The OECD's 'Action Plan' to Raise Taxes on Multinational Corporations

42 Pages Posted: 23 Sep 2015

See all articles by Gary Clyde Hufbauer

Gary Clyde Hufbauer

Peter G. Peterson Institute for International Economics; Institute for International Economics

Euijin Jung

Peter G. Peterson Institute for International Economics

Tyler Moran

Peter G. Peterson Institute for International Economics

Martian Vieiro

Peter G. Peterson Institute for International Economics

Date Written: September 18, 2015

Abstract

Hufbauer and colleagues critically evaluate the Organization for Economic Cooperation and Development’s ambitious multipart project titled Base Erosion and Profit Shifting (BEPS), which contains 15 "Actions" to prevent multinational corporations (MNCs) from escaping their "fair share" of the tax burden. Spurred by G-20 finance ministers, the OECD recommends changes in national legislation, revision of existing bilateral tax treaties, and a new multilateral agreement for participating countries. The proposition that MNCs need to pay more tax enjoys considerable political resonance as government budgets are strained, the world economy is struggling, income inequality is rising, and the news media have publicized instances of corporations legally lowering their global tax burdens by reporting income in low-tax jurisdictions and expenses in high-tax jurisdictions. Given that the US system taxes MNCs more heavily than other advanced countries and provides fewer tax incentives for research and development (R&D), implementation of the BEPS Actions would drive many MNCs to relocate their headquarters to tax-friendly countries and others to offshore significant amounts of R&D activity.

Keywords: Base Erosion and Profit Shifting (BEPS), Corporate Taxes, International Taxation, Tax Policy

JEL Classification: H26, K34

Suggested Citation

Hufbauer, Gary Clyde and Jung, Euijin and Moran, Tyler and Vieiro, Martian, The OECD's 'Action Plan' to Raise Taxes on Multinational Corporations (September 18, 2015). Peterson Institute for International Economics Working Paper No. 15-14. Available at SSRN: https://ssrn.com/abstract=2663503 or http://dx.doi.org/10.2139/ssrn.2663503

Gary Clyde Hufbauer (Contact Author)

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036-1903
United States

Euijin Jung

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Tyler Moran

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Martian Vieiro

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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