Gaëtan J.A. Nicodème

European Commission | ec · Taxation and Customs Union (TAXUD)

The paper uses the computable general equilibrium model CORTAX to analyse the extent of base erosion and profit shifting (BEPS) in the EU, Japan and the US. Our approach estimates the direct fiscal losses of BEPS and accounts for the second round effects, in particular on the cost of capital and corporate investment. Our central estimates show that...

Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the period 2000-12 for the top 2,000 corporate research and development investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corpora...

This paper provides novel evidence on the multi-factor Effective Marginal Tax Rates (EMTRs) for a sample of 17 OECD countries and 11 manufacturing sectors. We use a single framework encompassing capital, labour and energy taxes. Our cross-country/cross-sector approach allows us analysing the contributions of these input factors to the effective tax...

The merits and demerits of financial transaction taxes have been heavily debated among economists, who remain divided on the effects of the taxes on trading volumes, market liquidity, and quotes volatility. In 2011, the European Commission put forth a legislative proposal for a common system of financial transaction taxes in the European Union. The...

Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the period 2000-2011 for the top 2,000 corporate research and development (R&D) investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of...

The financial crisis has triggered new debates on regulation and taxation of the financial sector. Economists and policy makers were challenged to understand the sequence of events and the complex interactions between financial markets and the real economy—often not captured by economic models. The literature on banking and finance has paid almost...

Analytical and empirical perspectives on the interplay of taxation and regulation in the financial sector. The global financial crisis has prompted economists to rethink fundamental questions on how governments should intervene in the financial sector. Many countries have already begun to reform the taxation and regulation of the financial sector—i...

The question of additional taxes on banking institutions has recently been debated. At the same time, financial regulation in the banking sector is undergoing many changes aimed at strengthening financial stability. This paper on the base of a micro-simulation model of the banking system, estimates the contributions to systemic risk of individual b...

During the period 2008-2012, EU governments incurred substantial costs bailing out banks. As corporate income taxation (CIT) in most countries still favors debt- over equity-financing, reducing or eliminating this debt bias would complement regulatory reforms reducing costs of financial crises. To estimate this effect, we use a two-step approach. F...

Economic Policy Coordination is at the heart of the European Semester and taxation is an essential element of this process both for fiscal consolidation and for policies to support jobs and growth. Five main priorities have been flagged by the European Commission in the area of taxation. Country-specific recommendations flow from those priorities,...

This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the internal and total leverage of foreign aff...

Economic Policy Coordination is at the heart of the European Semester and taxation is an essential element of this process both for fiscal consolidation and for policies to support jobs and growth. Five main priorities have been flagged by the European Commission in the area of taxation. Country-specific recommendations flow from those priorities,...

The tax deductibility of interest payments in most corporate income tax systems coupled with no such measure for equity financing creates economic distortions and exacerbates leverage. This paper discusses the consequences of this debt bias and the possible remedies. JEL classification: H25, H32, G21, G32

This paper assesses the effects of applying VAT or a sales tax on (intermediate or final) sales of the financial sector. It uses a CGE Model calibrated for a small open economy. It highlights the differentiated sectoral and redistributional effects of these taxes and shows the importance of the financial openness of the economy on these results.

Political constraints and incentives are the true driver of tax reforms. This paper reviews the political economics literature on personal income tax systems and reforms to see how political mechanisms help explain tax reforms. We take some of the implications of these theories to the data using LABREF, a database that identifies labor tax reforms...

The 2008 financial crisis has been the worst economic crisis since the Great Depression of 1929. It has been characterized by a housing bubble in a context of rapid credit expansion, high risk-taking, and exacerbated financial leverage, ending in deleveraging and a credit crunch when the bubble burst. This chapter discusses the interactions between...

There is often a gap between the prescriptions of an 'optimal' tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax systems and reforms to see whether political mechanisms allo...

The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, ending into deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between housing...

The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, leading to deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between tax polic...

The recent uncovered cases of tax evasion in the Euro- pean Union and the United States have revived the fi ght against harmful tax practices and spurred impressive progress in the adoption of international standards on information exchange. This paper reviews the theoretical and empirical literature on harmful tax practices and information exchang...

En la UE se ha estimado que los costes de la congesti�n representan el 2% de su PIB y que el coste de la poluci�n del aire y ruido supera el 0,6% del PIB, siendo alrededor del 90% de los mismos ocasionados por el transporte terrestre. Ante este hecho y el continuo aumento de la demanda del transporte privado frente al p�blico para los desplazamient...

This paper reviews the economic effects of the EU Savings Taxation Directive. The Directive aims at enabling taxation of foreign interest payments received by individuals in accordance with the rules of their State of residence. The data suggest that the Directive, which is based on automatic information exchange, has not led to major shifts in int...

