In many OECD countries, family firms face lower or no succession taxes if they fulfill continuation requirements. We study the effects of such preferential treatment in a two-generation model. Preferential treatment of continued firms leads to more entrepreneurship and higher wages, as entrepreneurs invest more as they value passing on a larger firm. However, more low-ability heirs continue the firm, leading to efficiency losses. In the presence of financial frictions, richer (but less able) heirs may invest more than buyers from outside.
Since 2016, Country-by-Country reporting has provided tax authorities with detailed information about multinationals’ worldwide activities. It has been hailed as a game-changer for corporate taxation, enabling tax authorities to target multinational firms with high profits in tax havens. We model Country-by-Country reporting as increasing both tax planning and audit costs for profit-shifting multinationals, where the latter costs depend on the share of profits held in tax havens. Then, Country-by-Country reporting makes shifting profits from a high-tax country to a tax haven relatively more attractive than shifting from a low-tax country to a tax haven—a substitution effect. Thus, while the total amount of profits shifted to the tax haven decreases, profit shifting from high-tax affiliates may increase relative to the situation without Country-by-Country reporting. We confirm these changes in profit-shifting patterns using a staggered difference-in-differences design. The opposing effects for low-tax and high-tax countries also help explaining the mixed findings of previous empirical studies on Country-by-Country reporting.
Firms should use all available information to anticipate future tax rates. Firm mobility is one source of such information. We first establish theoretically that expected future tax rates are higher in jurisdictions attractive for immobile firms (such as wind power plants or resource extracting firms). Fewer mobile firms enter in such a jurisdiction. Building on previous empirical evidence that German municipalities raise tax rates following the entry of immobile firms, we confirm that firms use this information to anticipate future tax rates. In the jurisdictions with the largest expected future tax rate increases, 10% fewer firms enter
With (automatic) exchange of tax information among countries now common, tax evaders have had to find new ways to hide their offshore holdings. One such way are citizenship-by-investment programs, which offer foreigners a new passport for a local investment or a fixed fee. We show analytically that high-income individuals acquire a new citizenship to lower the probability that their tax evasion is detected through information exchange. Using data on cross-border bank deposits, we find that deposits in tax havens increase after a country starts offering a citizenship-by-investment program, providing indirect evidence that tax evaders use these programs.
In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that profits of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries, by an average of 2.1 percentage points. The increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
Wie viele andere Länder auch hat Deutschland als Reaktion auf die von der COVID-19-Pandemie ausgelöste Wirtschaftskrise die steuerliche Verlustverrechnung verbessert. Jedoch blieb die Gewerbesteuer, die rund die Hälfte der Steuerbelastung auf Unternehmensgewinne ausmacht, von dieser Maßnahme ausgenommen. In diesem Beitrag analysieren Reinald Koch, Dominika Langenmayr und Lena Schön mithilfe einer dynamischen Mikrosimulation die potenziellen Auswirkungen eines Verlustrücktrags bei der Gewerbesteuer auf das Steueraufkommen. Wie sich erweist, kann sich die Einführung eines Verlustrücktrags mittelfristig größtenteils selbst finanzieren; kurzfristig kommt es allerdings zu Aufkommenseinbußen von durchschnittlich 7 Prozent. Es zeigt sich eine große Heterogenität zwischen Gemeinden, wobei strukturschwache Gemeinden oder Gemeinden mit niedrigem Gewerbesteueraufkommen besonders viel Aufkommen verlieren. Die Ergebnisse verdeutlichen den Reformbedarf der Gewerbesteuer.
Little is known about how banks shift profits to low-tax countries. Because of their specific business model, banks use profit shifting channels different from those of other firms. We propose a novel and bank-specific method of profit shifting: the strategic relocation of proprietary trading to low-tax jurisdictions. Using regulatory data from the German central bank, we show that a one percentage point lower corporate tax rate increases banks’ fixed-income trading assets by 4.0% and trading derivatives by 9.0%. This increase does not arise from a relocation of real activities (i.e. traders); instead, it stems from the relocation of book profits.
