Global Firms, National Corporate Taxes: An Evolution of Incompatibility

28 Pages Posted: 30 Oct 2020

Multiple version iconThere are 2 versions of this paper

Date Written: September 2020


How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework? MNEs, and firms with market power, are not new phenomena, nor is the corporate income tax, which dates to the early 20th century. This prompts the question, what is distinctly new (about multinational enterprises)-if anything-that has triggered unprecedented recent concerns about vulnerabilities in international tax arrangements and the taxation of MNEs? This paper presents a set of empirical observations and a synthesis of strands of the literature to answer this question. A key message is that MNEs of the 21st century operate differently from prior periods and have evolved to become global firms-with important tax ramifications. The fragility of international tax arrangements was present at the outset of designing international tax rules, but the challenges have drastically intensified with the global integration of business, the increased trade in hard-to-price services and intangibles, and the rapid growth of the digital economy.

Keywords: Corporate income tax, Foreign direct investment, Double taxation, Tax incentives, Trade in services, WP, company, multinational enterprise, conduit company, holding company, business organization

JEL Classification: F14, F23, H25, H26, F21, H20

Suggested Citation

Hebous, Shafik, Global Firms, National Corporate Taxes: An Evolution of Incompatibility (September 2020). IMF Working Paper No. 20/178, Available at SSRN:

Shafik Hebous (Contact Author)

International Monetary Fund ( email )

Washington, DC
United States

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