{
  "title": "Global Firms, National Corporate Taxes: An Evolution of Incompatibility",
  "publication": "IMF Working Papers, September 4, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2020/09/04/global-firms-national-corporate-taxes-an-evolution-of-incompatibility-49721",
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  "summary": "How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework? MNEs, and firms with market power, are not new phenomena, nor is the corporate income tax, which dates to the early 20th century.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Research question: How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework?\n- Core finding: MNEs of the 21st century operate differently from prior periods and have evolved to become global firms—with important tax ramifications.\n- Central thesis: The fragility of international tax arrangements was present at the outset of designing international tax rules, but the challenges have drastically intensified with:\n  - the global integration of business,\n  - the increased trade in hard-to-price services and intangibles,\n  - and the rapid growth of the digital economy."
    },
    {
      "heading": "Empirical observations and synthesis",
      "content": "- The paper presents a set of empirical observations and a synthesis of strands of the literature to explain why recent concerns about vulnerabilities in international tax arrangements and the taxation of MNEs have become unprecedented.\n- Historical context: MNEs, firms with market power, and the corporate income tax (dating to the early 20th century) are not new; what is new is the operational evolution of MNEs into global firms that exploit features of modern economic integration and digitalization.\n- Key drivers of intensified tax challenges:\n  - deeper cross-border business integration,\n  - greater prevalence of transactions involving hard-to-price services and intangibles,\n  - expansion of the digital economy enabling activities that are difficult to locate or tax under traditional nexus and profit-allocation rules."
    },
    {
      "heading": "Implications for international corporate tax arrangements",
      "content": "- The evolution of MNEs into global firms increases vulnerabilities in national corporate tax systems and the compatibility of those systems with cross-border business models.\n- Traditional international tax rules, designed when business was less globally integrated and intangible-intensive, are increasingly strained by:\n  - difficulty in pricing and allocating profits from intangibles and services,\n  - challenges in establishing taxable presence (nexus) for digital activities,\n  - the potential for tax avoidance amplified by complex corporate structures and cross-border flows."
    },
    {
      "heading": "Key publication facts",
      "content": "- By Shafik Hebous\n- September 4, 2020\n- Pages: 27\n- Series: Working Paper No. 2020/178\n- Volume: 2020\n- Issue: 178\n- DOI: https://doi.org/10.5089/9781513556376.001\n- Stock No: WPIEA2020178\n- ISBN: 9781513556376\n- ISSN: 1018-5941\n\nSource: Global Firms, National Corporate Taxes: An Evolution of Incompatibility, Shafik Hebous, IMF Working Paper (September 4, 2020).\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/09/04/global-firms-national-corporate-taxes-an-evolution-of-incompatibility-49721"
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    "Authors: Shafik Hebous",
    "Published: September 4, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513556376.001",
    "Research question: How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework?",
    "Core finding: MNEs of the 21st century operate differently from prior periods and have evolved to become global firms—with important tax ramifications.",
    "Central thesis: The fragility of international tax arrangements was present at the outset of designing international tax rules, but the challenges have drastically intensified with:",
    "The paper presents a set of empirical observations and a synthesis of strands of the literature to explain why recent concerns about vulnerabilities in international tax arrangements and the taxation of MNEs have become unprecedented.",
    "Historical context: MNEs, firms with market power, and the corporate income tax (dating to the early 20th century) are not new; what is new is the operational evolution of MNEs into global firms that exploit features of modern economic integration and digitalization.",
    "Key drivers of intensified tax challenges:",
    "The evolution of MNEs into global firms increases vulnerabilities in national corporate tax systems and the compatibility of those systems with cross-border business models.",
    "Traditional international tax rules, designed when business was less globally integrated and intangible-intensive, are increasingly strained by:",
    "By Shafik Hebous",
    "September 4, 2020",
    "Pages: 27",
    "Series: Working Paper No. 2020/178",
    "Volume: 2020",
    "Issue: 178",
    "DOI: https://doi.org/10.5089/9781513556376.001",
    "Stock No: WPIEA2020178",
    "ISBN: 9781513556376",
    "ISSN: 1018-5941",
    "**Working Paper**"
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