Taxing multinationals: The scope for enforcement cooperation
(2018) , 29 pages
Files
coredp2018_29web.pdf
Open Access - Adobe PDF
- 939.27 KB
Details
- Authors
- Abstract
- We present a tax-competition model with two policy instruments: the corporate tax rate and the tightness of tax enforcement (i.e., controls on profit shifting by multinational enterprises). Tougher enforcement increases the cost of profit shifting, and thus mitigates tax competition. In a framework of noncooperative tax choices, we compare the equilibria of the noncooperative and cooperative enforcement choices. After showing that enforcement cooperation may not benefit the low-tax country, we indicate two drivers that promote enforcement cooperation. The first driver of cooperation is complementarity (imperfect substitutability) of countries’ enforcement efforts, taking into account that dispersed enforcement efforts among the involved countries are less effective. We show that cooperation is more likely with greater enforcement complementarity. The second driver of cooperation is tax leadership, which reduces the extent of disagreement on tax enforcement.
- Affiliations
Citations
Hindriks, J., & Nishimura, Y. (2018). Taxing multinationals: The scope for enforcement cooperation (CORE Discussion Paper 2018/29). https://hdl.handle.net/2078.5/172944