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This paper investigates the costs and benefits of concluding double tax treaties with investment hubs. Based on a sample of 41 African economies from 1985–2015, the results suggest that signing treaties with investment hubs is not associated with additional investments; yet, these treaties tend to come with nonnegligible revenue losses. Building on a theoretical model, the paper investigates the role of treaty shopping in driving nominal investment flows and provides indirect evidence for its importance in the sample.

Domestic resource mobilization --- Double tax treaties --- Economic adjustment and lending --- Governance --- International economics and trade --- International law --- International trade and trade rules --- Law and development --- Legal products --- Legal reform --- Macroeconomics and economic growth --- Public sector development --- Social development --- Social policy --- Tax law --- Tax treaty policy --- Taxation and subsidies --- Treaties --- Exports and Imports --- Public Finance --- Taxation --- Corporate Taxation --- International Investment --- Long-term Capital Movements --- Multinational Firms --- International Business --- Business Taxes and Subsidies --- Tax Evasion and Avoidance --- Fiscal Policies and Behavior of Economic Agents: Firm --- Taxation, Subsidies, and Revenue: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Public finance & taxation --- Corporate & business tax --- Finance --- Revenue administration --- Corporate income tax --- Foreign direct investment --- Double taxation --- Withholding tax --- Taxes --- Balance of payments --- Revenue --- Corporations --- Investments, Foreign --- Income tax --- Mauritius

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This paper develops a simple model to explore whether a higher detection probability for offshore tax evaders—e.g. because of improved exchange of information between countries and/or due to digitalization of tax administrations—renders it optimal for governments to introduce a voluntary disclosure program (VDP) and, if so, under what terms. We find that if the VDP is unanticipated, it is likely to be optimal for a revenue-maximizing government to introduce a VDP with relatively generous terms, i.e. a low or even negative penalty. When anticipated, however, the VDP is neither incentive compatible nor optimal, as it induces otherwise compliant taxpayers to evade tax. A VDP can then only be beneficial if tax evasion induces an external social cost beyond the direct revenue foregone, e.g., due to adverse effects on overall tax morale. In contrast to the common view that VDPs should come along with additional enforcement effort, we find that governments should relax enforcement if the VDP itself provides more powerful incentives to come clean.

Macroeconomics --- Economics: General --- Taxation --- Public Finance --- Tax Evasion and Avoidance --- Taxation, Subsidies, and Revenue: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Tax planning and compliance --- Public finance & taxation --- Tax evasion --- Revenue administration --- Tax administration core functions --- Tax return filing compliance --- Currency crises --- Informal sector --- Economics --- Tax administration and procedure --- Revenue --- Indonesia

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This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, on average, a 1 percentage-point lower corporate tax rate will expand before-tax income by 1 percent—an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research.

Macroeconomics --- Public Finance --- Taxation --- Corporate Taxation --- Multinational Firms --- International Business --- Business Taxes and Subsidies --- Tax Evasion and Avoidance --- Personal Income, Wealth, and Their Distributions --- Taxation, Subsidies, and Revenue: General --- Corporate & business tax --- Public finance & taxation --- Corporate income tax --- Tax avoidance --- Corporate taxes --- Personal income --- Revenue administration --- Taxes --- National accounts --- Corporations --- Tax evasion --- Income --- Revenue --- United States

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Simplifying tax policy comes with costs and benefits. This paper explores simplification options for the taxation of MNEs, an area where administrative and compliance costs of the current rules are large. Simplified approaches seek to reduce these costs by relying on an approximation of the true tax base, potentially distorting resource allocation. We examine the efficiency cost of transfer pricing simplification theoretically and empirically. Using a sample of 300,000 firms located in 22 countries, we estimate that common transfer pricing practices reduce efficiency between 0.25 and 2.2 percent of total factor productivity across sectors. Focusing on the manufacturing sector, we then observe that simplification more than doubles sectoral inefficiency on average. However, large differences exist, with moderate efficiency costs in several sectors.

Macroeconomics --- Economics: General --- International Taxation --- Production and Operations Management --- Taxation --- Industries: Manufacturing --- Taxation, Subsidies, and Revenue: General --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Macroeconomics: Production --- Industry Studies: Manufacturing: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- Manufacturing industries --- Transfer pricing --- Taxes --- Total factor productivity --- Productivity --- Tax wedge --- Tax policy --- Manufacturing --- Economic sectors --- Currency crises --- Informal sector --- Economics --- Industrial productivity --- Tax administration and procedure --- Mexico

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We analyze the impact of exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, we find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. Furthermore, to test the sensitivity of our findings, we estimate countries’ offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirm that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low income tax rates and strong financial secrecy.

Banks and Banking --- Taxation --- Criminology --- Personal Finance -Taxation --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Tax Evasion and Avoidance --- Illegal Behavior and the Enforcement of Law --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- International Lending and Debt Problems --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Banking --- Corporate crime --- white-collar crime --- Tax evasion --- Anti-money laundering and combating the financing of terrorism (AML/CFT) --- Offshore financial centers --- Bank deposits --- Revenue administration --- Crime --- Financial services --- Double taxation --- Taxes --- Personal income tax --- Money laundering --- Banks and banking --- International finance --- Income tax --- United States