1. Multinational Activity and Profit Sifting: The Case of Germany
Abstract:
Multinationals can use various strategies to circumvent taxation in high-tax locations. One of them consists in the use of distorted transfer prices enhancing profit shifting. On the other side especially governments in high-tax countries, have introduced different anti-tax avoidance measures in the recent past in order to prevent profit shifting. Anti-tax avoidance legislation has been also in Germany established during the nineties. This paper tries to detect how effective the German legislation is. It analyzes if multinationals use payments for immaterial goods to shift profits outside Germany. Further, the financing pattern of German in-and outbound FDI is investigated. The results for patent trade as well as for the financing pattern suggest that multinationals are able to shift profits out of Germany, which in turn causes some doubt on the effectiveness of the German anti-tax avoidance legislation. One exception is the thin capitalization rule restricting the amount of debt financing in the case of inbound FDI.
2. Tax-Avoidance Strategies of American Multinationals: An Empirical Analysis.
Abstract:
This paper analyzes the opportunities of American multinationals to reallocate their profits into tax havens. In contrast to previous papers a comprehensive look on the profit shifting process is undertaken by proposing three different tests. Multinationals in high-tax countries pay more interest to affiliates in tax havens than vice versa, indicating that income is shifted by extensively financing subsidiaries in high-tax countries with debt. Second, the share of retained earnings is lower in high-tax countries due to the unattractiveness of tax deferral. Finally, when testing for the outcomes of profit shifting the results show that the pre-tax profitability of American multinationals is higher in tax havens, consistent with the opportunities of multinationals to shift income outside high-tax jurisdictions.
3. Does Capital Mobility Reduce the Relative Tax Burden?
Abstract:
Previous empirical studies have shown that there is only a small negative (if any) effect of capital mobility on the corporate tax burden. This paper tries to investigate a less rigid hypothesis: Although capital taxes have not substantially declined in the last twenty years the relative burden of corporate to labor taxes may have fallen due to capital mobility. The results suggest that capital mobility has a weak negative impact on the corporate-labor tax ratio. However, other factors like country size or the share of investment expenditures are more important in explaining the relative tax burden in a country than capital mobility.
4. Do Countries Engage in Tax Competition? An Empirical Analysis for the OECD
Countries Using Various Indicators of the Tax Burden.
Abstract:
Most of the tax competition models predict that governments are unable to tax companies heavily under increasing capital mobility. Using four different indicators of the tax burden for up to 20 highly developed countries it is shown that increasing capital mobility has led to cuts in the business tax rate during the last twenty years. The specific impact of capital mobility depends on the type of tax indicator. Whereas capital mobility has only a moderate negative effect on the effective marginal and average tax rate its impact is more pronounced in the case of the statutory tax rate. Trade integration and public inputs matter for effective tax rates but do not affect the statutory rate. Thus, the empirical results indirectly favor income shifting as an explanation for the large cuts in statutory tax rates. In that case, a policy focusing solely on the coordination of the tax base seems to be misguided because it fosters enhanced competition in statutory tax rates and therefore profit shifting.5. Why Do Some Countries Exchange Information on Interest Income and Others Not?
Abstract:
Since 1.7.2005 the EU-Savings Tax Directive ensures a minimum of taxation on foreign interest income. Some countries apply a withholding tax, whereas others exchange information vis-à-vis the rest of the participating countries. The paper investigates why countries do not exchange information on interest income. The results suggest that the incentive to exchange information is weakened, when the banking sector in a country is very profitable. A high profitability of the banking sector enables countries to maximize tax revenues from the corporation tax. A second reason discouraging information exchange is related to the spill-over effects on the domestic labor market. An inflow of financial capital is indirectly associated with the creation of employment and well-paid jobs. Both effects are especially observable in small countries, indicating that competition for mobile capital is asymmetric. Thus, tax havens have little incentives to cooperate in international taxation matters.
6. How Important Are Relative Preferences for Subjective Well-Being?
Abstract:
Economists normally assume that individuals have non-interdependent preferences. Thus, higher income translates in increasing consumption opportunities, which in turn favour the well-being of an individual. Positional concerns are almost neglected within that framework. In this paper the importance of positional concerns on subjective- well being is evaluated. Although the well-being of a person increases with income, relative income-concerns have a negative impact on individual well-being, especially in the eastern German states. This negative externality can be explained by envy and status concerns of human beings.
7. Capital Mobility and Expenditure Competition: An Empirical Investigation.
Abstract:
This paper analyzes the impact of capital mobility on social and total government expenditures for the most developed OECD-countries. During the eighties/nineties capital mobility had a negative impact on expenditures, whereas the effect is weakly positive in the sixties/seventies. Further, it is shown that countries react to changes in expenditures in other countries. The degree of fiscal interaction is more significant in the last twenty years compared to the sixties/seventies. This result favours expenditure competition as an explanation for the observed empirical pattern, instead an intellectual trend.
8. Direktinvestitionen im Ausland: Eine Untersuchung zu den Effekten auf den inländischen Arbeitsmarkt.
Abstract:
Seit Jahren wird im Zusammenhang mit der Attraktivität des deut-schen Standorts die These diskutiert, ob ein Kapitalexport in Form von Direktinvesti-tionen auch einen Arbeitsplatzexport bewirkt. Neben der Möglichkeit einer substituti-ven Beziehung zwischen Direktinvestitionen und der inländischen Beschäftigung be-steht auch die Möglichkeit eines wirkungsneutralen oder gar eines komplementären Verhältnisses. Die Auswirkungen von Direktinvestitionen auf die Beschäftigung im Inland sind, aufgrund der Heterogenität der Ergebnisse vieler Untersuchungen, nicht ein-deutig zu quantifizieren. Als sicher erscheinen lediglich die überwiegend negativen Auswirkungen kostengetriebener und die positiven Effekte ab-satzorientierter Verlagerungen. Zur Abschätzung des Nettoeffektes werden im vorliegenden Beitrag für Deutschland die in- und ausländische Beschäfti-gungsentwicklung für die Sektoren des Verarbeitenden Gewerbes analysiert. Hierbei zeigt sich jedoch, dass die oftmals geäußerte Befürchtung Produktionsverlagerungen führten zu Arbeitsplatzverlusten empirisch nicht belegt werden kann. Der Gesamteffekt einer wachsenden Internationalisierung deutscher Unternehmen ist nicht negativ.