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Using data from the Stockholm Stock Exchange we study the value added by (as distinct from the abnormal returns to) analysts’ recommendations. Recommending brokers’ clients trade profitably around positive recommendations at the expense of the clients of brokers without analyst coverage. Significant profits come from transactions before recommendation dates. Value added is greatest for upgrades to large caps. Value added from downgrades and from recommendations for small caps is largely insignificant despite high abnormal returns to these categories. Brokers making profitable recommendations for their clients are rewarded by abnormal trading volumes, and capture much of the value added themselves.

Many applications require forecasts for a hierarchy comprising a set of time series along with aggregates of subsets of these series. Hierarchical forecasting require not only good prediction accuracy at each level of the hierarchy, but also the coherency between different levels — the property that forecasts add up appropriately across the hierarchy. A fundamental limitation of prior research is the focus on forecasting the mean of each time series. We consider the situation where probabilistic forecasts are needed for each series in the hierarchy, and propose an algorithm to compute predictive distributions rather than mean forecasts only. Our algorithm has the advantage of synthesizing information from different levels in the hierarchy through a sparse forecast combination and a probabilistic hierarchical aggregation. We evaluate the accuracy of our forecasting algorithm on both simulated data and large-scale electricity smart meter data. The results show consistent performance gains compared to state-of-the art methods.

This paper analyzes whether fund valuations produced by private equity managers are biased predictors of future discounted cash flows (DCF). Our research is based on an extensive set of timed cash flows and reported net asset values (NAVs) that relates to 483 funds spanning 1988-2011. Using an ex ante lens, we find that, on average, reported NAVs converge on the future DCF early in the life of the fund. This result is particularly interesting to investors for whom unbiased asset valuations are important in keeping portfolios optimally allocated. In addition, findings indicate that although NAVs generally are more conservative in the first half of our sample period, NAVs for venture capital funds tend to overstate economic value after 1999 following the bursting of the tech bubble. We also find some evidence that private equity managers of funds that perform less well use their discretion over asset valuations to keep asset values high during fundraising periods, as well as at the end of the fund life, which can result in higher management fees.

Research on reputation building suggests that it is linked to an organization’s identity. For example, Fombrun (2012) argues that companies with strong identities are more likely to gain attention and appreciation. While it is accepted that identity and reputation differ, we know little about how organizations manage the tensions that this may create. How, therefore, do organizations respond when identity claims are inconsistent with reputation? To examine this question we focus on a large management consulting firm. We contribute to reputation theory by identifying three mechanisms focused on work winning and execution that, collectively, help employees to bridge the gap between claimed identity and reputation. We suggest that these mechanisms help sustain the organization’s identity in the face of conflicting reputational evidence.

The presentation is based on a Centre report which is available online, 'HMRC's relationship with business', draft report, 19/06/2014.

This longitudinal study of professional service firms (PSFs) examines the linkage mechanisms through which high performance work systems (HPWS) influence firm performance. Two intervening mechanisms are theorized and examined. They are: (1) the resources that HPWS create, and (2) the uses to which both HPWS and these resources can be put. The resources we investigate are human, social and organizational capital, all of particular importance in knowledge-based professional service firms. The two uses which the resources facilitate and enable are the exploitation of the firm’s current capabilities and client base and the exploration of new alternative opportunities. We thus theorize a linkage model that incorporates HPWS-resources-uses-performance. Results from 93 Irish accounting firms support the mediation mechanisms in our linkage model wherein resources and the uses made of them link HPWS to firm performance. Implications are presented for theory and practice.

Presentation based on existing published paper (R. de la Feria and R. Krever, “Ending VAT exemptions: towards a post-modern VAT” in R. de la Feria (ed.), VAT Exemptions: Consequences and Design Alternatives (The Hague: Kluwer Law International, 2013).

Based on unpublished paper (M. Devereux and R. de la Feria, “Designing and implementing a Destination-Based Corporate Tax”).

Business taxation is at the heart of the political agenda. The 2014 G20 agenda notes that “in recent years international tax laws have failed to keep pace with changes in the global business environment, particularly with the rapid growth of the global economy, meaning that multinational corporations aren’t necessarily taxed the way they should be”.

In the UK and elsewhere in Europe, and the USA, austerity has resulted in a heightened focus on collecting revenues from business and there is an active debate on business taxation in the media, legislatures and from NGOs and the public. The OECD Base Erosion and Profit Shifting Action Plan seeks to address these concerns. At the same time, corporation tax rates are falling worldwide and many governments are seeking to keep their tax systems competitive.

Professor Judith Freedman will give a UK and European perspective on the debate and then discuss this, together with the view from Hong Kong and China, with a panel of experts including Professor Richard Cullen, Wilson Chow and Dr Doreen Qiu.

The presentation is based on a book chapter co-authored with Dr Giorgia Maffini, Centre for Business Taxation. The book is to be published by the IBFD in the near future.

Based on unpublished paper (M. Devereux and R. de la Feria, “Designing and implementing a Destination-Based Corporate Tax”).

