Innovation studies rarely incorporate finance in their analysis, although productive innovation and economic development require efficient allocation of financial resources. Complex financial ...vehicles other than banks increasingly fund global economic activity. These innovative, yet 'dark' financial entities service the shielding of private - not public - wealth, and challenge the positive notion of financial innovation as they help cement socio-spatial inequalities. We illustrate how legal structuring benefits (from) the commercialization of state sovereignty and the finetuned work of finance-cum-law that have long shaped the business model of leading financial centres; a legacy difficult to disengage from in times of financial sustainability imperatives.
Governance and Taxes Bird, Andrew; Karolyi, Stephen A.
The Accounting review,
01/2017, Volume:
92, Issue:
1
Journal Article
Peer reviewed
Open access
We implement a regression discontinuity design to examine the effect of institutional ownership on tax avoidance. Positive shocks to institutional ownership around Russell index reconstitutions lead, ...on average, to significant decreases in effective tax rates (ETRs) and greater use of international tax planning using tax haven subsidiaries. These effects are smaller for firms with initially strong governance and high executive equity compensation, suggesting poor governance as an explanation for the undersheltering puzzle, and appear to come about as a result of improved managerial incentives and increased monitoring by institutional investors. Furthermore, we observe the largest decreases among high ETR firms, and increases for low ETR firms, consistent with institutional ownership pushing firms toward a common level of tax avoidance.
Various countries' tax laws adopt certain forms of a so-called worldwide tax system which levy taxes on their countries' multinational firms' global incomes at home country tax rates. To avoid double ...taxation, they permit tax cross-crediting, i.e., a global firm can use excess foreign tax credits (the portion of foreign tax payments that exceed its home country tax liabilities) generated from a subsidiary (located in a high-tax country) to offset the tax obligations from another subsidiary (located in a low-tax country). This article studies a multinational firm's global sourcing decisions at two subsidiaries located in low- and high-tax countries, respectively, with an objective of maximizing its expected worldwide after-tax profit. We characterize the optimal sourcing decisions under various decentralized and centralized after-tax profit-maximizing performance measures. We show that the global firm can devise an easily implementable incentive scheme to optimally coordinate the decentralized sourcing decisions made at the two subsidiaries. We also demonstrate that decentralized policies with after-tax performance measures are more advantageous than the traditional pretax policies when the "tax effects", i.e., the impacts of certain features of the tax laws (such as tax cross-crediting) on supply chain decisions, are significant.
This paper examines corporate tax avoidance involving Dutch special purpose entities (SPEs), or shell companies. We use unique data of the SPEs including the origin and destination country of ...dividend, interest, and royalty flows passing the Netherlands. First, we present descriptive statistics of these flows which amount to 140 billion euro in 2016. Second, we collect national tax data on the corporate income tax and fiscal treatment of these flows. By combining tax parameters with bilateral flows, we can assess the potential tax gains for multinational enterprises using Dutch SPEs. We find massive tax savings for royalties when Dutch SPEs are used as an intermediate station compared to direct flows between the origin and destination country. We measure this tax gain at almost 3 billion euro in a single year. However, we do not find such tax savings for dividends and interest. We explain where we lack information and hence cannot measure possible tax gains. In regression analysis, controlling for country characteristics, we find that tax differentials partially explain the geographical patterns of income flows diverted through the Netherlands. This paper is one of the first using bilateral income flows as dependent variables instead of FDI stocks or flows.
This paper describes the main anti-avoidance rules against international tax planning by multinational enterprises in OECD and G20 countries. Building on this information and on previous ...classification efforts in the literature, a new classification of anti-avoidance strength is compiled. It takes into account five key dimensions of anti-avoidance: (i) transfer price rules and documentation requirements; (ii) rules on interest deductibility such as thin capitalisation and interest-to-earnings rules to prevent the manipulation of debt location; (iii) controlled foreign company (CFC) rules; (iv) general anti-avoidance rules (GAARs); and (v) withholding taxes on interest payments, royalties and dividends, taking into account bilateral tax treaties. The classification is based on a simple framework aiming to capture the main features of anti-avoidance rules in a harmonised way across countries, although it inevitably leaves aside certain country-specific characteristics as well as the enforcement of existing rules. The empirical analysis in Johansson et al., (2016), which is based on this classification, suggests that strong anti-avoidance rules can reduce profit shifting.
