Discussion of The Impact of U.S. Tax Law Revision on Multinational Corporations' Capital Location and Income-Shifting Decisions and Geographic Income Shifting by Multinational Corporations in Response to Tax Rate Changes

1993 ◽  
Vol 31 ◽  
pp. 174 ◽  
Author(s):  
Douglas A. Shackelford
Keyword(s):  
Multinational Corporations ◽  
Income Shifting ◽  
Tax Law ◽  
Tax Rate ◽  
The Impact

scholarly journals Measuring the Effects of Corporate Tax Cuts

2018 ◽  
Vol 32 (4) ◽  
pp. 97-120 ◽  
Author(s):  
Alan J. Auerbach
Keyword(s):  
Multinational Corporations ◽  
Income Tax ◽  
Capital Investment ◽  
Corporate Income Tax ◽  
Tax Law ◽  
Corporate Tax ◽  
The Law ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), the most sweeping revision of US tax law since the Tax Reform Act of 1986. The law introduced many significant changes. However, perhaps none was as important as the changes in the treatment of traditional “C” corporations—those corporations subject to a separate corporate income tax. Beginning in 2018, the federal corporate tax rate fell from 35 percent to 21 percent, some investment qualified for immediate deduction as an expense, and multinational corporations faced a substantially modified treatment of their activities. This paper seeks to evaluate the impact of the Tax Cuts and Jobs Act to understand its effects on resource allocation and distribution. It compares US corporate tax rates to other countries before the 2017 tax law, and describes ways in which the US corporate sector has evolved that are especially relevant to tax policy. The discussion then turns the main changes of the Tax Cuts and Jobs Act of 2017 for the corporate income tax. A range of estimates suggests that the law is likely to contribute to increased US capital investment and, through that, an increase in US wages. The magnitude of these increases is extremely difficult to predict. Indeed, the public debate about the benefits of the new corporate tax provisions enacted (and the alternatives not adopted) has highlighted the limitations of standard approaches in distributional analysis to assigning corporate tax burdens.

scholarly journals Corporate Income Shifting in an Era of Tax Multilateralism: The Impact of Exchange-of-Information Agreements

2021 ◽  
Vol 69 (2) ◽  
pp. 357-389
Author(s):  
Devan Mescall ◽  
Paul Nielsen
Keyword(s):  
Multinational Corporations ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Empirical Studies ◽  
Annual Reports ◽  
Income Shifting ◽  
Exchange Of Information ◽  
Pricing Rules ◽  
Using Data ◽  
The Impact

Using data from the annual reports of over 100,000 subsidiaries of multinational enterprises (MNEs) from 55 countries between 2003 and 2012, the authors of this article investigate the impact of exchange-of-information agreements ("EOI agreements") on tax-motivated income shifting. Transparency created by the signing of EOI agreements is expected to reduce the tax-motivated shifting of income by multinational corporations. Whether such agreements affect the income-shifting behaviour of multinational corporations is an unanswered question. The authors find evidence that, on average, EOI agreements do have an impact on tax-motivated income shifting. Additionally, they find that more advanced, modern EOI agreements are associated with a larger decrease in tax-motivated income shifting compared to the impact of early EOI agreements. This evidence challenges the prevalent assumption in empirical studies that EOI agreements are homogeneous. Supplemental analyses suggest that factors that affect the information asymmetry between MNEs and tax authorities, such as corporations with high levels of intangibles and tax authorities with strong transfer-pricing rules and enforcement, can diminish or enhance the effectiveness of EOI agreements in moderating tax-motivated income shifting. The evidence provided by this study shows that consideration of the tax authorities' information environment and the substance of an EOI agreement is essential when assessing the impact of such an agreement on the tax behaviour of sophisticated taxpayers such as multinational corporations.

scholarly journals Abuses and Penalties of a Corporate Tax Inversion

2019 ◽  
Vol 7 (1) ◽  
pp. 5
Author(s):  
James Yang ◽  
Leonard Lauricella ◽  
Frank Aquilino
Keyword(s):  
Multinational Corporations ◽  
International Taxation ◽  
Internal Revenue Service ◽  
Tax Law ◽  
Corporate Tax ◽  
Tax Base ◽  
Tax Rate ◽  
Tax Savings ◽  
Treasury Department ◽  
The U.S

There is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. This practice is known as “corporate tax inversion”. This paper discusses the abuses and penalties of this phenomenon. It is rooted in some deficiencies in the U.S. tax law. This paper points out that the U.S. has the highest corporate tax rate in the world. It imposes tax on worldwide income. It permits deferral of tax on foreign-sourced income until dividends are repatriated back to the U.S. As a result, it creates tax loopholes. This paper reveals six actual cases of corporate tax inversion. This practice has triggered the Congress to enact §7874, the Internal Revenue Service (IRS) to issue Notices IR 2014-52 and IR 2015-79, and the U.S. Treasury Department to promulgate TD 9761. This paper investigates some details of these penalties. This paper further demonstrates an example in determining the amount of tax savings by engaging in a corporate tax inversion. It also offers many strategies.

scholarly journals Tax Law Asymmetries and Income Shifting: Evidence from Japanese Capital Keiretsu

