Location-sector analysis of international profit shifting on a multilayer ownership-tax network

Tembo Nakamoto (), Odile Rouhban () and Yuichi Ikeda ()
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Tembo Nakamoto: Kyoto University
Odile Rouhban: Kyoto University
Yuichi Ikeda: Kyoto University

Evolutionary and Institutional Economics Review, 2020, vol. 17, issue 1, No 13, 219-241

Abstract: Abstract Currently all countries including developing countries are expected to utilize their own tax revenues and carry out their own development for solving poverty in their countries. However, developing countries cannot earn tax revenues like developed countries partly because they do not have effective countermeasures against international tax avoidance. Our analysis focuses on treaty shopping among various ways to conduct international tax avoidance because tax revenues of developing countries have been heavily damaged through treaty shopping. To analyze the location and sector of conduit firms likely to be used for treaty shopping, we constructed a multilayer ownership-tax network and proposed multilayer centrality. Because multilayer centrality can consider not only the value flowing in the ownership network but also the withholding tax rate, it is expected to grasp precisely the locations and sectors of conduit firms established for the purpose of treaty shopping. Our analysis shows that firms in the sectors of Finance and Insurance and Wholesale and Retail trade etc. are involved with treaty shopping. We suggest that developing countries make a clause focusing on these sectors in the tax treaties they conclude.

Keywords: Network analysis; Multilayer network; International taxation; Profit shifting; Treaty shopping (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40844-019-00147-z

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