What Will the OECD BEPS Indicators Indicate?

19 Pages Posted: 11 Feb 2021 Last revised: 7 Feb 2023

See all articles by Jost Heckemeyer

Jost Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research

Katharina Finke

University of Mannheim - Accounting and Taxation

Christoph Spengel

University of Mannheim - Accounting and Taxation

Date Written: 2021

Abstract

As part of its action plan against base erosion and profit shifting(BEPS), the OECD (2015) has proposed six indicators to measure profit shifting activity. These indicators add to past and ongoing efforts in academic tax research to empirically identify the scale and tax sensitivity of international profit shifting. In this paper, we discuss whether the proposed OECD indicators indeed represent methodological advances and critically assess their informative value. While a certain need for “easy-access” indicators to measure the relevance of the base erosion problem seems justified, our discussion reveals that the indicators come up with certain shortcomings, many of them acknowledged by the OECD (2015) itself, that pre-vent them from reliably tracing profit shifting activity in available international data. With one notable exception, the OECD's indicators lack consistent counterfactuals and comparison groups which are essential benchmarks for the observed data. Even the most promising approaches require representative and timely data that covers firms' global activity, including tax haven operations. With better access to such high-quality micro-level data, it will be more promising to empirically isolate the effects of profit shifting from relocations of real economic activity and value creation.

Keywords: Tax policy, International Taxation, BEPS, OECD, Base Erosion and Profit Shifting

JEL Classification: H20, H25, H26

Suggested Citation

Heckemeyer, Jost and Finke, Katharina and Spengel, Christoph, What Will the OECD BEPS Indicators Indicate? (2021). ZEW - Centre for European Economic Research Discussion Paper No. 21-005, Available at SSRN: https://ssrn.com/abstract=3783644 or http://dx.doi.org/10.2139/ssrn.3783644

Jost Heckemeyer (Contact Author)

University of Kiel - Faculty of Economics and Social Sciences ( email )

Kiel
Germany

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

Katharina Finke

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Christoph Spengel

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

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