Lorraine Eden
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199241828
- eISBN:
- 9780191596834
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199241821.003.0021
- Subject:
- Economics and Finance, International
An outline is given of the complex issue of transfer pricing (the cross‐border intra‐firm transactions between related parties), as seen by multinational enterprises (MNE) managers and by governments ...
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An outline is given of the complex issue of transfer pricing (the cross‐border intra‐firm transactions between related parties), as seen by multinational enterprises (MNE) managers and by governments faced with the task of taxing business profits. First, transfer pricing from the MNE's perspective, and the problems that this raises for national governments, are briefly discussed. The basic rules of international taxation as they apply to MNE profits are then reviewed. The specific rules and procedures that apply to transfer pricing, as practised in the USA and recommended by the OECD, are then outlined. The rest of the chapter discusses an alternative approach to taxing MNEs—the arm's length standard, which is based on separate accounting or the separate entity approach, and outlines future trends that are likely to have major impacts—globalization, regionalization, and the Internet.Less
An outline is given of the complex issue of transfer pricing (the cross‐border intra‐firm transactions between related parties), as seen by multinational enterprises (MNE) managers and by governments faced with the task of taxing business profits. First, transfer pricing from the MNE's perspective, and the problems that this raises for national governments, are briefly discussed. The basic rules of international taxation as they apply to MNE profits are then reviewed. The specific rules and procedures that apply to transfer pricing, as practised in the USA and recommended by the OECD, are then outlined. The rest of the chapter discusses an alternative approach to taxing MNEs—the arm's length standard, which is based on separate accounting or the separate entity approach, and outlines future trends that are likely to have major impacts—globalization, regionalization, and the Internet.
Stephen D. Cohen
- Published in print:
- 2007
- Published Online:
- May 2007
- ISBN:
- 9780195179354
- eISBN:
- 9780199783779
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195179354.003.0014
- Subject:
- Economics and Finance, International
Only the most rabid proponents deny the potential for MNCs and FDI to inflict costs and harm on large numbers of people and countries. This chapter is the equivalent of a law brief, this time ...
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Only the most rabid proponents deny the potential for MNCs and FDI to inflict costs and harm on large numbers of people and countries. This chapter is the equivalent of a law brief, this time one-sidedly expounding on the merits of the opposite side of the case and offering a totally different perspective on how to evaluate FDI and MNCs. Once again, no effort is made to replicate the emphasis in earlier chapters on the need for a balanced, objective approach to a subject dominated by heterogeneity, complexity, and subjectivity. The downsides of MNCs and FDI are discussed in terms of their demonstrable threat to a country's overall economic growth and prosperity as the result of the inherent conflict between their single-minded pursuit of profits and the interests of the host country's population. More specific costs such as intimidation of government officials anxious to promote and retain inward FDI, bribing regulators, tax avoidance, reduced competition in the marketplace including price collusion, diminished union and worker negotiating leverage, increased pollution, and increased capital outflows in the form of profit remittances, are also discussed.Less
Only the most rabid proponents deny the potential for MNCs and FDI to inflict costs and harm on large numbers of people and countries. This chapter is the equivalent of a law brief, this time one-sidedly expounding on the merits of the opposite side of the case and offering a totally different perspective on how to evaluate FDI and MNCs. Once again, no effort is made to replicate the emphasis in earlier chapters on the need for a balanced, objective approach to a subject dominated by heterogeneity, complexity, and subjectivity. The downsides of MNCs and FDI are discussed in terms of their demonstrable threat to a country's overall economic growth and prosperity as the result of the inherent conflict between their single-minded pursuit of profits and the interests of the host country's population. More specific costs such as intimidation of government officials anxious to promote and retain inward FDI, bribing regulators, tax avoidance, reduced competition in the marketplace including price collusion, diminished union and worker negotiating leverage, increased pollution, and increased capital outflows in the form of profit remittances, are also discussed.
