This paper explores the effects of a federal law that obligates previously unregulated municipalities in Germany to set a minimum tax rate on firms’ taxable profits. In particular, we examine the ...tax-policy response of municipalities that compete locally with “tax-haven municipalities”, i.e.municipalities that originally have set lower and, in some cases, even zero tax rates. The analysis distinguishes treated and not-treated municipalities based on their distance to a tax-haven. Our results show that the majority of municipalities do not change their tax policy. Apart from the tax-havens, only high-tax municipalities show a response – they reduce the business tax rate without experiencing a decline in tax revenues.
•In 2004, Germany introduces a minimum tax on the local profit tax.•The paper uses a spatial diff-in-diff approach to analyse the effects on local tax-competition.•We examine the tax-policy of municipalities that compete with tax-havens.•Apart from the tax havens, only high-tax municipalities are found to revise their tax policy.•Without experiencing revenue losses, high-tax municipalities reduce their tax rates.
Tax Havens and Tax Elusion in Ecuador Manuel de Jesús Real López; Navarrete Luque, Corina Elena
Dilemas contemporáneos: educación, política y valores,
07/2018, Letnik:
V, Številka:
Special
Journal Article
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The purpose of this paper is to investigate the consequences of tax avoidance and the exit of currencies to tax havens, which cause serious damage to the economy of the state, and consequently, to ...citizens who are affected by the lack of public works. The lack of a tax culture and the pettiness of the human being, are the radical factors that fluctuate at the expense of tax revenues. It is intended to provide solutions to this serious damage to the fiscal fund.
Research Summary
Using 138 firm‐year observations for 46 U.S.‐listed firms headquartered in tax havens from 2004 to 2013, this study employs a matched‐sample design and documents that the level of ...corporate social responsibility (CSR) engagement is relatively lower for firms with tax haven headquarters (HQ) than for those with U.S. HQ. This result is robust to the use of firm philanthropy as a measure of CSR engagement and holds true in an environment with high CSR expectations from U.S. communities. In an alternative setting of HQ relocations within the United States, we use a difference‐in‐differences methodology and find that when firms move their HQ to states with lower corporate income taxes, they decrease the level of CSR engagement. Overall findings are consistent with corporate culture theory.
Managerial Summary
This article examines CSR engagement of U.S.‐listed firms headquartered in tax havens. Using data from 2004 to 2013, we find that firms with tax haven HQ exhibit a relatively lower level of CSR engagement than otherwise similar firms headquartered in the United States. In the same vein, tax‐haven‐headquartered firms tend to give less to charity, even when they face high CSR expectations from U.S. communities. In an alternative setting of HQ relocations within the United States, we document that the level of corporate social engagement is more likely to drop for firms that move their HQ to lower‐tax regions. We interpret our findings as evidence of corporate culture affecting both the tax avoidance and CSR activities of firms headquartered in tax havens.
This paper presents an investigation of the relationship between home country institutional quality and EMNE investments in tax havens. We develop a conceptual framework that adapts the institutional ...escapism framework, whereby EMNEs expand globally to escape any home country institutional hazards, together with the institutional leverage framework, whereby EMNEs can leverage their home country institutions as a competitive advantage. This enabled us to conceptually derive and explain the curvilinear (U-shaped) relationship that develops between institutional differences and reforms over time and how this affects EMNE strategy towards tax havens. Based on a large cross-country firm-level dataset, our empirical results confirm the curvilinear relationship, such that EMNEs from weaker institutional environments are more likely to own tax haven subsidiaries. However, as emerging countries improve their institutional environment, the likelihood of investing in tax havens declines before increasing again at a time when said emerging countries have achieved developmental stages similar to those of developed countries. Based on our results, we draw several managerial and policy related implications.
We examine whether Delaware is a domestic tax haven. We find that taxes play an economically important role in determining whether U.S. firms locate subsidiaries in Delaware and that a Delaware-based ...state tax avoidance strategy lowers state effective tax rates by between 0.7 and 1.1 percentage points, on average. The tax savings represent a 15–24% decrease in the state income tax burden and translate to an increase in net income of 1.04–1.47%. However, we find that the tax benefits of Delaware tax strategies are diminishing over time in response to initiatives by state governments to limit multistate tax avoidance.
Which countries become tax havens? Dharmapala, Dhammika; Hines, James R.