There is a widespread perception, often aired by politicians, the media and NGOs, that multi-national companies are not paying their ‘fair share’ of tax. The G20 have made the issue of tax base erosion and profit shifting (BEPS) a priority and tasked the OECD with taking action to bring international tax rules into the 21st century. At the same time, governments across the world aim to make their economies more competitive and attractive to inward investors. There is a clear policy tension. In this age of globalisation and digital commerce, how should we determine how much and what kind of tax corporations should pay and where they should pay it? The OECD promises a progress report in September 2014 but some have suggested that this will only result in patching a structurally unsound system. Do we need more radical reform?

Organisations today operate in a world fraught with threats, including “script kiddies”, hackers, hacktivists and advanced persistent threats. Although these threats can be harmful to an enterprise, a potentially more devastating and anecdotally more likely threat is that of the malicious insider. These trusted individuals have access to valuable company systems and data, and are well placed to undermine security measures and to attack their employers. In this paper, we engage in a critical reflection on the insider threat in order to better understand the nature of attacks, associated human factors, perceptions of threats, and detection approaches. We differentiate our work from other contributions by moving away from a purely academic perspective, and instead focus on distilling industrial reports (i.e., those that capture practitioners’ experiences and feedback) and case studies in order to truly appreciate how insider attacks occur in practice and how viable preventative solutions may be developed.

This study examines the ways in which fields are structured, and explores the particular dynamics that foster homogeneity and heterogeneity in actors' behaviour. we found that actors' understansing of the field varied along six dimensions. These dimensions were interpreted based upon the actor's perceived position in the field. As a result, actors' reactions to ongoing events varied too. Thus, this paper uncovers various factors shaping homogeneity or, conversely, heterogeneity in actors' understandings of, and subsequent reactions tot ongoing events. In doing so, we contribute to out understanding of what fields are, and how their specific characteristics may affect actors' response.

The academic literature and popular press has chronicled large IT project failures for the last 40 years. Two points of contention surround this debate. First, quantitative studies found mixed support of a wide-spread crisis, questioning the representativeness of failure cases. Second, organizational theories disagreed on underlying assumptions about the nature of uncertainty, in particular about stability, locus of control, and controllability of the causes of IT project disasters. To advance the understanding of these two gaps four hypotheses were tested with a sample of 4,227 IT projects. The findings showed that outliers are stable phenomena following power laws, occurrence and impact of outliers differs between public and private sector, benefits management is associated with thinner tails and lower risk, and agile delivery methods do not statistically significantly influence the thickness of the tails. In sum, outliers are stable and non-random phenomena. They matter more than medians or means when it comes to IT project risk. Second, the notion of outliers bridges the gap between qualitative and quantitative studies. The findings also show that causes of outliers are, at least to some extent, internal and controllable by organizations. Lastly, the paper draws implications for organizational decision-making, learning, and risk management.

Michael Devereux (Director, Oxford University Centre for Business Taxation) argues that the existing corporation tax system is not fit for purpose, and advocates fundamental reform of the corporate income system. One option is a new type of corporate tax, the destination based corporate income tax, levied on sales, where investment expenditure and labour costs are completely deductible and exports are exempt (but imports are taxed).

Professor Rita de la Feria examines “conflicts” with neutrality principle as part of a seminar organised by the Academy of European Law (ERA) providing tax law practitioners with an in-depth analysis of the landmark judgments of the Court of Justice of the European Union (CJEU) on the fundamentals of European VAT law.

If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firms choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneurs tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. These imply a marginal deadweight cost of the tax around £10K of around 25%. We find no evidence of intertemporal shifting of profit.

Firms generating larger surpluses on average pay higher wages. We study the effect of this rent-sharing between firms and workers on international tax competition. In our model, firms in a large country can shift surplus to a tax haven. In the benchmark case firms only have a tax incentive for profit shifting as shifted surplus is fully taken into account in the wage bargaining. In this case rent-sharing decreases the competitive pressure on the large country and leads to higher equilibrium tax rates. When workers do not observe the full surplus shifted, a wage incentive arises. Profit shifting then becomes more attractive as it reduces the surplus bargained over with workers. If this effect is sufficiently strong, rent-sharing increases the competitive pressure on the large country, which implies a lower equilibrium tax rate.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

Shipping goods internationally is risky and takes time. Therefore, trading partners not only have to agree on the specification and the price of a good, but also on the timing of payments. To allocate risk and to finance the time gap between production and sale, a range of different payment contracts is utilized, broadly classified into exporter finance (Open Account), importer finance (Cash in Advance) and bank finance (Letter of Credit). I study the optimal choice between these three types of payment contracts considering one shot transactions, repeated transactions and implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs. The latter effect is the larger, the longer the time needed for trade. I use a panel of bilateral trade flows to test these predictions, running gravity regressions that include interaction terms between distance and financing costs. Results are in line with the model, highly significant and economically relevant.