W. Max Corden
- Published in print:
- 1997
- Published Online:
- November 2003
- ISBN:
- 9780198775348
- eISBN:
- 9780191715471
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198775342.003.0011
- Subject:
- Economics and Finance, International
First, the direct and indirect effects of protection on capital inflow are presented. Secondly, the principles for taxing foreign capital are reviewed. Then, tariffs are shown in some cases to be ...
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First, the direct and indirect effects of protection on capital inflow are presented. Secondly, the principles for taxing foreign capital are reviewed. Then, tariffs are shown in some cases to be second‐best taxes or subsidies on foreign capital. Finally, it is shown that transfer pricing by vertically integrated multinationals has implications for tax and tariff policies.Less
First, the direct and indirect effects of protection on capital inflow are presented. Secondly, the principles for taxing foreign capital are reviewed. Then, tariffs are shown in some cases to be second‐best taxes or subsidies on foreign capital. Finally, it is shown that transfer pricing by vertically integrated multinationals has implications for tax and tariff policies.
Oscar Amerighi
- Published in print:
- 2008
- Published Online:
- August 2013
- ISBN:
- 9780262026451
- eISBN:
- 9780262269124
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262026451.003.0006
- Subject:
- Economics and Finance, Econometrics
In this chapter, multinational enterprises (MNE) and their effect on transfer pricing, taxable profits and payments are explored. One of the purposes of the chapter is to consider the international ...
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In this chapter, multinational enterprises (MNE) and their effect on transfer pricing, taxable profits and payments are explored. One of the purposes of the chapter is to consider the international taxation of MNEs and enforcement of the arm’s-length principle. The analysis carried out in the chapter is heavily reliant upon the work done by Kind, Midelfart Knarvik, and Schjelderup on the study of the effects of economic integration on equilibrium taxes. Both Peralta’s and Kind’s models are modified in order reveal that as governments increase the level of enforcement as a response to transfer pricing, the results show that equilibrium tax rates also increase. An analysis is then made on the effects of increased economic integration on transfer pricing and quantity decisions by MNEs when facing two policy instruments. In the end, increased economic integration is shown to affect corporate profit tax rates in either a race to the bottom or a race to the top.Less
In this chapter, multinational enterprises (MNE) and their effect on transfer pricing, taxable profits and payments are explored. One of the purposes of the chapter is to consider the international taxation of MNEs and enforcement of the arm’s-length principle. The analysis carried out in the chapter is heavily reliant upon the work done by Kind, Midelfart Knarvik, and Schjelderup on the study of the effects of economic integration on equilibrium taxes. Both Peralta’s and Kind’s models are modified in order reveal that as governments increase the level of enforcement as a response to transfer pricing, the results show that equilibrium tax rates also increase. An analysis is then made on the effects of increased economic integration on transfer pricing and quantity decisions by MNEs when facing two policy instruments. In the end, increased economic integration is shown to affect corporate profit tax rates in either a race to the bottom or a race to the top.
Alex Cobham and Petr Janský
- Published in print:
- 2020
- Published Online:
- March 2020
- ISBN:
- 9780198854418
- eISBN:
- 9780191888717
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198854418.003.0003
- Subject:
- Economics and Finance, Financial Economics, Development, Growth, and Environmental
International trade plays an important role in some of the most prominent studies aimed at estimating the scale of illicit financial flows (IFF). This chapter provides a critical survey of the ...
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International trade plays an important role in some of the most prominent studies aimed at estimating the scale of illicit financial flows (IFF). This chapter provides a critical survey of the leading estimates of trade-based IFF, addressing separately the strengths and weaknesses of methodologies that rely on data at the country, commodity and transaction level. The current state of data availability makes a trade-off between coverage and quality of estimation inevitable, and at present no approach in this area yields sufficiently a strong, global series. There are a number of promising areas for future development, but unfortunate trade-offs will remain unless there is a step change in data availability.Less
International trade plays an important role in some of the most prominent studies aimed at estimating the scale of illicit financial flows (IFF). This chapter provides a critical survey of the leading estimates of trade-based IFF, addressing separately the strengths and weaknesses of methodologies that rely on data at the country, commodity and transaction level. The current state of data availability makes a trade-off between coverage and quality of estimation inevitable, and at present no approach in this area yields sufficiently a strong, global series. There are a number of promising areas for future development, but unfortunate trade-offs will remain unless there is a step change in data availability.
