Optimal fiscal barriers to international economic integration in the presence of tax havens

• 成果类型: Article
• 署名作者: Johannesen, Niels
• 署名单位: University of Copenhagen
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2011.12.008
• 发表日期: 2012
• 页码: 400-416
• 关键词: Tax competition; Profit shifting; tax havens; Tax planning; Withholding taxes; Economic integration

摘要

This paper develops a model where firms can shift profits to tax havens by means of intra-firm loans and countries can protect themselves against profit shifting by taxing cross-border interest flows. The model considers two countries with a scope for welfare improving economic integration. The first-best tax system has two important characteristics: (i) the tax rate on interest flows to the other country is zero to ensure the optimal level of economic integration; (ii) the tax rate on interest flows to tax havens is high enough to deter profit shifting to tax havens. In second-best environments, countries face a trade-off between economic integration and protection against tax havens, which causes protection to be suboptimally low. The key to the result is that economic integration makes it easier for multinational firms to circumvent taxes on interest payments to tax havens with conduit loans. The paper thus provides an explanation for the empirical puzzle that many countries do not tax interest payments to tax havens despite the scope for profit shifting. (C) 2011 Elsevier B.V. All rights reserved.