The UK tax bills of groups such as Starbucks, Google and Amazon have been much in the news. This is provoking debate in many quarters as to how the system might be fixed – if indeed it needs fixing. Professor Michael Devereux discusses how corporation tax might develop, starting with some basic principles (on what principles should the tax base be allocated); looks at some alternatives (e.g. is taxing profit a good idea; what about withholding taxes on dividends or other routes); and talks about transitional issues and other constraints on change.

The theoretical and practical advantages of the VAT have led to its adoption in some form or another by most countries and by many hundreds of subnational administrations worldwide. However, nowhere is VAT found without exemptions. Exemptions are arguably the most controversial feature of VAT regimes. They constitute exceptions to the principle of VAT as a tax on consumption, undermine its fundamental logic, and compromise its efficiency and neutrality. In traditional VAT systems, like those in place in European countries, exemptions constitute a sizable portion of the potential tax base. Historical factors that led to the adoption of multiple exemptions in the traditional European VAT model were not present in most jurisdictions outside the EU and adopters of a modern VAT model were able to avoid these features of the traditional VAT, for the most part substantially limiting the number of exemptions. However, whilst the modern VAT model undoubtedly constitutes an improvement on the traditional VAT model, there is a clear realisation that modern VATs are not a complete panacea. Existing exemptions under modern VATs can still impose significant economic and administrative costs. Against this background, this paper questions the current existence of VAT exemptions. Are VAT exemptions desirable and/or unavoidable, or are alternative legal designs possible and/or necessary? And if alternative designs are available and required, which of these represents the best solution to doing away with exemptions? Thirty years since the first appearance of modern VATs on the world stage, this paper argues that it is time to consider a progression in tax design and move towards a post-modern VAT.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

We examine whether social ties influence the careers of company executives. We analyse appointments to UK company boards, and exploit detailed data on executives’ educational backgrounds, boardroom experience and affiliations to elite clubs. We find that social connections, through membership of private members clubs and golf clubs seem to play a role in appointments. For example, being a member of the same golf club as a current director is associated with an increased probability of appointment. Professional connections made through the boardroom also appear to matter. Educational connections through attending the same Oxford or Cambridge college, play less of a role than social connections, although these may influence social club memberships. Our findings imply that less reliance on elite social networks in recruitment will be necessary to increase boardroom diversity.

Using consolidated firm-level accounting data for about 3,400 companies in 15 OECD countries from ORBIS (2003{2007), this paper compares the tax burden of companies headquartered in worldwide countries with that of companies headquartered in territorial countries. The tax burden is measured by a marginal effective tax rate (METR) and, employing a new methodology, by a marginal effective tax base (METB) which controls for statutory corporate tax rates. A higher METR for entities headquartered in worldwide jurisdictions is explained by higher corporate statutory tax rates rather than by the difference in the taxation of foreign profits. The METB of companies headquartered in worldwide countries is not statistically different from that of companies headquartered in territorial countries. Using corporate presence in tax havens, the paper also investigates the vulnerability of territorial jurisdictions to tax avoidance. The results show that offshore low-tax operations reduce the METR and the METB of multinationals more in territorial systems than in worldwide systems.

When trading across borders, firms choose between different payment contracts. In particular, they need to decide whether payment takes place before or after delivery. Schmidt-Eisenlohr (2011) shows that this choice is relevant as it allows firms to trade off differences in financing costs and contract enforcement across countries and thereby has large effects on aggregate trade flows. This paper extends the model to allow for product complexity and uses data from the World Bank Enterprise Survey to test the main predictions. In line with the model, a larger share of international sales is paid after delivery (Open Account) if enforcement is weak and financing costs are low in the source country. The regressions confirm the prediction that contract choice in complex industries is more affected by enforcement, whereas contract choice in non-complex industries is more affected by financing costs.

When trading across borders, firms choose between different payment contracts. In particular, they need to decide whether payment takes place before or after delivery. Schmidt-Eisenlohr (2011) shows that this choice is relevant as it allows firms to trade off differences in financing costs and contract enforcement across countries and thereby has large effects on aggregate trade flows. This paper extends the model to allow for product complexity and uses data from the World Bank Enterprise Survey to test the main predictions. In line with the model, a larger share of international sales is paid after delivery (Open Account) if enforcement is weak and financing costs are low in the source country. The regressions confirm the prediction that contract choice in complex industries is more affected by enforcement, whereas contract choice in non-complex industries is more affected by financing costs.

When trading across borders, firms choose between different payment contracts. In particular, they need to decide whether payment takes place before or after delivery. Schmidt-Eisenlohr (2011) shows that this choice is relevant as it allows firms to trade off differences in financing costs and contract enforcement across countries and thereby has large effects on aggregate trade flows. This paper extends the model to allow for product complexity and uses data from the World Bank Enterprise Survey to test the main predictions. In line with the model, a larger share of international sales is paid after delivery (Open Account) if enforcement is weak and financing costs are low in the source country. The regressions confirm the prediction that contract choice in complex industries is more affected by enforcement, whereas contract choice in non-complex industries is more affected by financing costs.

