International Tax

Low-income countries are more dependent on corporate income tax revenue than richer countries, and at the same time, disproportionately affected by multinational tax avoidance. Our research on this theme investigates ways in which developing countries can protect their tax bases, including through simplified transfer pricing methods and improved tax treaty policies. It also examines the challenges and opportunities developing countries face from their participation in international tax negotiations.

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Publications:

December 2021
Tax Treaties and Enterprise Outcomes: Evidence Across Developing African Countries
by Uchenna Efobi & Oluwabunmi O. Adejumo

Studies have noted the possibility of tax treaties constraining the tax policy autonomy of developing countries, while their impact on enterprise development within host economies remains an empirical issue. This study examines the effects and heterogeneous differences in estimated effects of tax treaties on small businesses in developing countries that agree to these agreements. The…

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November 2021
Taxing Profits from International Maritime Shipping in Africa: Past, Present and Future of UN Model Article 8 (Alternative B)
by Bob Michel & Tatiana Falcão

International maritime shipping is an essential part of global business. Since the establishment of the current international tax regime in the 1920s, there has been a consensus that profits generated by this business are taxable only in the residence state – the state where the shipowners are located. Source states – the port states where…

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November 2021
Tax Treaty Aggressiveness: Who is Undermining Taxing Rights in Africa?
by Lucas Millán-Narotzky, Javier García-Bernardo, Maïmouna Diakité & Markus Meinzer

Tax avoidance strategies by multinational companies rely heavily on tax treaties. Multinational companies can relocate financial activities across countries to ensure the applicability of the most beneficial tax treaties. This ‘treaty shopping’ can be particularly harmful to African countries, impairing their efforts for domestic resource mobilisation and achieving sustainable development goals. In this paper, we…

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Using New Data to Support Tax Treaty Negotiation
by Martin Hearson, Marco Carreras & Anna Custers

This paper introduces the new Tax Treaties Explorer dataset, developed with support from the World Bank and the G-24, and illustrates its use for research by tax treaty negotiators, policy makers, and researchers. The new dataset provides a rich source of data to reexamine existing tax treaty policy, inform negotiation positions, and assess treaty networks….

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July 2021
The Contested Shaping of International Tax Rules: The Growth of Services and the Revival of Fractional Apportionment
by Sol Picciotto

The digitalisation of the economy has spotlighted fundamental flaws in international tax rules, which have been exacerbated since the 1970s with the wider shift to the services economy and the growth of international services. These systemic flaws have been more evident from the perspective of countries that are mainly importers of services that have tried…

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Tax Treaties of G-24 Countries: Analysis Using a New Dataset
by Martin Hearson

Between them, the G-24 countries have over 800 bilateral tax treaties in force. Each treaty limits states’ ability to tax income earned within their borders by investors and service providers from the treaty partner. As well as constraining states’ ‘taxing rights’, they are also vulnerable to abuse through ‘treaty shopping’. A new dataset of developing…

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“An Unacceptable Surrender of Fiscal Sovereignty:” The Neoliberal Turn to International Tax Arbitration
by Martin Hearson & Todd Tucker

This article examines the growth of inequality over the past half century, which is closely connected to the rise of neoliberal policies and institutions and the latter of which shield capital from state actions that might limit wealth accumulation. Economic nationalism since the global financial crisis has slowed or even reversed this, yet this same…

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May 2021
Imposing Standards: The North-South Dimension to Global Tax Politics
by Martin Hearson

In Imposing Standards: The North-South Dimension to Global Tax Politics, ICTD Research Fellow Martin Hearson shifts the focus of political rhetoric regarding international tax rules from tax havens and the Global North to the damaging impact of this regime on the Global South. Even when not exploited by tax dodgers, international tax standards place severe limits…

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March 2021
Profit Shifting of Multinational Corporations Worldwide
by Javier Garcia-Bernardo & Petr Janský

