International Tax Planning in the Age of Ict

48 Pages Posted: 31 May 2004 Last revised: 14 Aug 2008

See all articles by Christoph Spengel

Christoph Spengel

Centre for European Economic Research (ZEW)

Anne Schäfer

Centre for European Economic Research (ZEW)

Date Written: 2004

Abstract

The increased use of information and communication technologies (ICT) leads to new ways of doing business internationally. Nowadays, firm-specific intangible assets as well as services often constitute the most important factors for the creation of value. Besides, geographic distances tend to be less relevant. The main objective of international tax planning consists of minimising the effective tax rate of the whole company or group. In this paper, it is examined for several instruments of international tax planning whether new chances of minimising the effective tax rate emerge with the use of ICT and to what extent new risks occur. The analysis comprises the (re)location of a company's residence, the (re)allocation of functions and risks, the implementation of a transfer pricing system, the choice of the form and location of investments abroad as well as hybrid forms of co-operation. For each instrument, both current and non-current tax issues are considered.

We conclude that, due to ICT, it is easier to make use of the international tax differential by choosing the optimal location and form of investment and by allocating functions and risks. Thus, companies can pay more attention to the tax-optimal choice between international locations and the importance of this instrument to reduce the effective tax rate is further strengthened by the use of ICT.

Keywords: International Company Taxation, Tax Planning, Information and Communication Technologies, Electronic Commerce

JEL Classification: H25

Suggested Citation

Spengel, Christoph and Schäfer, Anne, International Tax Planning in the Age of Ict (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-027. Available at SSRN: https://ssrn.com/abstract=552061 or http://dx.doi.org/10.2139/ssrn.552061

Christoph Spengel (Contact Author)

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany

Anne Schäfer

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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