Lorraine Eden
- Published in print:
- 2016
- Published Online:
- March 2016
- ISBN:
- 9780198725343
- eISBN:
- 9780191792687
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198725343.003.0007
- Subject:
- Economics and Finance, International, Macro- and Monetary Economics
Many transfer pricing experts argue the arm’s length standard (ALS) is “dead” and should be replaced by a formulary apportionment system that allocates the profits of a multinational enterprise among ...
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Many transfer pricing experts argue the arm’s length standard (ALS) is “dead” and should be replaced by a formulary apportionment system that allocates the profits of a multinational enterprise among its home and host countries using a formula based on capital, labor, and sales. Criticisms of the arm’s length standard fall into two categories: concerns that (1) abusive transfer pricing by multinationals is rampant, unfair, and draining development; and (2) the current transfer pricing rules are difficult to implement in theory and in practice. This chapter assumes that, at least for the foreseeable future, the arm’s length standard will be the predominant method for taxing related party transactions within multinational enterprises. Its focus is therefore to recommend changes within the current ALS system to improve its workability in a world of twenty-first-century multinationals and nation-states.Less
Many transfer pricing experts argue the arm’s length standard (ALS) is “dead” and should be replaced by a formulary apportionment system that allocates the profits of a multinational enterprise among its home and host countries using a formula based on capital, labor, and sales. Criticisms of the arm’s length standard fall into two categories: concerns that (1) abusive transfer pricing by multinationals is rampant, unfair, and draining development; and (2) the current transfer pricing rules are difficult to implement in theory and in practice. This chapter assumes that, at least for the foreseeable future, the arm’s length standard will be the predominant method for taxing related party transactions within multinational enterprises. Its focus is therefore to recommend changes within the current ALS system to improve its workability in a world of twenty-first-century multinationals and nation-states.
Kimberly A. Clausing
- Published in print:
- 2001
- Published Online:
- February 2013
- ISBN:
- 9780226341736
- eISBN:
- 9780226341750
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226341750.003.0008
- Subject:
- Economics and Finance, International
Multinational corporations (MNCs) play a very large role in international trade. Not only is there a substantial amount of arm's-length trade between MNCs and unaffiliated buyers, but trade within ...
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Multinational corporations (MNCs) play a very large role in international trade. Not only is there a substantial amount of arm's-length trade between MNCs and unaffiliated buyers, but trade within MNCs is also quite considerable. For instance, in 1994, this intrafirm trade accounted for approximately 36 percent of exports and 43 percent of imports in the United States. These fractions vary somewhat from year to year, but intrafirm trade has been a similarly large share of international trade since 1977. Recently, researchers have devoted some attention to examining how intrafirm trade may be different from arm's-length trade. One essential reason intrafirm trade may differ from non-intrafirm trade results from the fact that MNCs may alter their transactions in order to minimize worldwide tax burdens. This chapter discusses the impact of transfer pricing on intrafirm trade. Using data on the operations of U.S. parent companies and their foreign affiliates, it examines the relationship between the tax minimization strategies of MNCs and intrafirm trade. The results indicate that taxes have a substantial influence on intrafirm trade flows.Less
Multinational corporations (MNCs) play a very large role in international trade. Not only is there a substantial amount of arm's-length trade between MNCs and unaffiliated buyers, but trade within MNCs is also quite considerable. For instance, in 1994, this intrafirm trade accounted for approximately 36 percent of exports and 43 percent of imports in the United States. These fractions vary somewhat from year to year, but intrafirm trade has been a similarly large share of international trade since 1977. Recently, researchers have devoted some attention to examining how intrafirm trade may be different from arm's-length trade. One essential reason intrafirm trade may differ from non-intrafirm trade results from the fact that MNCs may alter their transactions in order to minimize worldwide tax burdens. This chapter discusses the impact of transfer pricing on intrafirm trade. Using data on the operations of U.S. parent companies and their foreign affiliates, it examines the relationship between the tax minimization strategies of MNCs and intrafirm trade. The results indicate that taxes have a substantial influence on intrafirm trade flows.