Ce document décrit les principales règles anti-évitement contre la planification fiscale internationale par les entreprises multinationales dans les pays de l'OCDE et du G20. En s’appuyant sur cette description et sur les efforts de classification précédents dans la littérature, une nouvelle classification de la force des règles anti-évitement est compilée. Elle prend en compte cinq dimensions clés de l'anti-évitement: (i) les règles de prix de transfert et les exigences en matière de documentation ; (ii) les règles sur la déductibilité des intérêts pour empêcher la manipulation de l'emplacement de la dette, telles que les règles relatives à la sous-capitalisation ou portant sur les ratios intérêt-bénéfice ; (iii) les règles CFC sur les sociétés étrangères contrôlées ; (iv) les règles générales anti-évitement (GAAR) ; et (v) les impôts retenus à la source sur les paiements transnationaux d'intérêts, de redevances et de dividendes, en tenant compte des conventions fiscales bilatérales. Le classement est basé sur un cadre simple visant à capturer les principales caractéristiques des règles anti-évitement d'une manière harmonisée dans tous les pays, même si elle laisse inévitablement de côté certaines caractéristiques propres à chaque pays, ainsi que l'application des règles existantes. L'analyse empirique de Johansson et al., (2016), qui est basée sur cette classification, suggère que des règles anti-évitement fortes peuvent réduire les transferts de bénéfices des entreprises multinationales.
Taxes, Investors, and Managers Howard, Margot; Pancak, Katherine A.; Shackelford, Douglas A.
Proceedings (Conference on Taxation),
01/2015, Volume:
108
Journal Article
Exploiting a 2004 reduction in a unique capital gains withholding tax for foreign investors in U.S. publicly-traded REITs, this paper explores both the sensitivity of real estate investors to changes ...in their own taxes and the reaction of real estate managers to changes in their investors’ taxes. We find that both foreign investors and REIT managers responded to the tax change. This is consistent with taxes both restricting the flow of foreign capital into U.S. REITs and affecting the management of their real estate properties. To our knowledge, this is the first paper documenting that U.S. managers change their U.S. operations in response to the tax positions of foreign investors. This work should spur further study of the interplay between real estate and income taxes, the role of taxes on foreign portfolio investment, and the role of taxes on real managerial decisions. It should also be informative to policy makers who recently relaxed the discriminatory tax treatment for foreign investors in U.S. real estate after considering the issue for many years.
La internacionalización económica ha incrementado el temor de las administraciones tributarias de los diferentes Estados sobre los riesgos de deslocalización de rentas. Uno de los mecanismos que ...utilizan las empresas (principalmente multinacionales) como mecanismos de reducción de la carga tributaria consiste en la utilización de los precios de transferencia como mecanismos de traslación de rentas y beneficios entre las diferentes partes del grupo multinacional y, en consecuencia, entre las diferentes jurisdicciones tributarias. Desde la óptica fiscal los precios de transferencia adquieren significativa importancia en la actualidad, debido a la intensificación del tráfico internacional y al hecho de que gran número de las transacciones nacionales e internacionales se realizan al interior de los grupos empresariales vinculados; según la Organización de Naciones Unidas más del 60% del comercio transnacional y nacional se realiza entre empresas vinculadas. El tema de la planificación fiscal dentro del derecho tributario tiene suma relevancia, ya que no sólo se limita al ámbito económico internacional, sino a todo un análisis exhaustivo, por el cual las empresas buscan reducir la carga tributaria. Ello implica tener conocimiento sobre las normas tributarias aplicables, estrategias jurídicamente permitidas y que no ocasionen un perjuicio económico a la administración. Si bien la planificación fiscal internacional se basa en la libertad económica, ésta tiene sus límites, como son: la subcapitalización, gastos procedentes de paraísos fiscales y el valor de mercado. Si bien el contribuyente apunta a reducir su carga tributaria, ello no implica que todo ahorro fiscal configure una evasión o una elusión ilícita. La progresiva internacionalización de las economías lleva a plantear la necesidad de realizar una planificación fiscal internacional, con el objetivo de minimizar la carga fiscal, la cual incide sobre las inversiones o rentas procedentes de diferentes estados. El rol de la planificación fiscal internacional consiste en buscar la mejor estructura para desarrollarse de manera eficiente; es decir, debe tener en cuenta, los siguientes aspectos: seguridad jurídica de la operación planteada, la incertidumbre de cambios legislativos, la flexibilidad para reorganizar la estructura empresarial, la movilidad de los recursos empleados, el diferimiento en el pago de los tributos, la carga fiscal conjunta y la máxima rentabilidad. La planificación fiscal internacional basada en la economía de opción requiere de una estrategia efectiva y eficiente para maximizar beneficios. Para ello, acude a las normas tributarias aplicables para obtener la seguridad jurídica en las operaciones comerciales; sin embargo, debe evitar el abuso de estrategias que de manera encubierta y simulada, configuren operaciones entre vinculadas con valores inferiores o mayores, cuya única finalidad sea aminorar la carga fiscal.
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