Multinational corporations (MNCs) avoid taxes by shifting their profits from countries where real activity takes place towards tax havens, depriving governments worldwide of billions of tax revenue. Earlier research investigating the scale and distribution of profit shifting has faced methodological and data challenges, both of which we address. First, we propose a logarithmic function to…

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December 2020
At the Table, Off the Menu? Assessing the Participation of Lower-Income Countries in Global Tax Negotiations
by Rasmus Corlin Christensen, Martin Hearson & Tovony Randriamanalina

For half a century, the most influential international rules and standards for taxing multinational corporations have been formulated by a select group of developed countries, the OECD, with lower-income countries on the outside. Since 2013, this has changed: decision making at the OECD has moved to the ‘Inclusive Framework’ (IF), which today encompasses 137 jurisdictions….

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Blogs:

November 2021
by Martin Hearson

G20 leaders are celebrating a new agreement to strengthen the taxation of tech firms and create a global minimum tax, reached by 136 jurisdictions and brokered at the OECD. Numerous lower-income countries have expressed frustration that their influence was marginal and their demands rejected, but many have nonetheless signed up. Historical legacies These negotiations reflect…

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October 2021
by Giulia Mascagni & Rhiannon McCluskey

The recent Pandora Papers leak has exposed yet again the scandal of how the world’s rich and powerful hide their wealth and avoid paying taxes. The revelations are particularly galling during a global pandemic, when tax revenue to invest in public services and social safety nets is more needed than ever. The pandemic has pushed…

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October 2021
by Bob Michel & Tatiana Falcão

From October 19th to 28th, the 23rd Session of the United Nations Committee of Experts on International Cooperation in Tax Matters (‘the UN Tax Committee’) is taking place. It is the first meeting of the committee’s new membership, at which those members will determine the plan of work for their four-year term. A per usual,…

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Research Projects:

Current Project
National Authority and Contestation in Global Tax Governance: Transfer Pricing Regulations in Sub Sahara Africa
Project Researchers: Cassandra Vet & Danny Cassimon

This project revolves around the question of how OECD transfer pricing regimes gained national authority on the intersection of a global push for harmonisation and the questionable efficacy of national transfer pricing audits. This way, the project brings relevant knowledge on the emergence, authority and efficiency of the SSH-African regimes to support the development of…

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Past Project
Tax Treaties and High Growth Entrepreneurship: Firm-Level Evidence across Developing African Countries
Project Researchers: Uchenna Efobi, Covenant University & Oluwabunmi Adejumo

This research sets out to answer two main research questions. They include: What is the impact of Ratified Tax Treaties on small business development in the African region? Are there heterogeneous differences in this impact when considering the treaty partner, the type of treaty, and the proportion of foreign ownership of small businesses in the…

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Current Project
Tax Treaty Aggressiveness: Who is Undermining Taxing Rights in Africa?
Project Researchers: Markus Meinzer, Maimouna Diakite, Lucas Millan & Mirsolav Palansky

Tax avoidance strategies by multinational companies rely heavily on tax treaties. Multinational companies can relocate financial activities across countries to ensure the applicability of the most beneficial tax treaties. This ‘treaty shopping’ can be particularly harmful to African countries, impairing their efforts to mobilise domestic revenues. This research project will analyse the extent to which…

Project Outputs

Working Paper
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Past Project
Effective Tax Rates of Multinational Enterprises in Low- and Middle-Income Countries: Evidence from Country by Country Reporting
Project Researchers: Petr Janský & Javier García Bernardo

This project will look at the economic activities and taxes reported by large US MNCs in low- and middle-income countries – in contrast with other countries and other data sources. The researchers will present all the information in a paper that could be published in an ICTD working paper series and submitted to a leading…

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Past Project
Taxing international shipping in Africa: the source taxation alternative
Project Researchers: Tatiana Falcao, European University Institute & Bob Michel

The central question we want to address is whether African countries should consider taxing profits from international shipping derived by non-resident shipping companies and which are the policy options available for them to do so. We believe the question fits in with current calls in international tax demanding for the re-evaluation of the century-old rules…

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