When trading across borders, firms choose between different payment contracts. In particular, they need to decide whether payment takes place before or after delivery. Schmidt-Eisenlohr (2011) shows that this choice is relevant as it allows firms to trade off differences in financing costs and contract enforcement across countries and thereby has large effects on aggregate trade flows. This paper extends the model to allow for product complexity and uses data from the World Bank Enterprise Survey to test the main predictions. In line with the model, a larger share of international sales is paid after delivery (Open Account) if enforcement is weak and financing costs are low in the source country. The regressions confirm the prediction that contract choice in complex industries is more affected by enforcement, whereas contract choice in non-complex industries is more affected by financing costs.

When trading across borders, firms choose between different payment contracts. In particular, they need to decide whether payment takes place before or after delivery. Schmidt-Eisenlohr (2011) shows that this choice is relevant as it allows firms to trade off differences in financing costs and contract enforcement across countries and thereby has large effects on aggregate trade flows. This paper extends the model to allow for product complexity and uses data from the World Bank Enterprise Survey to test the main predictions. In line with the model, a larger share of international sales is paid after delivery (Open Account) if enforcement is weak and financing costs are low in the source country. The regressions confirm the prediction that contract choice in complex industries is more affected by enforcement, whereas contract choice in non-complex industries is more affected by financing costs.

In the wake of the financial crisis, a number of countries have introduced Pigouvian levies on bank liabilities associated with systemic risk. We study how the levies have affected bank capital structure using a rich panel dataset for European banks. Our results suggest that the levies have caused an average increase in equity-asset ratios of around 1-1.5 percentage points driven by increases in stocks of equity rather than contractions of the balance. Our results also lend support to the theoretical prediction that levies induce banks to hold more risky assets when the regulatory capital requirement is binding.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

This article examines the European Commission’s Proposal for a Council Directive implementing a financial transaction tax through the enhanced cooperation procedure published on February 14, 2013. It starts by providing a brief description and analysis of the Proposal and the accompanying Impact Assessment, focusing on the newly added features of the proposed tax and its potential impact on both participating and non-participating Member States. Next, the article examines the Proposal from the perspective of public international law, discussing the controversial extraterritorial reach of the proposed tax. It is argued that doubts exist with respect to the compatibility of the “contagion effect” and the issuance principle with internationally recognised legal principles. The article then turns to EU law and considers the legal requirements imposed by the EU Treaties on the use of enhanced cooperation. Whilst raising some concerns in relation to the Proposal’s compliance with these requirements, the article concludes that the political and judicial controlling mechanisms in place appear weak and therefore the outcome of any potential political or judicial challenge remains uncertain. The importance of this debate is not limited to the financial transaction tax, but also extends to the use of enhanced cooperation in other areas of taxation and beyond.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the increase in tax revenue, absent any behavioural responses.

This paper discusses identification problems that may be important for the estimation of Cobb-Douglas production function parameters from micro data, where identification relies on cross-section variation. We highlight a problem for the estimation of parameters on quasi-fixed inputs that has not been discussed previously. We also show that factor price variation is necessary but not sufficient for the identification of parameters on flexible inputs. Simulated production data suggests that these identification problems can be relevant in samples with limited cross-section variation in input prices, and symmetric, quadratic adjustment costs. Richer variation in input prices would allow consistent estimation using the GMM procedure proposed by Blundell and Bond (2000), but would preclude the use of the estimator proposed by Olley and Pakes (1996).

In the wake of the financial crisis, a number of countries have introduced Pigouvian levies on bank liabilities associated with systemic risk. We study how the levies have affected bank capital structure using a rich panel dataset for European banks. Our results suggest that the levies have caused an average increase in equity-asset ratios of around 1-1.5 percentage points driven by increases in stocks of equity rather than contractions of the balance. Our results also lend support to the theoretical prediction that levies induce banks to hold more risky assets when the regulatory capital requirement is binding.

This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

On 21 May 2013, Mendel University, Faculty of Business and Economics (Brno, Czech Republic) together with Vienna University of Economics, Institute for Austrian and International Tax Law (Wien, Austria) organized an exploratory workshop in Brno, as the starting point of the Research Project on the Introduction of the Financial Transaction Tax in the European Union through Enhanced Cooperation. This research project brings together researchers of different nationalities and backgrounds from, among others, University of Amsterdam (Amsterdam, the Netherlands), Catholic University of Piacenza (Piacenza, Italy), Complutense University (Madrid, Spain), IBFD (Amsterdam, the Netherlands), Oxford University Centre for Business Taxation (Oxford, the United Kingdom), Mendel University (Brno, Czech Republic), University of Salerno (Salerno, Italy) and WU Vienna (Vienna, Austria). The structure of the conference was divided into two main parts; the morning session comprising the opening presentation followed by four keynote input statements on critical issues, with discussion sessions in between, and the afternoon session, which was concentrated on five parallel workshops, followed by the concluding remarks.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

According to the OECD, "base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for OECD members countries and non-members alike a significant cause of base erosion is profit shifting". Although there has been discontent with the existing framework for many years, considerable impetus has been given to the OECD BEPS project by the G8 and the G20. OECD rhetoric includes statements such as "BEPS offers a global roadmap that will allow governments to collect the tax revenue they need to serve their citizens. It also gives businesses the certainty they need to invest and grow", and that this is a "once in a century" opportunity to reform the international tax system. It is clear that the OECD intends to propose evolutionary, rather than revolutionary, reforms. But it is not at all clear that such an approach will generate an international tax system fit for the 21st century. It is not only the practical working of the system that is in doubt, but its conceptual basis. A lack of a good conceptual basis means that reforms may be piecemeal and arbitrary.

