Clever planning or unfair play? Exploring the economic and statistical impacts of tax avoidance by multinationals

Alessio Anzuini, Elena Pisano (), Luca Rossi, Alessandra Sanelli (), Enrico Tosti and Ernesto Zangari ()
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Elena Pisano: Bank of Italy
Alessandra Sanelli: Bank of Italy
Ernesto Zangari: Bank of Italy

No 799, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Following the 2007-8 financial crisis, increasing concern surrounding tax avoidance by multinational enterprises (MNEs) drew attention from academia and policy circles alike. Profit shifting practices not only impact revenue and fairness, but also exacerbate global tax competition and generate economic distortions. Tax avoidance by MNEs is achieved through several complex strategies, in which tax havens and offshore financial centres typically play a prominent role. Policy initiatives adopted under the aegis of the G20 and the OECD, including the BEPS plan and the Two-Pillar agreement, attempt to address this issue, but their final impact remains uncertain. The interplay between the tax strategies of MNEs and governments' efforts to attract investments also distorts external economic statistics. Indeed, residency-based reporting blurs the distinction between profit-driven and genuine investments. Recent economic literature has developed methods to better allocate foreign direct investments (FDIs) and portfolio investments, revealing a different picture of international capital flows, both internationally and in Italy, where external statistics show a high incidence of tax havens.

Keywords: profit shifting; tax avoidance; BEPS; Two Pillars; global minimum tax; official statistics; cross-border investments (search for similar items in EconPapers)
JEL-codes: F53 H2 K20 K34 M48 (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-acc, nep-int and nep-pbe
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Citations: View citations in EconPapers (1)

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