Papers & Reports

This paper empirically examines whether firms reclassify related-party payments to avoid the base erosion and anti-abuse tax (BEAT) of the Tax Cuts and Jobs Act (TCJA). The paper estimates a $6 billion aggregate reduction in US taxes for the sample firms in 2018. The paper also examines the consequences of reclassifying related-party payments and finds some evidence of an increase in tax reserves and a reduction in internal information quality for firms that engage in cost reclassification to avoid the BEAT.

The GloBE Model Rules have introduced the Qualified Domestic Minimum Top-Up Tax (QDMTT) into the ruleset of the international compromise on an effective minimum tax i.e. Pillar 2. Although countries do not need to implement a QDMTT as part of the internationally agreed common approach to Pillar 2, it is generally assumed that there are strong incentives for its adoption once a critical mass of countries have implemented GloBE. Possible alternative domestic minimum tax designs are hardly discussed because they are generally assumed to be inferior to a QDMTT. This paper first summarizes the benefits that adoption of a QDMTT offers to jurisdictions, as well as associated drawbacks and administrative challenges, especially for developing countries. The second part of the paper suggests that a Safe Harbour Domestic Minimum Top-Up Tax (SHDMTT) could be a viable alternative to the QDMTT. Like the latter, it safeguards the primacy of source countries to tax locally generated profits, and it allows jurisdictions to maintain their preferred mix of tax incentives, with only moderately higher losses in international competitiveness for limited categories of MNEs.  But it is far easier to comply with and administer, and requires no peer review to take immediate effect.

Over the last 10 years, governments have launched major initiatives to reduce international tax evasion. Yet despite the importance of these developments, little is known about the effects of these new policies. Is global tax evasion falling or rising? Are new issues emerging, and if so, what are they? This report addresses these questions thanks to an unprecedented international research collaboration building on the work of more than 100 researchers globally.

This article analyzes the tax-induced profit shifting behavior of firms and the impact of governments' anti-shifting rules. It derives a model of a firm that combines internal sales and internal debt in a full profit shifting strategy and which is required to apply the arm's length principle and a general thin capitalization rule. It finds several cases where the firm may shift profits to low-tax countries while satisfying the usual arm's length conditions in all countries. Internal sales and internal debt may be regarded either as complementary or as substitute shifting channels, depending on how the implicit concealment costs vary after changes in all transactions. The paper shows that the cross-effect between the shifting channels facilitates profit shifting by means of accepted transfer prices and interest rates.

This article analyzes the necessity to adapt the OECD Model Tax Convention (OECD Model) for remote work. It argues for the need for a legally binding agreement on two fundamental aspects: One, tax liability criteria for remote workers’ earnings and conditions relevant to determining when an employee’s remote work creates a PE for the employer. Second, the paper examines the current regulation of these issues in the OECD Model, identifies problem areas and proposes reforms.

This paper surveys the pre-BEPS efforts to create a multilateral tax convention (MTC) from the 19th century onward, and explains why these efforts have failed, leading to an international tax regime dominated by unilateralism and bilateralism. It contrasts the success of multilateralism in investment and trade law, and also examines the BEPS era efforts to create an MTC. It suggests that, while there has been more convergence of the tax laws of countries, a fundamental divergence of interests persists that will likely doom any such efforts to failure. The article concludes that tax law still remains unsuitable to multilateralism, in contrast to investment and trade law, mainly due to the monetary impact.

The Inclusive Framework’s Task Force on the Digital Economy (TFDE) has approved the publication of a text of the Multilateral Convention (MLC) to implement Amount A, together with its Explanatory Statement (ES) and the Understanding on the Application of Certainty for Amount A of Pillar One (UAC). This text reflects the consensus achieved so far among members on the technical architecture of Amount A, with different views on a handful of specific items noted in footnotes by a small number of jurisdictions who are constructively engaging to resolve differences.

The text of this Explanatory Statement to accompany the MLC was prepared to provide clarification of the approach taken in the MLC and how each provision is intended to apply. It therefore reflects the agreed understanding of the negotiators with respect to the MLC. It is intended by the negotiators to form part of the context of the MLC, as that term is used in customary international law, for the purpose of the interpretation of its terms.

This Implementation Handbook on the minimum tax provides an overview of the key provisions of the rules and the considerations to be taken into account by tax policy and administration officials and other stakeholders in assessing their implementation options.

Countries involved in the global tax deal negotiations have agreed on a multilateral convention to implement a rule aimed at helping developing countries collect more tax under treaties that set low withholding rates.

The rule, known as the subject-to-tax rule, will allow companies to tax certain intra-group payments where they are taxed below a 9% corporate income tax rate.