This talk addressed fundamental issues of principle and practice in the allocation of profits for taxation. It questioned the conceptual basis of the existing OECD framework, discussed the BEPS action plan, and considered other potential methods of allocating taxing rights between countries, including methods based on residence, destination and formula apportionment. This lecture was organised by the ESRC Centre for the Microeconomic Analysis of Public Policy at IFS and the Chartered Institute of Taxation (CIOT) and was designed to promote serious debate among policy-makers, opinion-formers and the wider tax and economic communities. Stephen Coleclough, CIOT, opened the event. Following the lecture, there was a panel debate with Paul Johnson, IFS (chair), Bill Dodwell, Deloitte, and Nicholas MacPherson, Permanent Secretary, HM Treasury.

This paper estimates the response of corporate tax revenues to the business cycle, the so called ‘cyclicality of corporate tax revenues’. It distinguishes between the impact of the business cycle in recessions and booms and calculates the asymmetry in tax revenues response. It also explains the heterogeneous nature of the asymmetries using a new index of loss offset generosity provisions. We find that the short run contemporaneous impact of business cycle on corporate tax revenues is quite strong in normal times, but much lower in booms. The asymmetry of cyclicality between booms and recessions is persistent and points to larger responses in recessions. We also show how sensitive tax revenue responses are to different recession and boom thresholds. Importantly, we find that loss offset generosity provisions enhance this asymmetry in the cyclicality of corporate tax revenues. Countries that are more generous in terms of loss offset provisions experience much more volatile response of corporate tax revenues to business cycle during recessions, magnifying the asymmetry of cyclicality. As a result the automatic stabilizer impact of corporation tax will differ between booms and recessions, being stronger and more effective in the latter, especially in countries that offer more generous loss-offset provisions.

Seminar given as part of training provided to Bulgarian judges at the Bulgarian National Institute of Justice, Sofia, Bulgaria.

Presentation providing an overview of some of the current projects and published research undertaken in the HMRC Datalab.

This paper contributes to the literature providing indirect evidence for profit shifting within multinational companies. In contrast to the previous studies we account for the tax responsiveness of the capital stock and analyse the impact of corporate taxes on both pre- and post-tax profitability. Evidence from our large panel dataset of European subsidiaries supports the profit shifting hypothesis. We find that a 10 percentage point decrease in the tax rate increases post-tax profitability by up to 1.1 percentage points. Further, our results suggest that financial profits and losses are particularly responsive to taxes, which indicates that a large part of profit shifting takes places via debt shifting.

This paper contributes to the literature providing indirect evidence for profit shifting within multinational companies. In contrast to the previous studies we account for the tax responsiveness of the capital stock and analyse the impact of corporate taxes on both pre- and post-tax profitability. Evidence from our large panel dataset of European subsidiaries supports the profit shifting hypothesis. We find that a 10 percentage point decrease in the tax rate increases post-tax profitability by up to 1.1 percentage points. Further, our results suggest that financial profits and losses are particularly responsive to taxes, which indicates that a large part of profit shifting takes places via debt shifting.

Paper published in proceedings of the workshop in: L. Bauger, ed. European Economy. The use of tax expenditures in times of fiscal consolidation. Economic Papers 523, July 2014. European Commission: Directorate-General for Economic and Financial Affairs.

We examine whether social ties influence the careers of company executives. We analyse appointments to UK company boards, and exploit detailed data on executives’ educational backgrounds, boardroom experience and affiliations to elite clubs. We find that social connections, through membership of private members clubs and golf clubs seem to play a role in appointments. For example, being a member of the same golf club as a current director is associated with an increased probability of appointment. Professional connections made through the boardroom also appear to matter. Educational connections through attending the same Oxford or Cambridge college, play less of a role than social connections, although these may influence social club memberships. Our findings imply that less reliance on elite social networks in recruitment will be necessary to increase boardroom diversity.

This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to final consumption, and the cost of intermediation services is fixed and the same across firms, the optimal taxes are generally indeterminate. But, when firms differ exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally different to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production efficiency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case.

