This paper shows that the OECD inclusive framework of Pillar Two fails to implement the claimed 15% minimum corporate tax for all subsidiaries of multinational corporations that are not shell companies. The reason is that the Substance-based Income Exclusion of Pillar Two allows to tax-deduct...

Increased activity of multinational firms exposes national corporate tax bases to cross-country profit shifting, but also leads to rising profitability of the corporate sector. We incorporate these two effects of economic integration into a simple political economy model where the median voter...

This paper analyses the development of the ratio of corporate taxes to wage taxes using a simple political economy model with internationally mobile and immobile firms. Among other results, our model predicts that countries reduce their corporate tax rate, relative to the wage tax, either when...

The paper analyses optimal taxation of corporate profits when governments can choose both the rate and the base of the corporation tax, but are constrained to collect a given amount of corporate tax revenue. In a standard two-period model of investment and international mobility of portfolio...

There is a growing concern that governments lose substantial corporate tax revenue because of profit shifting through transfer-pricing and thin-capitalization strategies. Existing literature studies profit shifting and transfer pricing separately. In practice, the choice of debt-to-asset ratios...

This paper sets up an imperfect-competition model of a small open economy, and undertakes a welfare comparison of the Corporate Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE). A main result is that a small open economy should levy a positive source tax on capital in...

This paper studies the market and welfare effects of two main tax reforms - the Corporate Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE). Using an imperfect-competition model for a small open economy, it is shown that the well-known neutrality property of ACE does...

Multinational firms are known to shift profits and countries are known to compete over shifty profits. Two major principles for corporate taxation are Separate Accounting (SA) and Formula Apportionment (FA). These two principles have very different qualities when it comes to preventing profit...

Multinational firms are known to shift profits and countries are known to compete over shifty profits. Two major principles for corporate taxation are Separate Accounting (SA) and Formula Apportionment (FA). These two principles have very different qualities when it comes to preventing profit...

This paper studies the market and welfare effects of two main tax reforms – the Corporate Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE). Using an imperfect-competition model for a small open economy, it is shown that the well-known neutrality property of ACE does...