James K. Boyce
Leonce Ndikumana (ed.)
- Published in print:
- 2014
- Published Online:
- December 2014
- ISBN:
- 9780198718550
- eISBN:
- 9780191788000
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198718550.003.0016
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Drawing on the literature and new evidence presented in the other chapters of the book, this chapter discusses strategies to stem capital flight from African countries. It emphasizes the importance ...
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Drawing on the literature and new evidence presented in the other chapters of the book, this chapter discusses strategies to stem capital flight from African countries. It emphasizes the importance of the distinction between licitly and illicitly acquired capital, and the need to tailor strategies to the specific type of capital flight concerned. Policies to prevent the illegal export of honestly acquired capital and strategies to address both trade-related capital flight and transfer pricing are examined. The chapter then turns to strategies for preventing asset theft and for tracking and repatriating stolen assets. It discusses the burden of odious debts and the role of debt audits in addressing this problem. Finally it maps the contours of a global compact for the prevention of capital flight and tax evasion.Less
Drawing on the literature and new evidence presented in the other chapters of the book, this chapter discusses strategies to stem capital flight from African countries. It emphasizes the importance of the distinction between licitly and illicitly acquired capital, and the need to tailor strategies to the specific type of capital flight concerned. Policies to prevent the illegal export of honestly acquired capital and strategies to address both trade-related capital flight and transfer pricing are examined. The chapter then turns to strategies for preventing asset theft and for tracking and repatriating stolen assets. It discusses the burden of odious debts and the role of debt audits in addressing this problem. Finally it maps the contours of a global compact for the prevention of capital flight and tax evasion.
Andrew Coulson
- Published in print:
- 2013
- Published Online:
- September 2013
- ISBN:
- 9780199679966
- eISBN:
- 9780191765964
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199679966.003.0024
- Subject:
- Economics and Finance, Development, Growth, and Environmental
The years after the Arusha Declaration saw a proliferation of parastatals, or government corporations, in almost every sector, including industry, agriculture, banking, trade, transport and housing. ...
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The years after the Arusha Declaration saw a proliferation of parastatals, or government corporations, in almost every sector, including industry, agriculture, banking, trade, transport and housing. The Government negotiated compensation with the owners of the banks and large factories that were nationalized, and run as parastatals––Government-owned arms-length bodies. Many new factories depended on protection provided by tariffs on imports. But transfer pricing, which provided a mechanism for international companies to take money out of Tanzania, was an issue from the start. The State Trading Corporation, which in 1970 took over the import of all consumer goods, building supplies and agricultural inputs encountered many problems, as did the Mwananchi Engineering and Construction Company (MECCO), the state-owned construction parastatal. The chapter also explores the dilemmas faced by the Party when it encouraged worker and Party involvement in the management of industries, at the same time crushing workers’ initiatives in particular factories.Less
The years after the Arusha Declaration saw a proliferation of parastatals, or government corporations, in almost every sector, including industry, agriculture, banking, trade, transport and housing. The Government negotiated compensation with the owners of the banks and large factories that were nationalized, and run as parastatals––Government-owned arms-length bodies. Many new factories depended on protection provided by tariffs on imports. But transfer pricing, which provided a mechanism for international companies to take money out of Tanzania, was an issue from the start. The State Trading Corporation, which in 1970 took over the import of all consumer goods, building supplies and agricultural inputs encountered many problems, as did the Mwananchi Engineering and Construction Company (MECCO), the state-owned construction parastatal. The chapter also explores the dilemmas faced by the Party when it encouraged worker and Party involvement in the management of industries, at the same time crushing workers’ initiatives in particular factories.
