Country-by-country Reporting and the Effective Tax Rate : how Effective is the Effective Tax Rate in Detecting Tax Avoidance in Country-by-country Reports?. PDF Download
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Author: P. Klaassen Publisher: ISBN: Category : Languages : en Pages :
Book Description
A low effective tax rate in combination with a high profit can be an important indicator of possible tax avoidance. This article discusses the limitations of the definitions of two columns in the country-by-country report, namely 'profit (loss) before income tax' and 'income tax accrued - current year'. The authors conclude that the effective tax rate calculated based on the country-by-country report can not be accurately used in high level risk analyses.
Author: P. Klaassen Publisher: ISBN: Category : Languages : en Pages :
Book Description
A low effective tax rate in combination with a high profit can be an important indicator of possible tax avoidance. This article discusses the limitations of the definitions of two columns in the country-by-country report, namely 'profit (loss) before income tax' and 'income tax accrued - current year'. The authors conclude that the effective tax rate calculated based on the country-by-country report can not be accurately used in high level risk analyses.
Author: Felix Hugger Publisher: ISBN: Category : Languages : en Pages :
Book Description
Within the framework of its BEPS initiative, the OECD introduced a requirement for non-public country-by-country reporting (CbCR) applying to multinational companies with revenues above EUR 750m. The reports provide data on the global activities and financial structure of multinationals at a country level to tax authorities. This paper investigates the effectiveness of this measure against corporate tax avoidance using a difference-in-difference approach. The analysis is based on financial data both at the group and the subsidiary level. By testing several hypotheses, this paper provides limited support for the effectiveness of CbCR. While the effective tax rates of multinational groups with a reporting requirement increase by about 0.8 percentage points as compared to companies in the control group, the growth rate of total tax payments is unaffected. This seems to be due to a reduction of the tax base which is also due to a rise in leverage and resulting tax-deductible interest payments. At the same time, shifting of profits out of high tax jurisdictions is reduced by CbCR, but not at the expense of low tax OECD countries. CbCR therefore seems to primarily reduce profits located in tax haven affiliates of multinational groups. Lastly, there is little evidence for a distribution of profits closer aligned with frequently suggested apportionment factors.
Author: Preetika Joshi Publisher: ISBN: Category : Languages : en Pages :
Book Description
In this study, we examine the effect of increased tax transparency on the tax planning behavior of European banks. In 2014, the European Union introduced public country-by-country reporting requirements to the banking industry. Treating this new requirement as an exogenous shock, we find limited evidence consistent with a decline in income-shifting by the banks' financial affiliates in the post-adoption period (starting from 2015). We do not, however, find robust evidence of a significant change in the consolidated book effective tax rates among the affected banks. Our findings suggest that increased transparency from public country-by-country reporting can deter tax-motivated income shifting but that it did not appear to materially influence the banks' overall tax avoidance. Our findings have policy implications for the ongoing debate between the European Parliament, the Organisation for Economic Co-operation and Development, and accounting standard-setting bodies on whether to require multinationals to publish country-by-country reports.
Author: Simon Falcke Publisher: GRIN Verlag ISBN: 3346153193 Category : Business & Economics Languages : en Pages : 48
Book Description
Bachelor Thesis from the year 2019 in the subject Business economics - Review of Business Studies, grade: 1,3, Otto Beisheim School of Management Vallendar, language: English, abstract: This thesis contributes to the large literature of drivers of tax avoidance, for example tax system characteristics or the degree of tax incidence, by investigating which kind of firms drive the discovered difference in tax avoidance between countries. Thereby, it tries to answer the question which kind of firms benefit the most from common tax mechanisms and thus use them the most. By doing so, this thesis focus on firm characteristics that are not part of the tax system itself, but rather are common characteristics associated with a difference in tax avoidance. Moreover, the research is complemented by investigating some tax related country characteristics to answer the question whether the observed firm-tax avoidance correlations differ depending on certain country-specific factors. The thesis therewith further completes the explanation for the difference between the degree of tax avoidance in different countries. On January 22, 2019, the German political party Bündnis 90/Die Grünen published a study about the extent of tax avoidance in the European Union, revealing a gap between the effective tax rate paid by companies and the statutory tax rate in their home country. This gap between statutory tax rate and effective tax rate is one way of considering tax avoidance. There are other definitions as well, but overall tax avoidance can be seen as not paying the share of pre-tax income as taxes as intended by the government. In other words, tax avoidance is the attempt to legally reduce the tax burden paid to the government as much as possible.