Capital mobility is one of the key determinants of corporate tax rates. We first show theoretically that governments will set higher tax rates on firm profits after an immobile firm has entered. We then test this prediction in a well-identified setting, using the rapid growth of wind power plants (a very immobile industry) and the large variation in local business taxes across Germany for identification. We confirm that municipalities increase corporate tax rates by up to 24% after immobile firm entry. The effect is stronger when immobile firms make up a larger share of the overall tax base.
This paper investigates how multinational banks use internal debt to shift profits to low-taxed affiliates. Using regulatory data on multinational banks headquartered in Germany, we show that banks use this tax avoidance channel more aggressively than non-financial multinationals do. We find that a ten percentage points higher corporate tax rate increases the internal net debt ratio by 5.7
percentage points, corresponding to a 20% increase at the mean. Our study also takes into account the existence of conduit entities, which simply pass through financial flows. If conduit entities are systematically located in low-tax countries, previous studies may have underestimated the extent of debt shifting.
We study whether the corporate tax system provides incentives for risky firm investment. We first model the effects of corporate tax rates and tax loss offset rules on firm risk-taking. Testing the theoretical predictions, we find that firm risk-taking is positively related to the length of tax loss periods. This result occurs because the loss rules shift a portion of investment risk to the government, inducing firms to increase their overall level of risk-taking. Moreover, the corporate tax rate has a positive effect on risk-taking for firms that expect to use their tax losses, and a negative effect for those that cannot. Thus, the effect of taxes on risky investment decisions varies among firms, and its sign hinges on firm-specific expectations of future tax loss recovery.
Many countries apply lower fines to tax evading individuals when they voluntarily disclose the tax evasion they committed. I model such voluntary disclosure mechanisms theoretically and show that while such mechanisms increase the incentive to evade taxes, they nevertheless increase tax revenues net of administrative costs. I confirm the importance of administrative costs in a survey of German competent local tax authorities. I then test the effects of voluntary disclosure on the tax evasion decision, using the introduction of the 2009 offshore voluntary disclosure program in the U.S. for identification. The analysis confirms that the introduction of voluntary disclosure increases tax evasion.
This paper analyzes measures that limit firms’ profit shifting activities in a model that incorporates heterogeneous firm productivity and monopolistic competition. Such measures, e.g. thin capitalization rules, have become increasingly widespread as governments have reacted to growing profit shifting activities of multinational companies. However, besides limiting profit shifting, such rules entail costs. As the regulations can only focus on the means to shift profits, not on profit shifting itself, they impose costs on all firms, no matter whether these firms shift profits abroad or not. In the model, these costs force some firms to exit the market. Thus, as the resulting lower competition makes the remaining firms more profitable, regulations to limit profit shifting may even increase the aggregate amount of profits shifted abroad. From a welfare point of view, it can be optimal not to limit profit shifting by such rules.
Heterogeneous firm productivity raises the question of whether governments should pursue ‘pick-the-winner’ strategies by subsidizing highly productive firms more (or taxing them less) than their less productive counterparts. We study this issue in a setting where governments can set differentiated effective tax rates in an oligopolistic industry in which firms with two productivity levels co-exist. We show that the optimal structure of tax differentiation depends critically on the feasible level of the corporate profit tax, which in turn depends on the degree of international tax competition. When tax competition is weak and optimal profit tax rates are high, favoring high-productivity firms is indeed the optimal policy. When tax competition is aggressive and profit taxes are low, however, the optimal tax policy reverses and favors low-productivity firms.
This article analyzes profit taxation according to the arm’s length principle in a model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium, intra-firm transactions occur in firms that are better than the market at input production. Moreover, market input prices include a mark-up that arises from the bargaining between the firm and the independent supplier. Transfer prices set at market values following the arm’s length principle thus systematically exceed multinationals’ marginal costs, leading to a reduction of tax payments for each unit sold. The optimal organization of firms hence provides a new rationale for the empirically observed lower tax burden of multinational corporations.