Alex Cobham and Petr Janský
- Published in print:
- 2020
- Published Online:
- March 2020
- ISBN:
- 9780198854418
- eISBN:
- 9780191888717
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198854418.003.0005
- Subject:
- Economics and Finance, Financial Economics, Development, Growth, and Environmental
exy2Tax avoidance by multinational companies is the most widely recognised tax abuse, and also the most heavily researched aspect of illicit financial flows (IFF). This chapter provides a critical ...
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exy2Tax avoidance by multinational companies is the most widely recognised tax abuse, and also the most heavily researched aspect of illicit financial flows (IFF). This chapter provides a critical survey of the leading estimates, highlighting the range of methodological innovation and alternative data. While the global range of estimated revenue losses is wide (between around $200bn and $600bn a year), consistent findings include that it is only a handful of jurisdictions that benefit from profit shifting at the expense of all others; and that lower-income countries lose the highest share of current tax revenues. While there is no single, perfect estimate in the literature, it does point the way to a potential indicator for the UN target.Less
exy2Tax avoidance by multinational companies is the most widely recognised tax abuse, and also the most heavily researched aspect of illicit financial flows (IFF). This chapter provides a critical survey of the leading estimates, highlighting the range of methodological innovation and alternative data. While the global range of estimated revenue losses is wide (between around $200bn and $600bn a year), consistent findings include that it is only a handful of jurisdictions that benefit from profit shifting at the expense of all others; and that lower-income countries lose the highest share of current tax revenues. While there is no single, perfect estimate in the literature, it does point the way to a potential indicator for the UN target.
Roger W. Spencer and David A. Macpherson
- Published in print:
- 2014
- Published Online:
- May 2015
- ISBN:
- 9780262027960
- eISBN:
- 9780262325868
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262027960.003.0012
- Subject:
- Economics and Finance, Economic History
This chapter looks at the career of Myron S. Scholes who received the Nobel Prize in 1997. Born in 1941, Scholes went to McMaster University for his B.A. and completed his Ph.D. at the University of ...
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This chapter looks at the career of Myron S. Scholes who received the Nobel Prize in 1997. Born in 1941, Scholes went to McMaster University for his B.A. and completed his Ph.D. at the University of Chicago in 1969. He became a professor at the Graduate School of Business, University of Chicago, and a professor of finance, emeritus, at Stanford University. Together with Mark Wolfson, he developed a new theory of tax planning under uncertainty and information asymmetry. His work as an economist was shaped by attempts to conceptualize and test real-world problems. He helped invent the concept of the index fund. His other works involved developing models to explain changes in the prices of risk transfer and liquidity in the market. He wrote Taxes and Business Strategy: A Planning Approach in collaboration with Wolfson.Less
This chapter looks at the career of Myron S. Scholes who received the Nobel Prize in 1997. Born in 1941, Scholes went to McMaster University for his B.A. and completed his Ph.D. at the University of Chicago in 1969. He became a professor at the Graduate School of Business, University of Chicago, and a professor of finance, emeritus, at Stanford University. Together with Mark Wolfson, he developed a new theory of tax planning under uncertainty and information asymmetry. His work as an economist was shaped by attempts to conceptualize and test real-world problems. He helped invent the concept of the index fund. His other works involved developing models to explain changes in the prices of risk transfer and liquidity in the market. He wrote Taxes and Business Strategy: A Planning Approach in collaboration with Wolfson.
Frank Barry
- Published in print:
- 2014
- Published Online:
- December 2014
- ISBN:
- 9780198718550
- eISBN:
- 9780191788000
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198718550.003.0013
- Subject:
- Economics and Finance, Development, Growth, and Environmental
The terms “safe haven” and “secrecy jurisdiction” are arguably more appropriate than “tax haven” or even “offshore financial center” in discussing capital flight. Most capital flight is thought to ...
