How Much in Taxes Do Multinational Enterprises Pay?

• Název práce v češtině: Kolik platí mezinárodní společnosti na daních?
• Název v anglickém jazyce: How Much in Taxes Do Multinational Enterprises Pay?
• Klíčová slova: nadnárodní společnosti, daň z příjmů právnických osob, mezinárodní zdanění, vládní příjmy, daňové úniky
• Klíčová slova anglicky: multinational enterprise, corporate income tax, international taxation, government revenue, tax avoidance
• Akademický rok vypsání: 2017/2018
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. Petr Janský, M.Sc., Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 28.05.2019
• Datum zadání: 28.05.2019
• Datum a čas obhajoby: 27.01.2021 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26
• Datum odevzdání elektronické podoby: 05.01.2021
• Datum proběhlé obhajoby: 27.01.2021
• Oponenti: Mgr. Tereza Palanská

Zásady pro vypracování

Please email me if you were interested in writing a thesis on this topic.

The most relevant literature is this:
UNCTAD. (2015). World Investment Report 2015 - Reforming International Investment Governance. Geneva: United Nations.
Tørsløv, T., Wier, L., & Zucman, G. (2017). €600 Billion and Counting: Why High Tax Countries Let Tax Havens Flourish. Preliminary Slides.

Seznam odborné literatury

Bolwijn, R., Casella, B., & Rigo, D. (2018). Establishing the baseline: estimating the fiscal contribution of multinational enterprises. Transnational Corporations, 25(3), 111-143.

Cobham, A., & Janský, P. (2018). Global distribution of revenue loss from corporate tax avoidance: re‐estimation and country results. Journal of International Development, 30(2), 206-232.

Crivelli, E., De Mooij, R., & Keen, M. (2016). Base erosion, profit shifting and developing countries. FinanzArchiv: Public Finance Analysis, 72(3), 268-301.

Janský, P., & Palanský, M. (2018). Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment (No. 2018/21). WIDER Working Paper.

Johannesen, N., Tørsløv, T., & Wier, L. (2016). Are less developed countries more exposed to multinational tax avoidance? Method and evidence from micro-data (No. 2016/10). WIDER Working Paper.

UNCTAD. (2015). World Investment Report 2015 - Reforming International Investment Governance. New York, USA, and Geneva, Switzerland: United Nations Conference on Trade and Development.

Tørsløv, T. R., Wier, L. S., & Zucman, G. (2018). The missing profits of nations (No. w24701). National Bureau of Economic Research.

Předběžná náplň práce

Předběžná náplň práce v anglickém jazyce

Research question and motivation

Multinational Enterprises (MNEs) are responsible for a significant share of government revenues. According to UNCTAD (2015), the contribution of MNEs to government revenues is around 37 percent globally. Very intense debate is ongoing about a particular section of the MNEs contribution – taxes which account for 6 percent share of government revenues (UNCTAD, 2015). MNEs take into account several tax considerations to achieve the most tax-efficient decisions. This leads many companies to shift their profits into low-tax locations. To this strategy, we often refer to Base Erosion and Profit Shifting (BEPS). This phenomenon and its estimations are described very closely in literature (see for example: Johansson et al., 2015; Crivelli et al., 2016).

What literature does not cover to such an extent is the actual contribution of MNEs to national governments in taxes. This gap in literature will be the subject of the thesis when I will be asking the following question: how much in taxes do foreign affiliates of MNEs pay to national governments. This question is partly answered by Zucman et al. (2018). They point out that countries acting as tax havens as Luxemburg and Ireland collect a higher share of its national income in corporate tax revenues (7% and 5% respectively) than countries with the highest statutory tax rates as the United States or Germany (less than 3%). Another prominent work of Bolwijn et al. (2018) estimates the total contribution of foreign affiliates of MNEs to developing-countries. They find that foreign affiliates pay around $725 billion which corresponds roughly to 20% of government revenues in developing-countries. Additionally, they estimate the corporate tax component to be around $220 billion. However, these works have certain limitations which are addressed in the following section.


Contribution

As I have indicated in the previous section, my research question distinguishes itself from the prevailing literature on this topic. My thesis aims to put the estimation of BEPS into a wider context. The question of how much are governments losing from profit shifting remains partially open if we do not account for government tax revenues.

In my thesis, I would like to focus on a cross-country comparison of corporate tax revenues. This is something which is left unanswered by Bolwijn et al. (2018) as they focus only on tax revenue gains for developing-countries in total. On the other hand, Zucman et al. (2018) show cross-country comparison of corporate tax revenues but do not break down their results neither they provide any discussion over them. This may due to the secondary importance of this question in their research. Hence, I would like to use the methodology of Bolwijn et al. (2018) in which they decompose government revenue shares paid by foreign affiliates on various sources. Whereas Bolwijn et al. (2018) is focusing on developing countries in total, I would like to provide a calculation for each OECD country plus several countries which we may identify as tax havens. Subsequently, I would compare these numbers with the results of Zucman et al. (2018).


The second contribution of my thesis lies in regression analysis which I would like to employ in my thesis. I would like to set the calculated tax revenues of governments from MNEs (as a percentage of national income) as dependent variable allowing me to show the importance of various characteristics of countries depending on their tax corporate gains. Here, the approach differs from the literature that in most cases uses econometrics methods to examine the profit shifting of MNEs (Johansson et al., 2015; Crivelli et al., 2016; Janský & Palanský, 2018).


Methodology

Firstly, I focus on the estimation of the amount of taxes paid by MNEs in separate countries. I use the approach developed by Bolwijn et al. (2018). Particularly, I employ the method based on the foreign affiliates of MNEs. In order to get data, I exploit the ICTD Government Revenue Dataset that provides a very detailed coverage of government revenues and taxes at cross-country level. As an additional source of data may be used the database developed by Zucman et al. (2018).

In the second part, I employ the OLS model to analyse how the countries score on various independent variables based on their corporate tax revenue gains (as a percentage of national income). As a possible independent variable, I include the corporate tax rate in a given country. In addition, I might include a dummy variable which would identify countries as being tax havens or not as I expect to find out the significance of this dummy variable.


Outline

I start with the introduction, pointing out to my motivation and to the relevance of this topic. Second, I describe existing literature in this field looking on both BEPS and tax contribution of MNEs. I continue with research part of my thesis that would be divided into two sections. In the first section, I focus on the estimation of corporate tax revenues for individual countries. In the second section, I attempt to put the calculations into a broader context by running a linear regression analysis on corporate tax revenue gains of countries. Both parts are consisting of methodology, calculation part, and a quick summary of results. The research part is followed by the discussion over the results of both sections of my research and link to the existing literature will be provided. Finally, I state a conclusion of my thesis, point out to limitations and give suggestion for future research.