The purpose of this paper is to assess whether politicians manipulate the timing of tax rate changes in a strategic way to maximize reelection prospects. To do so, we exploit the German local business tax as a testing ground which is set autonomously by German municipalities. As election dates vary across local councils, the data allows us to disentangle effects related to the timing of elections from common trends. Using a rich panel data-set for German municipalities, we assess the impact of elections on local business tax choices. The findings support the notion of a political cycle in tax setting behavior as the growth rate of the local business tax is significantly reduced in the election year and the year prior to the election, while it jumps up in the year after the election. This pattern turns out to be robust against a number of sensitivity checks.

This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to final consumption, and the cost of intermediation services is fixed and the same across firms, the optimal taxes are generally indeterminate. But, when firms differ exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally different to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production efficiency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case.

This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to final consumption, and the cost of intermediation services is fixed and the same across firms, the optimal taxes are generally indeterminate. But, when firms differ exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally different to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production efficiency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case.

This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to final consumption, and the cost of intermediation services is fixed and the same across firms, the optimal taxes are generally indeterminate. But, when firms differ exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally different to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production efficiency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case.

This paper considers of the proposals of the Mirrlees (2011) review to introduce an allowance for corporate equity (ACE) in the corporation tax system. It assesses how an ACE would affect various dimensions of corporate decision making. Broadly, the ACE would introduce neutrality in decisions as to the scale of investment and the source of finance. But it would leave distortions to mutually exclusive discrete choices, such as location decisions, and to profit shifting decisions. The paper presents some evidence on the likely impact of introducing an ACE, which depends on the government makes up for foregone revenue for corporation tax. It also considers more radical options.

This paper considers of the proposals of the Mirrlees (2011) review to introduce an allowance for corporate equity (ACE) in the corporation tax system. It assesses how an ACE would affect various dimensions of corporate decision making. Broadly, the ACE would introduce neutrality in decisions as to the scale of investment and the source of finance. But it would leave distortions to mutually exclusive discrete choices, such as location decisions, and to profit shifting decisions. The paper presents some evidence on the likely impact of introducing an ACE, which depends on the government makes up for foregone revenue for corporation tax. It also considers more radical options.

This paper considers of the proposals of the Mirrlees (2011) review to introduce an allowance for corporate equity (ACE) in the corporation tax system. It assesses how an ACE would affect various dimensions of corporate decision making. Broadly, the ACE would introduce neutrality in decisions as to the scale of investment and the source of finance. But it would leave distortions to mutually exclusive discrete choices, such as location decisions, and to profit shifting decisions. The paper presents some evidence on the likely impact of introducing an ACE, which depends on the government makes up for foregone revenue for corporation tax. It also considers more radical options.

This paper considers of the proposals of the Mirrlees (2011) review to introduce an allowance for corporate equity (ACE) in the corporation tax system. It assesses how an ACE would affect various dimensions of corporate decision making. Broadly, the ACE would introduce neutrality in decisions as to the scale of investment and the source of finance. But it would leave distortions to mutually exclusive discrete choices, such as location decisions, and to profit shifting decisions. The paper presents some evidence on the likely impact of introducing an ACE, which depends on the government makes up for foregone revenue for corporation tax. It also considers more radical options.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

This paper analyses several options for the introduction of new taxes on the financial sector. It sets out possible objectives for such taxes, and in particular analyses the Financial Activities Tax (FAT) and the Financial Services Contribution (FSC). It compares the properties of the various forms of the FAT in terms of the revenue-raising potential while minimising distortions. The FSC may instead be seen as a mechanism to correct negative externalities created by the financial sector. To analyse this, the paper considers the origins of the recent financial crisis, and then considers the likely effects of the introduction of the FSC alongside existing regulations.

We model and estimate the incidence of the corporate income tax under imperfect competition. Identification comes from variation in effective marginal tax rates in the United States across industries and time. Our empirical results suggest that labor bears a significant portion of the burden of the corporate income tax. In addition, we find that the elasticity of wages with respect to the corporate marginal effective tax rate increases with industry concentration. Over all industries, our estimates suggest that a one dollar increase in corporate tax revenue decreases wages by around 60 cents.

The U.S. corporate income tax system provides investment incentives that vary across asset types. Do corporations’ investment choices respond to these differences and if so, by how much? I analyze the effect of corporate income taxes on the allocation of new capital investment in the U.S. economy by constructing an industry-level panel data from 1962 to 1997. My preferred-IV estimates of the asset substitution elasticities suggest a sizable interasset distortion effect of corporate income taxes. Substitutability is the strongest between machinery
equipment and computing and electronic equipment. Compared to a revenue-neutral uniform tax scheme, differential corporate income taxes cause under-investment in computing and electronic equipment and over-investment in machinery and transportation equipment.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level data-set covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firms choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneurs tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.

If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firms choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneurs tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.