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The terms “safe haven” and “secrecy jurisdiction” are arguably more appropriate than “tax haven” or even “offshore financial center” in discussing capital flight. Most capital flight is thought to reflect the transfer—typically to jurisdictions characterised by strong financial secrecy regulations—of the receipts of plunder, money laundering, and tax evasion. These same jurisdictions are occasionally used by governments to dodge reparations, evade the impact of sanctions, and covertly fund political interference in rival states. This chapter considers how safe havens operate and facilitate capital flight. It reviews the arguments over financial secrecy laws and practices, and considers recent multilateral and unilateral attempts—by the OECD, the EU, the US, and others—to counter secrecy abuses.Less
The terms “safe haven” and “secrecy jurisdiction” are arguably more appropriate than “tax haven” or even “offshore financial center” in discussing capital flight. Most capital flight is thought to reflect the transfer—typically to jurisdictions characterised by strong financial secrecy regulations—of the receipts of plunder, money laundering, and tax evasion. These same jurisdictions are occasionally used by governments to dodge reparations, evade the impact of sanctions, and covertly fund political interference in rival states. This chapter considers how safe havens operate and facilitate capital flight. It reviews the arguments over financial secrecy laws and practices, and considers recent multilateral and unilateral attempts—by the OECD, the EU, the US, and others—to counter secrecy abuses.
Angela Penrose
- Published in print:
- 2017
- Published Online:
- November 2017
- ISBN:
- 9780198753940
- eISBN:
- 9780191815720
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198753940.003.0013
- Subject:
- Business and Management, Business History, Strategy
The chapter covers Edith’s research into the oil industry and multinational companies, and the rise of the Organization of Petroleum Exporting Countries, including publication of The Large ...
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The chapter covers Edith’s research into the oil industry and multinational companies, and the rise of the Organization of Petroleum Exporting Countries, including publication of The Large International Firm in Developing Countries (1968), which challenged the traditional theories of international trade and investment as they applied to the oil industry. She was the first to discover the significance of transfer pricing and tax avoidance. She started seminars on the international petroleum industry with Peter Odell and later with Robert Mabro, at St Anthony’s College, Oxford. Edith travelled extensively, analysing the impact of multinationals on the economic welfare of the countries in which they operated, focusing on the efforts made by governments to retain as much as possible of their economic and political sovereignty, while still benefiting from the resources and capabilities of foreign investors. By the time of the ‘oil crisis’ of 1973 she was considered one of the top oil economists in the world.Less
The chapter covers Edith’s research into the oil industry and multinational companies, and the rise of the Organization of Petroleum Exporting Countries, including publication of The Large International Firm in Developing Countries (1968), which challenged the traditional theories of international trade and investment as they applied to the oil industry. She was the first to discover the significance of transfer pricing and tax avoidance. She started seminars on the international petroleum industry with Peter Odell and later with Robert Mabro, at St Anthony’s College, Oxford. Edith travelled extensively, analysing the impact of multinationals on the economic welfare of the countries in which they operated, focusing on the efforts made by governments to retain as much as possible of their economic and political sovereignty, while still benefiting from the resources and capabilities of foreign investors. By the time of the ‘oil crisis’ of 1973 she was considered one of the top oil economists in the world.
James R. Hines (ed.)
- Published in print:
- 2001
- Published Online:
- February 2013
- ISBN:
- 9780226341736
- eISBN:
- 9780226341750
- Item type:
- book
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226341750.001.0001
- Subject:
- Economics and Finance, International
Because the actions of multinational corporations have a clear and direct effect on the flow of capital throughout the world, how and why these firms behave the way they do is a major issue for ...
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Because the actions of multinational corporations have a clear and direct effect on the flow of capital throughout the world, how and why these firms behave the way they do is a major issue for national governments and their policymakers. With an unprecedented ability to adjust the scale, character, and location of their global operations, international corporations have become increasingly sensitive to the kind and degree of tax obligations imposed on them by both host and home countries. Tax rules affect the volume of foreign direct investment, corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. National governments that tax the profits of international firms face important challenges in designing tax policies to attract them. This collection examines the global ramifications of tax policies, offering up-to-date, theoretically innovative, and empirically sound perspectives on a problem of immense significance to future economic growth around the globe.Less
Because the actions of multinational corporations have a clear and direct effect on the flow of capital throughout the world, how and why these firms behave the way they do is a major issue for national governments and their policymakers. With an unprecedented ability to adjust the scale, character, and location of their global operations, international corporations have become increasingly sensitive to the kind and degree of tax obligations imposed on them by both host and home countries. Tax rules affect the volume of foreign direct investment, corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. National governments that tax the profits of international firms face important challenges in designing tax policies to attract them. This collection examines the global ramifications of tax policies, offering up-to-date, theoretically innovative, and empirically sound perspectives on a problem of immense significance to future economic growth around the globe.
