Nominal vs. Effective Corporate Tax Rates Applied by Multinational Enterprises

13-10-2015

This paper forms part of a series of analytical pieces on various key tax issues, prepared by Policy Department A at the request of the TAXE Special Committee of the European Parliament. The international tax system is at a critical juncture. The G20 and the OECD are leading an important international project for its reform: the Base Erosion and Profit Shifting (BEPS). The project was launched following unprecedented public and political anger at the aggressive tax planning activities of multinational enterprises (MNE). Reform at the EU level is also underway; both in parallel with the BEPS project but also beyond it. This paper provides some background to these developments. In particular, it explains a number of significant aggressive tax planning techniques and mechanisms used by MNEs and provides an overview of the empirical evidence on the scale of this behaviour. In other words, this paper looks at how and how much aggressive tax planning by MNEs takes place. The paper also provides a concise overview of the basic structure of the international tax system as well as the factors undermining it.

This paper forms part of a series of analytical pieces on various key tax issues, prepared by Policy Department A at the request of the TAXE Special Committee of the European Parliament. The international tax system is at a critical juncture. The G20 and the OECD are leading an important international project for its reform: the Base Erosion and Profit Shifting (BEPS). The project was launched following unprecedented public and political anger at the aggressive tax planning activities of multinational enterprises (MNE). Reform at the EU level is also underway; both in parallel with the BEPS project but also beyond it. This paper provides some background to these developments. In particular, it explains a number of significant aggressive tax planning techniques and mechanisms used by MNEs and provides an overview of the empirical evidence on the scale of this behaviour. In other words, this paper looks at how and how much aggressive tax planning by MNEs takes place. The paper also provides a concise overview of the basic structure of the international tax system as well as the factors undermining it.