In September 2011 the EU Commission put forward a proposal for an EU-wide Financial Transaction Tax. This article assesses the proposal. It starts by looking at the design of the tax before moving on to the objectives it is meant to achieve. Two questions are asked in relation to each objective: (i) is the objective reasonable? (ii) is the FTT the most adequate tool to obtain it? The conclusions reached are that a case can be made for pursuing some objectives but not others, and the FTT is not the most adequate tool to obtain them.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level dataset covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level dataset covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level dataset covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

This paper introduces endogenous technical change through basic and applied research in a growth model. Basic research differs from applied research in two significant ways. First, significant advances in technological knowledge come through basic research rather than applied research. Second, these significant advances could potentially be applicable to multiple industries. Since these applications are not immediate, the innovating firm cannot exploit all the benefits of the basic innovations for production. We analyze the impact of this appropriability problem on firms' basic research incentives in an endogenous growth framework with private firms and an academic sector. After characterizing the equilibrium, we estimate our model using micro level data on research expenditures and behavior by French firms. We then decompose the aggregate growth by the source and type of innovation. Moreover, we quantitatively document the size of the underinvestment in basic research and consider various research policies to alleviate this inefficiency. Our analysis highlights the need for devoting a larger fraction of GDP for basic academic research, as well as higher subsidy rates for private research.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level dataset covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures
in bankruptcy on firms' cost of loan financing. Using a unique loan-level dataset covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of �nance but also relaxed credit constraints.

The United Kingdom is undergoing a significant review of the law relating to tax avoidance. In December 2010, the UK Government appointed Graham Aaronson QC, supported by a Study Group to consider and report on the need for, and possible shape of, a general anti-avoidance rule (GAAR) in the UK.

The proposals for tax reform contained in the report by Graham Aaronson can be found at the HM Treasury website: General Anti-Avoidance Rule (GAAR).

This seminar will discuss the problems posed by recent tax cases in the UK, the proposals for tax reform contained in the Graham Aaronson’s report and the reaction to that report.

This discussion has significant relevance to New Zealand academics and practitioners because of the debate about the need for reform to our GAAR legislation. In previous forums (November 2011) here at the University of Auckland the tax avoidance working groups report “Improving the Operation of New Zealand's Tax Avoidance Laws" suggested reform. It is therefore extremely pertinent to examine and learn from the UK experience in designing a modern GAAR as we deal with legislation that received its last overhaul nearly 40 years ago.

In recent years tax havens and offshore financial centres have come under increasing political pressure to cooperate with other countries in matters of taxation and efforts to crowd back tax evasion and avoidance. As a result many tax havens have signed tax information exchange agreements (TIEAs). In order to comply with OECD standards tax havens are obliged to sign at least 12 TIEAs with other countries. This paper investigates how tax havens have chosen their partner countries. We ask whether they have signed TIEAs with countries to which they have strong economic links or whether they have systematically avoided doing this, so that information exchange remains ineffective. We analyse 555 TIEAs signed by tax havens in the years 2008-2011 and find that on average tax havens have signed more TIEAs with countries to which they have stronger economic links. Our analysis thus suggests that tax havens do not systematically undermine tax information exchange by signing TIEAs with irrelevant countries. However, this does not mean that they exchange information with all important partner countries.

In recent years tax havens and offshore financial centres have come under increasing political pressure to cooperate with other countries in matters of taxation and efforts to crowd back tax evasion and avoidance. As a result many tax havens have signed tax information exchange agreements (TIEAs). In order to comply with OECD standards tax havens are obliged to sign at least 12 TIEAs with other countries. This paper investigates how tax havens have chosen their partner countries. We ask whether they have signed TIEAs with countries to which they have strong economic links or whether they have systematically avoided doing this, so that information exchange remains ineffective. We analyse 555 TIEAs signed by tax havens in the years 2008-2011 and find that on average tax havens have signed more TIEAs with countries to which they have stronger economic links. Our analysis thus suggests that tax havens do not systematically undermine tax information exchange by signing TIEAs with irrelevant countries. However, this does not mean that they exchange information with all important partner countries.

Using consolidated firm-level accounting data for about 3,400 companies in 15 OECD countries from ORBIS (2003{2007), this paper compares the tax burden of companies headquartered in worldwide countries with that of companies headquartered in territorial countries. The tax burden is measured by a marginal effective tax rate (METR) and, employing a new methodology, by a marginal effective tax base (METB) which controls for statutory corporate tax rates. A higher METR for entities headquartered in worldwide jurisdictions is explained by higher corporate statutory tax rates rather than by the difference in the taxation of foreign profits. The METB of companies headquartered in worldwide countries is not statistically different from that of companies headquartered in territorial countries. Using corporate presence in tax havens, the paper also investigates the vulnerability of territorial jurisdictions to tax avoidance. The results show that offshore low-tax operations reduce the METR and the METB of multinationals more in territorial systems than in worldwide systems.

This paper is the first to provide evidence of efficient taxation of groups with heterogeneous levels of 'tax morale'. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that 'nice guys finish last': groups with higher tax morale will be taxed more heavily, simply because taxing them is less costly. Based on unique cross-country micro data and an IV approach to rule out reverse causality, we find empirical support for this hypothesis. Income groups with high tax morale systematically face higher average and marginal tax rates.

The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems. The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone.

If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firms choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneurs tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.

