Arbeitspapier
Extending taxation of interest and royalty income at source: An option to limit base erosion and profit shifting?
This paper discusses tax policy measures to reduce corporate tax avoidance by extending taxation in the source country without imposing double taxation. We focus on four options: Bilaterally restricting interest and royalty deductibility, introducing an inverted tax credit system, levying withholding taxes on all interest and royalty payments and levying withholding taxes as an anti-avoidance regulation. We calculate the tax revenue effects of introducing a minimum withholding tax on royalty payments and an inverted tax credit. For the withholding tax we find that the US would suffer the greatest tax revenue losses, while some other countries would increase their tax revenue. In general, gains and losses depend not only on net balances in royalty income flows but also on withholding tax and credit rules under the status quo. The inverted tax credit would increase tax revenue in particular in high-tax countries. Revenue redistribution would only arise if withholding taxes were replaced by the inverted credit.
- Language
-
Englisch
- Bibliographic citation
-
Series: ZEW Discussion Papers ; No. 14-073
- Classification
-
Wirtschaft
Taxation, Subsidies, and Revenue: General
Taxation and Subsidies: Efficiency; Optimal Taxation
Fiscal Policies and Behavior of Economic Agents: Firm
Multinational Firms; International Business
Tax Law
- Subject
-
profit shifting
multinational firm
source taxation
tax policy
tax reform
optimal taxation
- Event
-
Geistige Schöpfung
- (who)
-
Finke, Katharina
Fuest, Clemens
Nusser, Hannah
Spengel, Christoph
- Event
-
Veröffentlichung
- (who)
-
Zentrum für Europäische Wirtschaftsforschung (ZEW)
- (where)
-
Mannheim
- (when)
-
2014
- Handle
- URN
-
urn:nbn:de:bsz:180-madoc-371828
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Finke, Katharina
- Fuest, Clemens
- Nusser, Hannah
- Spengel, Christoph
- Zentrum für Europäische Wirtschaftsforschung (ZEW)
Time of origin
- 2014
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