Global Firms, National Corporate Taxes: An Evolution of Incompatibility

Shafik Hebous

No 2020/178, IMF Working Papers from International Monetary Fund

Abstract: How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework? MNEs, and firms with market power, are not new phenomena, nor is the corporate income tax, which dates to the early 20th century. This prompts the question, what is distinctly new (about multinational enterprises)—if anything—that has triggered unprecedented recent concerns about vulnerabilities in international tax arrangements and the taxation of MNEs? This paper presents a set of empirical observations and a synthesis of strands of the literature to answer this question. A key message is that MNEs of the 21st century operate differently from prior periods and have evolved to become global firms—with important tax ramifications. The fragility of international tax arrangements was present at the outset of designing international tax rules, but the challenges have drastically intensified with the global integration of business, the increased trade in hard-to-price services and intangibles, and the rapid growth of the digital economy.

Keywords: WP; company; multinational enterprise; conduit company; holding company; business organization; Multinational enterprises; global firm; tax avoidance; international tax; management company; credit card company; financing company; Corporate income tax; Foreign direct investment; Double taxation; Trade in services; Personal income; Global (search for similar items in EconPapers)
Pages: 27
Date: 2020-09-04
New Economics Papers: this item is included in nep-acc, nep-int and nep-pbe
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Working Paper: Global Firms, National Corporate Taxes: An Evolution of Incompatibility (2020)
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