Im Jahr 2020 werden viele Unternehmen durch die Corona-Pandemie Verluste erleiden. Das deutsche Steuersystem behandelt Gewinne und Verluste asymmetrisch: Während Gewinne sofort versteuert werden müssen, führen Verluste oft nicht zu direkten Steuererstattungen. Dieser Beitrag diskutiert verschiedene Möglichkeiten, wie die steuerliche Behandlung von Unternehmen in Verlustsituationen verbessert werden kann. Eine Mikrosimulation der Reformoptionen zeigt, dass eine betragsmäßige Ausweitung der Verlustrücktragsmöglichkeiten eine deutlich größere Wirkung entfaltet als ein längerer Rücktragszeitraum. Bessere Verlustrücktragsmöglichkeiten setzen zudem starke Investitionsanreize.
Übergewinnsteuern sind politisch verlockend. Sie könnten ein Signal des gesellschaftlichen Zusammenhalts sein: Diejenigen, die von einer Krise profitieren, tragen dazu bei, die Kosten der Krise bzw. der Gegenmaßnahmen zu finanzieren. Trotzdemsprechen sich viele Ökonominnen und Ökonomen gegen solche Steuern aus, wie z.B. der Wissenschaftliche Beirat beim Bundesfinanzministerium(2022). Was sind aus ökonomischerSicht die Hauptargumente gegen eine Übergewinnsteuer? Hat das Konzept vielleicht auch positive Seiten und kann zu einerVerbesserung der Unternehmensbesteuerung beitragen?
Sowohl die Bewältigung der Corona-Pandemie als auch die Anpassung der Wirtschaft an Erfordernisse der Nachhaltigkeit verlangen staatliche Investitionen. Dominika Langenmayr und Ferdinand Mittermaier analysieren in diesem Beitrag, wie diese finanziert werden sollten. Das Ziel der Staatsfinanzierung sollte ihres Erachtens darin bestehen, die Gesellschaft bei der Bewältigung langfristiger Herausforderungen zu unterstützen. Neben der Effizienz stehen die intra- und intergenerationelle Gerechtigkeit sowie administrative Kosten im Fokus. Die Autoren plädieren für die Ausgabe langlaufender Staatsanleihen und eine an der Zinslast ausgerichtete Schuldenregel, welche die demographische Entwicklung berücksichtigt. Steuern sollten die Wirtschaft nicht in ihrer Innovationskraft einschränken. Bestehende Ineffizienzen (zum Beispiel in der Güter-, Einkommen- und Gewinnbesteuerung) gilt es zu beheben. So ließe sich mit einer neuen Ausgestaltung bestehender Steuern mehr Chancen- und Verteilungsgerechtigkeit erzielen.
Für die Einnahmenseite der Staatsfinanzen ist nicht die aggregierte rechnerische Steuer-schuld ausschlaggebend, sondern das tatsächliche Steueraufkommen. Diese beiden Größen fallen durch die „Steuerlücke“ auseinander, die das Ausmaß an Steuerhinterziehung beschreibt. Insbesondere bei der Umsatzsteuer reduziert mangelnde Steuerehrlichkeit das Steueraufkommen vieler Staaten. Während in Deutschland z. B. die Registrierkassenpflicht und die Kassenbonpflicht als Maßnahmen eingeführt wurden, setzen andere Staaten auch auf Steuerlotterien. Solche Lotterien werden diskutiert und konkrete Ausgestaltungsvorschläge gemacht, die mithilfe moderner Technologien auch einen positiven Effekt auf die Steuermoral haben können. Das zugrundeliegende Konzept wurde von Schüler:innen der Deutschen Berufsschule Hong Kong für den Schülerwettbewerb YES! Young Economic Summit entwickelt.