The International Monetary Fund (IMF) published a working paper "International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots". This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations.
The paper surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. Based on literatures reviewed, the paper points out that on average, a 1 percentage-point lower corporate tax rate will expand before-tax income by 1 percent—an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. Based on its study, the paper concludes that:
The literature on tax avoidance also has several unresolved puzzles and blind spots that require further research. The first one is ‘large aggregate effects’ versus “small micro effects’. In particular, the meta regressions suggest that firm-responses reflected in aggregated data are substantially larger than in micro data, thereby controlling for several study attributes that may confound the estimated semi- elasticities in primary studies. Another puzzle regards debt shifting. The literature directly exploring the extent of debt shifting finds a robust significant impact of corporate tax differences onintracompany debt.
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