Taxing Multinational Enterprises: A Theory-Based Approach to Reform, CESifo Working Paper 10119, November 2022
Abstract: Almost 140 countries have agreed to reallocate the rights to tax international corporate profits and to introduce minimum tax rates. The agreed plan is the product of pragmatism and a search for consensus, but ambitious. It includes steps towards unitary taxation to be established by a multilateral convention that the world has not yet seen in comparable format. This paper argues for a reform that retains separate entity accounting and addresses the flaws in the current system of corporate taxation at their root rather than merely fixing symptoms. To this end, a reform aimed specifically at the rules governing the taxation of intangible assets is recommended.
Granting Market Countries the Right to Tax Profit without Physical Nexus, Discussion Paper, June, 2022
Abstract: Almost 140 countries have accepted the OECD invitation to reform the taxation of multinational enterprises (MNEs). One of two reform pillars aims at granting market countries the right to tax supernormal (“residual”) profit without requiring physical nexus. This paper examines the method of implementation proposed by the OECD and compares it with various discarded options. It concludes that intercountry tax equity and allocative efficiency speak against the OECD proposal to use a sales-based formula for allocating an MNE’s group profit. Simply splitting each market country’s residual profit contribution by an MNE-independent key is to be preferred. An even more fundamental argument in favor of residual profit splitting (RPS) is practicability of negotiation. RPS is implementable within the well-established tradition of separate entity assessment. By contrast, the OECD proposal calls for steps toward unitary taxation, which could still prove to be a daunting hurdle in the international search for consensus.
Taxing the Residual Profit of Multinational Enterprises: A Critique of Formulaic Apportionment and a Proposal, EconPol Policy Brief 35, May 2021
Abstract: According to plans put forward by the OECD/G20 Inclusive Framework on BEPS, a share of residual profit earned by eligible MNEs is to be taxed by market jurisdictions. For this purpose, revenue-based formulaic apportionment of residual profit is proposed. This note argues against the use of a rule requiring the multilateral assessment of MNEs’ worldwide profit and recommends an alternative method of sharing taxing rights with market jurisdictions. The proposed method relies on unilateral profit splitting and is suggested by the application of Shapley value theory to the fair and equitable division of taxing rights between cooperating jurisdictions.
A Demand-Oriented Approach to Health Care Capacity Planning, IZA DP No. 14860, jointly with Danny Wende and Thomas Kopetsch
Abstract: The planning practice of health care capacities suffers from sectoral and regional constraints and it remains difficult to ensure an equal access for patients. Moreover, standard planning approaches lack the choice-theoretic grounding necessary for making reliable predictions of the demand and competition for supplied care. This paper presents a general equilibrium model designed to overcome such shortcomings. The derived metric of access to care is demand-oriented measuring the time patients waste seeking treatment. It contrasts with the usual metrics based on the floating catchment area (FCA) method, which suffer from supply bias and ad hoc specification. The approach is illustrated using Germany as an example. Much in line with official planning figures, overcapacities are shown to exist in all specialities. However, a closer look at the data provides a differentiated picture. Overcapacities are typical for urban regions and they go hand in hand with supply deficits in rural areas, albeit to a specialty-specific extent. In smaller towns, the supply is more in line with demand.