would lower the Gini coefficients by 2% for Italy, 3% for Columbia and by 4% for Georgia, while it would increase the headcount poverty ratio by 6% for France and by 7% for Ireland. We conclude that regional price levels affect income inequality to a varying extent and should be taken into account by policy makers and in future research
Estimating the Scale of Profit Shifting and Tax Revenue Losses Related to Foreign Direct Investment
No full textGovernments' revenues are lower when multinational enterprises avoid paying corporate income tax by shifting their profits to tax havens. In this paper, we ask which countries' tax revenues are affected most by this tax avoidance and how much. To estimate the scale of profit shifting, we start by observing that the higher is the share of foreign direct investment from tax havens, the lower is the reported rate of return on this investment. Similarly to the 2015 World Investment Report of the United Nations Conference on Trade and Development, we assume that the reported rate of return is lower due to profit shifting. Unlike the report, however, we provide illustrative country-level estimates of profit shifting related to foreign direct investment which enable us to study the distributional impact of international corporate tax abuse. We find that, on average, higher-income countries lose least and lower-income countries lose most corporate tax revenue relative to their GDP. On the basis of these estimates, we conclude that profit shifting thus deepens the existing income inequalities and the differences in government revenues between countries. Furthermore, we compare our results with three other recent studies that use different methodologies to derive country-level estimates of tax revenue losses that can be related to profit shifting. In a first such comparison made, we find that every study identifies differences across income groups, but the nature of these differences varies across the four studies
Measuring Misalignment - The Location of Us Multinationalss Economic Activity Versus the Location of Their Profits
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