Author: Tijmen Tuinsma Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Private Country-by-Country Reporting (CbCR) is a measure against tax avoidance by large multinationals, implemented throughout the EU in 2016. Multinational companies with an annual revenue over € 750 million have been required to report their global activities on a country-by-country basis to tax authorities. Using this cutoff in a sharp regression discontinuity design, we find causal evidence for an increase in effective tax rates for affected companies, indicating an increase in tax compliance. We estimate the increase in effective tax rates at 5 to 6 percentage points locally. However, significant cross-sectional variation is present: the most aggressive multinationals with tax haven affiliates are at most moderately affected, while almost the full effect is concentrated in medium-aggressive firms. From a policy perspective, the results suggest that while CbCR was effective in combating some forms of tax avoidance, profit shifting opportunities in tax havens mostly negate this effect.
Author: C. Silberztein Publisher: ISBN: Category : Languages : en Pages : 86
Book Description
On 29 September 2017, the OECD released "Country-by-Country Reporting: Handbook on Effective Tax Risk Assessment", which provides tax authorities with guidance on ways to incorporate information obtained under CbC reporting into their tax risk assessment processes, the types of tax risk indicators that may be identified using CbC reports, and the challenges that may arise in the process. In this article, the authors outline the key elements provided in this report, illustrate with a practical example how tax authorities may use CbC reporting information to supplement their existing tax risk assessment and discuss the consequences thereof.
Author: Preetika Joshi Publisher: ISBN: Category : Languages : en Pages : 60
Book Description
To combat tax avoidance by multinational corporations, the Organisation for Economic Cooperation and Development introduced country-by-country reporting, requiring firms to provide tax authorities with a geographic breakdown of their profitability and activity. Treating the introduction of country-by-country reporting in the European Union as a shock to private disclosure requirements, this study examines the effect on corporate tax outcomes. Exploiting the €750M threshold and employing a regression discontinuity and difference-in-difference design, I document a 1%-2% increase in consolidated GAAP effective tax rates of the affected firms. I also find some evidence consistent with a decline in tax-motivated income shifting starting in 2018. These results suggest that while private geographic disclosures can have a deterrent impact on overall corporate tax avoidance, the regulations have so far had a limited effect on tax-motivated income shifting. The findings of this study have important policy implications for the global implementation of private country-by-country reporting and add to the ongoing debate on public versus private disclosure of tax information.
Author: Marina Serrat Romaní Publisher: Edward Elgar Publishing ISBN: 1035314568 Category : Law Languages : en Pages : 391
Book Description
This timely book provides a holistic analysis of the exchange of information procedures for tax purposes within the EU from an administrative law and tax law perspective. It explores how procedural and substantive taxpayers’ rights are affected by exchange of information processes, and rigorously examines the effectiveness of the current legal framework.
Author: OECD Publisher: OECD Publishing ISBN: 9264162941 Category : Languages : en Pages : 82
Book Description
Tax competition in the form of harmful tax practices can distort trade and investment patterns, erode national tax bases and shift part of the tax burden onto less mobile tax bases. The Report emphasises that governments must intensify their cooperative actions to curb harmful tax practices.
Author: Ms.Thornton Matheson Publisher: International Monetary Fund ISBN: 1484398467 Category : Business & Economics Languages : en Pages : 26
Book Description
Global investment patterns mean that effective taxation of foreign investors is of increasing importance to the economies of lower income countries. It is thus of considerable concern that the historical framework for cross-border income tax arrangements is not always well suited to allow low-income countries (LICs) effectively to generate tax revenues from profits on foreign direct investment (FDI). Several aspects of this framework contribute to the problem. This paper discusses, in particular, the likely effect of a shift by major economies from the system of worldwide corporate taxation toward a territorial system on the volume, distribution, and financing of FDI, focusing on LICs. It then empirically analyzes bilateral outbound FDI data for the UK for 2002–10 to determine whether the move to territoriality made corporations more sensitive to hostcountry statutory tax rates. Supporting evidence for this hypothesis is found for FDI financed from new equity.
Author: P. Klaassen
Author: P. Klaassen
Author: Felix Hugger
Author: Preetika Joshi
Author: Simon Falcke
Author: Tijmen Tuinsma
Author: C. Silberztein
Author: Preetika Joshi
Author: Marina Serrat Romaní
Author: OECD
Author: Ms.Thornton Matheson