Profit Shifting and 'Aggressive' Tax Planning by Multinational Firms: Issues and Options for Reform

30 Pages Posted: 31 Jul 2013

See all articles by Clemens Fuest

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Christoph Spengel

Centre for European Economic Research (ZEW)

Katharina Finke

University of Mannheim - Accounting and Taxation

Jost Heckemeyer

ZEW – Leibniz Centre for European Economic Research

Hannah Nusser

University of Mannheim

Multiple version iconThere are 2 versions of this paper

Date Written: July 30, 2013

Abstract

This paper discusses the issue of profit shifting and ‘aggressive’ tax planning by multinational firms. The paper makes two contributions. Firstly, we provide some background information to the debate by giving a brief overview over existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Secondly, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered.

Keywords: tax avoidance, profit shifting, multinational firms, intellectual property, tax policy, tax reform

JEL Classification: H20, H25, F23, K34

Suggested Citation

Fuest, Clemens and Spengel, Christoph and Finke, Katharina and Heckemeyer, Jost and Nusser, Hannah, Profit Shifting and 'Aggressive' Tax Planning by Multinational Firms: Issues and Options for Reform (July 30, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-044. Available at SSRN: https://ssrn.com/abstract=2303676 or http://dx.doi.org/10.2139/ssrn.2303676

Clemens Fuest (Contact Author)

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

Poschinger Str. 5
Munich, DE 81679
Germany
++89-9224-1430 (Phone)

Ludwig-Maximilians-University, Munich ( email )

Schackstrasse 4 / II
Munich, DE 80539
Germany

Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, DE 80539
Germany
++89 2180-2748 (Phone)
++89 2180-17845 (Fax)

Christoph Spengel

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany

Katharina Finke

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Jost Heckemeyer

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Hannah Nusser

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
1,339
Abstract Views
3,618
rank
3,684
PlumX Metrics