2010 ◽  
Vol 10 (1) ◽  
Author(s):  
Kazuki Onji ◽  
David Vera
Keyword(s):  
Tax Incentives ◽  
Attrition Rate ◽  
Income Shifting ◽  
Tax Law ◽  
Group Level ◽  
Large Dataset ◽  
Corporate Groups ◽  
Negative Income ◽  
Level Data ◽  
The Impact

Abstract While the asymmetric treatment of positive and negative income creates clear tax incentives to shift income among a group of closely related corporations, attempts to document the impact of such behavior on economic outcomes are relatively sparse. We aim to provide evidence on tax-motivated transfers from a large dataset of Japanese corporate groups. Using company level data on 33,340 subsidiary time pairs from 1988, 1990, and 1992, we consider testable implications of income shifting in a theoretical model tailored to the Japanese institution of the early 1990s and empirically examine the spread of the profitability distribution, the attrition rate of loss-making subsidiaries, and the propensity to report zero profit. The findings suggest that income shifting was pervasive when Japan had not adopted a formal allowance for group-level tax. The result underscores the importance of accounting for the inter-relatedness of companies, in designing a corporate income tax.

Short-Term Incentive Effects of a Reduction in the NOL Carryback Period

2011 ◽  
Vol 33 (2) ◽  
pp. 67-88 ◽  
Author(s):  
Susan M. Albring ◽  
Dan S. Dhaliwal ◽  
Inder K. Khurana ◽  
Raynolde Pereira
Keyword(s):  
Earnings Management ◽  
Income Tax ◽  
Control Sample ◽  
Fiscal Year ◽  
Income Shifting ◽  
Tax Law ◽  
Short Term ◽  
Tax Rate ◽  
Incentive Effects ◽  
Loss Firms

ABSTRACT We examine whether the Taxpayer Relief Act of 1997 (TRA 1997), which reduced the net operating loss (NOL) carryback period from three to two years, created a short-term incentive effect to shift income to accelerate loss recognition in the tax year 1997. We find that our sample of NOL firms in the treatment year of 1997 display higher (lower) levels of income-decreasing (-increasing) earnings management, compared to a control sample of loss firms. When we focus strictly on the NOL firms in the transition year, we find that firms with higher reported income tax expense in fiscal year 1995 display greater income shifting to accelerate loss recognition. We also find that income shifting is greater for treatment NOL firms that expect to report losses in the post-TRA 1997 regime. Overall, our study highlights how changes in tax law provisions (as opposed to tax rate changes) affect firms' reporting behavior.

scholarly journals SATISFACTION OF INDIVIDUAL TAXPAYERS’ IN BANGLADESH

2021 ◽  
pp. 64-73
Keyword(s):  
Economic Growth ◽  
Quantitative Data ◽  
Positive Relationship ◽  
Response Rate ◽  
Tax Law ◽  
Tax Rate ◽  
Independent Variables ◽  
Empirical Tests ◽  
The Individual ◽  
The Impact

As a developing country revenue is necessary to accelerate the economic growth of Bangladesh. Besides, implementation of the tax law, individual taxpayers’ satisfaction will accelerate the collection of tax. The main objective of the study is to find out the impact of some determinants or factors which influence the overall satisfaction of the individual taxpayers’ of Bangladesh. In this study, quantitative data was gathered by taking personal interviews among 450 respondents and the response rate was 93.33%. Empirical tests using factor analysis and tests of hypothesis were performed in the study. The study incorporated three factors: tax rate, taxpaying system, and the behavior of tax employees. These three factors are considered to play a significant role in individual taxpayer satisfaction in Bangladesh. All the variables showed a significant and positive relationship between the independent variables and the dependent variable, taxpayers’ satisfaction. The study suggests some recommendations in order to increase the effectiveness of the tax collection rate by satisfying individual taxpayers’.

scholarly journals Studi Komparatif Aplikasi Tax Treaty Indonesia-Tiongkok Dan Indonesia-Singapura

Educoretax ◽  
2021 ◽  
Vol 1 (3) ◽  
pp. 174-187
Author(s):  
Faqih Aji ◽  
Ferry Irawan
Keyword(s):  
Qualitative Research ◽  
Deep Understanding ◽  
Tax Law ◽  
Tax Rate ◽  
Close Relationship ◽  
The Government ◽  
The Impact ◽  
Dividend Tax

The increasing of global investment and trading has generated a close-relationship among countries. as a sovereign nation, a country will enforce its domestic rules particulary tax law. In order to stabilize the economy and keep the fairness, most countries agree to establish a tax treaty. This research investigates how the impact of tax treaty conducted by Indonesia. In addition, it compares the tax treaty between Indonesia-Chinese and Indonesia-Singapore. This research applies qualitative research to obtain a deep understanding. There are several important findings. First, in general tax treaty can promote a fair taxing for both treaty partners. Second, tax treaty between Indonesia-Singapore is more beneficial compares to Indonesia-Chinese from the perspective of dividend tax rate. Third, the research propose that the Government of Indonesia re-negotiate several articles particularly the tax rate.

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