As any non-lump-sum tax, corporate income taxation creates distortions in economic choices, reducing its efficiency. This paper reviews some of these domestic and international distortions and their most recent estimates from the economic literature. Distortions originating from income shifting between capital and labour sources, profit shifting ac...

Using a large international firm-level data set, we estimate separate effects of host and parent country taxation on the location decisions of multinational firms. Both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries. In fact, the impact of parent country taxation is estimated to be relatively l...

This paper measures the relative importance of quality and quantity effects of corporate taxation on foreign direct investment. Quantity is affected if corporate taxes reduce the equilibrium stock of foreign capital in a given country. Quality effects arise if taxes decrease the extent to which investment contributes to the corporate tax base and t...

In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on legal form of business to analyze income shifting via incorporation. The results sugge...

The governments of the European Union are facing important challenges that may impact both their need and their capacity to collect taxes. First, ageing will increase some social spending while reducing the potential of some tax bases such as labour. Second, globalisation has the potential to increase the mobility of capital and of high-skilled wor...

The paper presents the characteristic features of a pure dual income tax, discusses the current DIT system in the Nordic countries, which after recent reforms differs from the traditional DIT system implemented in the 1990s and describes the Cnossen agenda, which calls for the introduction of a dual income tax (DIT) as a first step towards a Europe...

This paper measures the relative importance of quality and quantity effects of corporate taxation on foreign direct investment. Quantity is affected if corporate taxes reduce the equilibrium stock of foreign capital in a given country. Quality effects arise if taxes decrease the extent to which investment contributes to the corporate tax base and t...

This paper has been awarded the Peggy and Richard Musgrave Award 2007 . See http://www.iipf.org/msgpz.htm. The discussion paper has resulted in a publication in International Tax and Public Finance .

This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter as mult...

The current debate in corporate taxation is focusing on leveling the tax playing field within the European Union for companies operating across-countries. However, tax burdens could also vary with the size of companies within the same country, raising the question whether large companies pay their share of the burden. This paper uses firm-level dat...

Product market reforms are microeconomic structural reforms that aim to improve the functioning of product markets by increasing competition amongst producers of goods and services. Theoretical models suggest that regulation and reforms which liberalise or improve the functioning of markets can positively affect productivity through three different...

This paper examines the responsiveness of external bank liabilities to deposit insurance policies for a sample of developed countries. External bank liabilities held by non-banks are found to increase after the introduction of explicit deposit insurance. Deposit insurance schemes tend to exclude interbank deposits from coverage and the response of...

In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on firm births and legal form of business to analyze income shifting via increased entrep...

We examine Italian inflation rates and the Phillips curve with a very long-run perspective, one that covers the entire existence of the Italian lira from political unification (1861) to Italy's entry in the European Monetary Union (end of 1998). We first study the volatility, persistence and stationarity of the Italian inflation rate over the long...

This paper investigates the impact of tax policy on international depositing. Non-bank international deposits are shown to be positively related to interest income taxes and to the presence of domestic bank interest reporting. This suggests that international deposits are in part intended to facilitate tax evasion. At present, only part of internat...

A vast and often confusing economics literature relates competition to investment in innovation. Following Joseph Schumpeter, one view is that monopoly and large scale promote investment in research and development by allowing a firm to capture a larger fraction of its benefits and by providing a more stable platform for a firm to invest in R&D. Ot...

Foreign ownership allows countries to effectively export part of their corporate tax burden. Hence, countries with high foreign ownership are expected to impose relatively high corporate taxes. The findings of this paper suggest that there indeed is an economically significant positive relationship between foreign ownership and tax burdens in Europ...

This Paper examines how international depositors respond to national deposit insurance policies. Countries with explicit deposit insurance are found to be relatively attractive to international non-bank depositors. Schemes characterized by co-insurance, a private administration, and a low deposit insurance premium appear to be particularly favoured...

This paper measures the relative importance of quality and quantity effects of corporate taxation on foreign direct investment. Quantity is affected if corporate taxes reduce the equilibrium stock of foreign capital in a given country. Quality effects arise if taxes decrease the extent to which investment contributes to the corporate tax base and t...

This paper presents a model that relates a multinational firm's optimal debt policy to taxation and to non-tax factors such as the desire to prevent bankruptcy. The model yields the predictions that a multinational's indebtedness in a country depends on national tax rates and differences between national and foreign tax rates. These differences mat...

The current debate in corporate taxation is focussing on leveling the tax playing field within the European Union in order to allow companies incorporated in different countries to face the same competitive conditions. However, various elements of corporate tax rules may discriminate against companies registered in the same country but having diffe...