Journal of public economics,
10/2009, Letnik:
93, Številka:
9
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This paper analyzes the factors influencing whether countries become tax havens. Roughly 15% of countries are tax havens; as has been widely observed, these countries tend to be small and affluent. ...This paper documents another robust empirical regularity: better-governed countries are much more likely than others to become tax havens. Controlling for other relevant factors, governance quality has a statistically significant and quantitatively large association with the probability of being a tax haven. For a typical country with a population under one million, the likelihood of a becoming a tax haven rises from 26% to 61% as governance quality improves from the level of Brazil to that of Portugal. Evidence from US firms suggests that low tax rates offer much more powerful inducements to foreign investment in well-governed countries than do low tax rates elsewhere. This may explain why poorly-governed countries do not generally attempt to become tax havens, and suggests that the range of sensible tax policy options is constrained by the quality of governance.
Tax Morale and International Tax Evasion Kemme, David M.; Parikh, Bhavik; Steigner, Tanja
Journal of world business : JWB,
April 2020, 2020-04-00, Letnik:
55, Številka:
3
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Low tax morale is associated with domestic tax evasion. We find evidence of cross-border equity flows designed to evade taxes in low tax morale countries. Using Foreign Portfolio Equity Investment ...(FPI) flows into 21 OECD countries from 138 source countries and an index of tax morale from the World Value Survey (WVS), we show that individuals in countries with low tax morale engage in tax evasion via roundtripping through tax havens. This allows them to benefit from differential taxes applied to foreign investors vis-a-vis domestic investors. Our results remain robust to various measures of tax morale and distinct subsamples.
The global financial crisis and leaked documents such as the Panama Papers highlighted the important role of financial secrecy in the global economy. Although international initiatives pressing for ...more transparency have gained strength, there is little knowledge on how the map of financial secrecy has changed over the past decade and why. We use the internationally recognised Financial Secrecy Index and analyse its five editions between 2011 and 2020. We find that financial transparency related to international standards and cooperation improved much more than transparency in the arguably more substantive areas of ownership registration, transparency of legal entities, as well as tax and financial regulation. Second, we document convergence of financial transparency among jurisdictions. While some of the most secretive countries and jurisdictions became more transparent, many with higher transparency in 2011 became relatively more secretive by 2020. This convergence is driven mainly by the most secretive countries and jurisdictions becoming more internationally cooperative. Third, we map the heterogeneity of financial secrecy across the world and classify 71 countries and jurisdictions into five groups, which cut across conventional geographical divisions, highlighting the need to study secrecy in specific contexts. They do, however, show that while OECD countries are relatively more transparent, their former colonies, with continued links with and dependency on former colonial powers, exhibit little improvement. Put together, our findings show that while some progress towards global financial transparency has been achieved, it is shallow and very uneven, with convergence potentially replacing a race-to-the-bottom dynamic.
The globalization of corporate control Fonseca, Luís; Nikalexi, Katerina; Papaioannou, Elias
Journal of international economics,
12/2023, Letnik:
146
Journal Article
Recenzirano
Odprti dostop
The internationalization of corporate control is a complex and poorly understood aspect of globalization, as it is challenging to trace controlling shareholders due to often opaque structures of ...ownership. We identify controlling shareholders for 22,000 listed firms to study the globalization of control. The network of international control appears very sparse, with strong home bias. A baseline gravity structure works well, as bilateral links are more potent for populous, affluent, and proximate countries. Institutions and tax haven status at source and destination play a modest role. Legal similarities, economic policy coordination, and cultural, linguistic, and historical ties play a non-negligible role telling of asset market and informational frictions; policy and legal similarities matter for financial institutions and banks, while informational/cultural barriers for individuals/families. International diversification motives play no major role. The results have implications for theoretical works on the internationalization of corporate control markets.
ABSTRACT
This study examines the effect of banking market consolidations via mergers and acquisitions (M&As) on the role of banks in intermediating corporate tax planning through offshore tax haven ...operations. We find that bank clients significantly increase their tax haven operations after their banks are merged with others. In addition, such an increase is greater when a commercial bank merges with an investment bank and when the clients have greater tax planning opportunities. We also employ network analyses to show that the propensity for a client to expand its operations into a new tax haven country increases significantly when its relationship bank enters into this country through an M&A. Collectively, our findings reveal that bank M&As enhance banks’ tax intermediation capability.
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