TY - JOUR
T1 - Taxing the Multinational Enterprise
T2 - On the Forced Redesign of Global Value Chains and other Inefficiencies
AU - Foss, Nicolai J.
AU - Mudambi, Ram
AU - Murtinu, Samuele
PY - 2019/12
Y1 - 2019/12
N2 - The taxation of the multinational enterprise (MNE) has been a continuing concern for policymakers. We argue that the changing nature of the mobile MNE (e.g., its improved ability to fine-slice the value chain and disperse it geographically) makes it increasingly important to rethink current tax policies. First, there should be more focus on the inefficiencies that arise when taxation leads to the inefficient location of MNE activities. Thus, MNEs may shift activities to low-tax jurisdictions that offer lucrative pecuniary and non-pecuniary incentives, but do not enable their investments to maximize their contribution to global value creation. Second, international tax regimes should ensure that MNEs pay for their consumption of local public goods, and public finance scholars have long known that the taxation-based distortions are minimized when the tax objects are immobile. However, the bulk of current tax policies are aimed at corporate profits that are both poor proxies for the consumption of local public goods as well as extremely mobile. Integrating theory from international business, public finance and economic geography, our analysis demonstrates that moving the incidence of taxation from corporate profits to dividends and consumption would unambiguously improve both wealth creation and efficiency.
AB - The taxation of the multinational enterprise (MNE) has been a continuing concern for policymakers. We argue that the changing nature of the mobile MNE (e.g., its improved ability to fine-slice the value chain and disperse it geographically) makes it increasingly important to rethink current tax policies. First, there should be more focus on the inefficiencies that arise when taxation leads to the inefficient location of MNE activities. Thus, MNEs may shift activities to low-tax jurisdictions that offer lucrative pecuniary and non-pecuniary incentives, but do not enable their investments to maximize their contribution to global value creation. Second, international tax regimes should ensure that MNEs pay for their consumption of local public goods, and public finance scholars have long known that the taxation-based distortions are minimized when the tax objects are immobile. However, the bulk of current tax policies are aimed at corporate profits that are both poor proxies for the consumption of local public goods as well as extremely mobile. Integrating theory from international business, public finance and economic geography, our analysis demonstrates that moving the incidence of taxation from corporate profits to dividends and consumption would unambiguously improve both wealth creation and efficiency.
KW - Finance
KW - Taxation
KW - Corporate profit taxation
KW - Transfer pricing
KW - Public goods
KW - Finance
KW - Taxation
KW - Corporate profit taxation
KW - Transfer pricing
KW - Public goods
UR - https://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=954921364516&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes
U2 - 10.1057/s41267-018-0159-3
DO - 10.1057/s41267-018-0159-3
M3 - Journal article
VL - 50
SP - 1644
EP - 1655
JO - Journal of International Business Studies
JF - Journal of International Business Studies
SN - 0047-2506
IS - 9
ER -