Real effects of an international tax reform for MNEs

41 Pages Posted: 28 Sep 2021

See all articles by Regina Ortmann

Regina Ortmann

Paderborn University; TRR 266 Accounting for Transparency

Dirk Simons

University of Mannheim - Accounting and Taxation

Dennis Voeller

TBS Business School

Date Written: August 27, 2021

Abstract

With multinational enterprises (MNEs) centralizing production facilities, market countries claim not to receive their fair share of taxes. A reform of international business taxation that includes new profit allocation rules as well as the introduction of minimum taxation is being considered as a problem mitigating mechanism. We analyze theoretically the real effects of the aforementioned tax reform, i.e., MNEs’ adjustments of production and sales decisions. Our findings show that the effects of an international tax reform on sales quantities depend on the properties of the underlying product markets. If national demand resembles characteristics of traditional industries, sales quantities remain unchanged. However, sales quantities are affected if specific demand characteristics of modern business models are assumed. For traditional industries a reformed tax regime increases tax revenues in high-tax market countries and even attracts production. In contrast, for modern business models tax revenues of high-tax countries can even decrease.

Keywords: BEPS, corporate taxation, minimum taxation, profit shifting, tax avoidance

JEL Classification: C70, H26, H32, M48

Suggested Citation

Ortmann, Regina and Simons, Dirk and Voeller, Dennis, Real effects of an international tax reform for MNEs (August 27, 2021). TRR 266 Accounting for Transparency Working Paper Series No. 64, Available at SSRN: https://ssrn.com/abstract=3931211 or http://dx.doi.org/10.2139/ssrn.3931211

Regina Ortmann (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

Dirk Simons

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Dennis Voeller

TBS Business School ( email )

1 Place Alphonse Jourdain
Toulouse, 31068
France

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