In September 2011 the EU Commission put forward a proposal for an EU-wide Financial Transaction Tax. This article assesses the proposal. It starts by looking at the design of the tax before moving on to the objectives it is meant to achieve. Two questions are asked in relation to each objective: (i) is the objective reasonable? (ii) is the FTT the most adequate tool to obtain it? The conclusions reached are that a case can be made for pursuing some objectives but not others, and the FTT is not the most adequate tool to obtain them.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firms choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneurs tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.

This work was based on data from the Annual Respondents Database, produced by the Office for National Statistics(ONS) and supplied by the Secure Data Service at the UK Data Archive. The data are Crown Copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the data in this work does not imply the endorsement of ONS or the Secure Data Service at the UK Data Archive in relation to the interpretation or analysis of the data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. With these estimated elasticities, we find that the marginal deadweight cost of the tax around £10k is around 25% of the
increase in tax revenue, absent any behavioural responses.

We review the empirical literature on competition in source-based taxes on corporate income. Drawing an analogy to the competition models for the goods market indicates how evidence for the existence of tax competition can be provided, and highlights that tax competition can take many forms. With this in mind we classify the empirical literature, and highlight the importance of the measurement of tax rates and openness. Using measures based on the statutory tax system, there is evidence for tax competition mostly in the European Union. In contrast to the view of Gordon (1992) small countries appear to be the leader of the tax competition game.

This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to final consumption, and the cost of intermediation services is fixed and the same across firms, the optimal taxes are generally indeterminate. But, when firms differ exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally different to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production efficiency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case.

We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level data-set covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

Examines business profit and transfers of wealth in the context of tax design and tax reform.

Examines Corporate Tax Policy under the Labour Government: 1997-2010.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. These imply a marginal deadweight cost of the tax around £10K of around 25%. We find no evidence of intertemporal shifting of profit.

We use the population of UK corporation tax returns between 2001 and 2008 to estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate. We do so by analysing bunching in the distribution of taxable income at two kinks in the marginal rate schedule. We find a relatively small elasticity of between 0.14 and 0.18 for companies with profits around the £ 300k kink and a small marginal deadweight cost of 8% of the revenue that would have been generated by a marginal increase in tax, ignoring behavioural responses. We find a much higher elasticity of between 0.54 and 0.57 for companies around the £10k kink. By matching the corporate tax return data with accounting records and analysing joint bunching in the corporate and personal tax system, we decompose the overall elasticity of corporate taxable income into two parts: an elasticity of total income with respect to the net of tax rate of between 0.2 and 0.3, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates of between 0.04 and 0.07. These imply a marginal deadweight cost of the tax around £10K of around 25%. We find no evidence of intertemporal shifting of profit.

Presentation given as part of a seminar on the Commission’s Proposal for a Financial Transaction Tax presented by The ATOZ Chair for European and International Taxation. The seminar explains the proposed FTT and its mechanisms and analyze whether the FTT’s policy goals can actually be achieved through the proposed directive. It explores the differences between the French FTT and the Commission’s proposal and present some initial experiences with the FTT. The seminar also reflects on the effects Luxembourg financial institutions and funds can expect to endure if an FTT is introduced in Luxembourg, as well as provide a brief look into the potential consequences Luxembourg may face if surrounded by countries implementing an FTT.

Panel discussion on topic ‘Providing Tax Certainty in an Uncertain World’. Panel of 5 with Dr. Jeffrey Owens as Chair.

In recent years tax havens and offshore financial centres have come under increasing political pressure to cooperate with other countries in matters of taxation and efforts to crowd back tax evasion and avoidance. As a result many tax havens have signed tax information exchange agreements (TIEAs). In order to comply with OECD standards tax havens are obliged to sign at least 12 TIEAs with other countries. This paper investigates how tax havens have chosen their partner countries. We ask whether they have signed TIEAs with countries to which they have strong economic links or whether they have systematically avoided doing this, so that information exchange remains ineffective. We analyse 555 TIEAs signed by tax havens in the years 2008-2011 and find that on average tax havens have signed more TIEAs with countries to which they have stronger economic links. Our analysis thus suggests that tax havens do not systematically undermine tax information exchange by signing TIEAs with irrelevant countries. However, this does not mean that they exchange information with all important partner countries.

The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems. The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone.

The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems. The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone.

The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems. The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone.

When trading across borders, firms choose between different payment contracts. In particular, they need to decide whether payment takes place before or after delivery. Schmidt-Eisenlohr (2011) shows that this choice is relevant as it allows firms to trade off differences in financing costs and contract enforcement across countries and thereby has large effects on aggregate trade flows. This paper extends the model to allow for product complexity and uses data from the World Bank Enterprise Survey to test the main predictions. In line with the model, a larger share of international sales is paid after delivery (Open Account) if enforcement is weak and financing costs are low in the source country. The regressions confirm the prediction that contract choice in complex industries is more affected by enforcement, whereas contract choice in non-complex industries is more affected by financing costs.