Quantifying the OECD BEPS indicators - an update to BEPS Action 11

Klein, Daniel ; Ludwig, Christopher A. ; Nicolay, Katharina ; Spengel, Christoph

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URL: https://madoc.bib.uni-mannheim.de/59004
URN: urn:nbn:de:bsz:180-madoc-590041
Document Type: Working paper
Year of publication: 2021
The title of a journal, publication series: ZEW Discussion Papers
Volume: 21-013
Place of publication: Mannheim
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSB (Business Studies)
Business School > Betriebswirtschaftliche Steuerlehre, insb. Unternehmensbesteuerung (Juniorprofessur) (Nicolay 2016-)
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel)
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H20 ,H25 , H26 , L25,
Keywords (English): Tax, tax policy , international taxation , BEPS , OECD , base erosion and profit shifting , business taxation , corporate tax regulations
Abstract: In its 2015 Final Report on “Measuring and Monitoring BEPS, Action 11”, the OECD introduced six indicators to quantify and evaluate base erosion and profit shifting (BEPS) activity over time. In this study, we revisit three selected indicators, provide a numerical update for recent periods using timely data and point out potential pitfalls when interpreting the indicator results. First, we transparently replicate Indicator 1, which intends to assess the disconnect between financial and real economic activities, and show a moderately decreasing trend of the indicator estimates. Second, replicating Indicator 4, which is based on a micro-data regression approach, we find that multinational firms have, on average, lower effective tax rates than domestic firms. We confirm this result using a state-of-the-art propensity score matching approach. Third, the replication of Indicator 5, which intends to capture profit shifting through intangibles, shows a stable trend of the annual indicator estimates that extends beyond the OECD’s sample period. Yet, the simplistic design of all indicators comes at the price of making them vulnerable to a number of confounding factors and economic effects that go beyond profit shifting. Overall, we conclude that the proposed indicators in the Final Report on BEPS Action 11 provide only limited information on the extent of BEPS.

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