Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102750
Authors: 
Finke, Katharina
Fuest, Clemens
Nusser, Hannah
Spengel, Christoph
Year of Publication: 
2014
Series/Report no.: 
ZEW Discussion Papers 14-073
Abstract: 
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.
Subjects: 
profit shifting
multinational firm
source taxation
tax policy
tax reform
optimal taxation
JEL: 
H20
H21
H32
F23
K34
Document Type: 
Working Paper

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