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.

Publications:

“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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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

Since 2013, the formal structure of global corporate tax policymaking at the OECD has changed. Decisions are no longer made by 37 OECD members, but by 137 countries from all regions and levels of development through the ‘Inclusive Framework’ (IF). Official documentation emphasises that all countries participate on an ‘equal footing’, but some participants and…

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Tax Amnesties in Africa: An Analysis of the Voluntary Disclosure Programme in Uganda
by Solomon Rukundo

Tax amnesties have taken centre stage as a compliance tool in recent years. The OECD estimates that since 2009 tax amnesties in 40 jurisdictions have resulted in the collection of an additional €102 billion in tax revenue. A number of African countries have introduced tax amnesties in the last decade, including Nigeria, Namibia, South Africa…

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December 2020
A Simplified Method for Taxing Multinationals for Developing Countries: Building on the ‘Amount B’ Proposal to Repair the Transactional Net Margin Method
by Michael C. Durst

The OECD’s Inclusive Framework is currently considering two substantial tax reform plans, Pillar One and Pillar Two. These are intended to develop a global consensus on methods for taxing the digitalised economy, but in their current form would have broad implications for international tax architecture in general, and particularly for the control of base erosion…

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December 2020
The Taxation of the Digitalised Economy: An African Study
by Mustapha Ndajiwo

African economies need adequate revenues for development, but weak tax laws, illicit financial flows and aggressive tax planning have made it difficult for them to attain their full potential in raising revenue. Furthermore, the advent of digitalised business models, although with considerable potential to improve trade in Africa, has greatly exacerbated the two central challenges…

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August 2020
A Simplified Method for Taxing Multinationals for Developing Countries: Building on the ‘Amount B’ Proposal to Repair the Transactional Net Margin Method
by Michael C. Durst

This paper considers whether the ‘Amount B’ proposal currently being negotiated in the Inclusive Framework, for the attribution of fixed remuneration for the ‘routine’ distribution and marketing activities of MNE affiliates, may offer a useful template for the re-working of the widely used ‘transactional net margin’ transfer pricing method (TNMM). The TNMM has for years…

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The Appropriateness of International Tax Norms to Developing Country Contexts
by Martin Hearson, Joy W. Ndubai & Tovony Randriamanalina

This FACTI Background Paper considers six sets of international tax norms: tax treaties (often known as double taxation agreements), transfer pricing rules, mutual assistance agreements between states, state-state and investor-state tax dispute resolution mechanisms, coercive mechanisms that oblige states to adopt international tax norms or face sanctions from powerful states, and finally the embryonic framework…

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Blogs:

June 2021
by Rasmus Corlin Christensen

This weekend, the Group of Seven (G7) finance ministers completed a “historic global tax agreement,” a “seismic” and “landmark deal,” that will create an international tax system “fit for the 21st century.” Or so, at least, is the narrative presented by some of the G7 folk (most prominently UK chancellor Rishi Sunak), which has been…

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May 2021
by Sol Picciotto

Reforming global corporate taxation Proposals from the Biden administration have injected new life into the international process to reform the taxation of multinational enterprises (MNEs), but achieving a fair and effective outcome remains problematic. Greater attention must be paid to the perspective of lower-income countries and proposals they have made for more comprehensive reforms that…

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April 2021
by Michael Durst

The Biden Administration’s proposal On March 31, the Biden Administration proposed, as part of its “Made in America” tax proposals, a 21% minimum tax on affiliates of US-owned multinationals operating in countries around the world. Under the proposal, if a US-owned company operating in a foreign jurisdiction were to succeed, perhaps through avoidance devices or…

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Research Projects:

Past 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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Past Project
Double Tax Treaty Aggressiveness: Who is bringing down withholding taxes in Africa?
Project Researchers: Markus Meinzer, Maimouna Diakite, Lucas Millan & Mirsolav Palansky

This paper asks two interrelated questions, one focusing on a substantive issue, and the other focusing on methodological issues. First, what countries are most aggressive in clipping taxing rights through tax treaties in Africa? Second, how sensitive are the findings to different measures of treaty content and aggressiveness? In the context of efforts to mobilise…

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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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