Rabah Arezki, Gregoire Rota-Graziosi, and Lemma W. Senbet
- Published in print:
- 2014
- Published Online:
- December 2014
- ISBN:
- 9780198718550
- eISBN:
- 9780191788000
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198718550.003.0010
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter investigates the relationship between natural resources and capital flight through tax avoidance by multinational corporations. It focuses on the spillover effects in terms of tax ...
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This chapter investigates the relationship between natural resources and capital flight through tax avoidance by multinational corporations. It focuses on the spillover effects in terms of tax revenue mobilization and stock market development from the thin capitalization rule, a policy that prevents firm tax avoidance by limiting a firm’s foreign indebtedness. We use data on oil discoveries for a panel of 117 countries during the period 1970–2012. We find that oil discoveries significantly enhance both tax revenue mobilization and stock market development, but only when a thin capitalization rule is in place. These findings can be explained through the limiting impact of the thin capitalization rule on multinational companies’ use of financial transactions among their affiliates or tax havens to transfer profits. The thin capitalization rule may thus help limit the erosion of the domestic tax base and entice multinational corporations to use the domestic financial system.Less
This chapter investigates the relationship between natural resources and capital flight through tax avoidance by multinational corporations. It focuses on the spillover effects in terms of tax revenue mobilization and stock market development from the thin capitalization rule, a policy that prevents firm tax avoidance by limiting a firm’s foreign indebtedness. We use data on oil discoveries for a panel of 117 countries during the period 1970–2012. We find that oil discoveries significantly enhance both tax revenue mobilization and stock market development, but only when a thin capitalization rule is in place. These findings can be explained through the limiting impact of the thin capitalization rule on multinational companies’ use of financial transactions among their affiliates or tax havens to transfer profits. The thin capitalization rule may thus help limit the erosion of the domestic tax base and entice multinational corporations to use the domestic financial system.
Alex Cobham and Petr Janský
- Published in print:
- 2020
- Published Online:
- March 2020
- ISBN:
- 9780198854418
- eISBN:
- 9780191888717
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198854418.003.0008
- Subject:
- Economics and Finance, Financial Economics, Development, Growth, and Environmental
This book asks: Which flows fall under the umbrella term, ‘illicit financial flows’ (IFF)? How will progress in reducing them be measured? How will that progress be achieved? And who is ultimately ...
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This book asks: Which flows fall under the umbrella term, ‘illicit financial flows’ (IFF)? How will progress in reducing them be measured? How will that progress be achieved? And who is ultimately accountable? In this closing chapter, we summarise the findings of the volume on these questions, including in respect of the quality of existing estimates, their methodology and data and the likely scope for progress; and on the potential for scale and non-scale indicators of illicit financial flows for global targets, including the Sustainable Development Goals, and for national policy prioritisation. With political progress on the SDG target likely to be difficult, we also identify other opportunities to move the IFF agenda forward in the UN context.Less
This book asks: Which flows fall under the umbrella term, ‘illicit financial flows’ (IFF)? How will progress in reducing them be measured? How will that progress be achieved? And who is ultimately accountable? In this closing chapter, we summarise the findings of the volume on these questions, including in respect of the quality of existing estimates, their methodology and data and the likely scope for progress; and on the potential for scale and non-scale indicators of illicit financial flows for global targets, including the Sustainable Development Goals, and for national policy prioritisation. With political progress on the SDG target likely to be difficult, we also identify other opportunities to move the IFF agenda forward in the UN context.