Information design for global tax competition in a post-BEPS world

Lead Research Organisation: University of Essex
Department Name: Economics

Abstract

The proposed research aims to develop policy relevant analysis of information exchange in the context of recent activity of international organizations, namely OECD, WB (World Bank), and IMF, against tax avoidance practices of multinational enterprises. The analysis will be theoretical and directly informed by current policy debate and practice through the direct involvement of the WB in the supervision and access to data and current expertise and discussions on the tax avoidance and information asymmetry. Information asymmetry is of key importance since national governments have incentive and opportunity to exploit it for financial gain. A government can increase its tax revenues by attracting foreign taxpayers to become resident taxpayers. It can do so through actions such as secret tax rulings and offshore tax havens, which facilitate avoidance of taxation in other countries, while at the same time use its private information on the taxpayer's income to increase its own tax receipts. Moreover, such scenarios provide clear incentives to national government to manipulate any information sharing with other countries. Existing information exchange agreements bear the same problem. For example, the Joint International Tax Shelter Information Centre (JITSIC) is closed with limited participant numbers and the Foreign Account Tax Compliance Act (FATCA) is exclusive to USA. The private nature of the cooperation vehicles further demonstrates the prevalence of information asymmetry among countries. Only a couple years ago WB and OECD created the Global Forum on Transparency and Exchange of Information for Tax Purposes opened to all countries. However, the question is still the same, whether such global agreement can be really working mechanism to achieve transparency. The core of proposed research topic is tax competition under asymmetric information. The proposed research will aim to address the issue information transparency and asymmetry in global tax competition. The existing literature does not provide analysis of such scenarios as it developed almost entirely in settings with complete information and where government actions are restricted to the setting of publicly observable tax rates. Moreover, the issue of information sharing and design under tax competition has not been addressed thus far. As Keen and Ligthart (2006) noted that sharing information between national tax authorities is central issue on the international tax policy agenda, but has gone largely unnoticed in the public finance literature. This gap is what my proposed research aims to fill. The result of the research will be the model, which will reveal conditions and limitations of global collaboration against tax-avoidance. It will be able to predict countries' reaction on different patterns of information sharing. In fact the model will simulate the role of WB as a designer of global information exchange. I will further build on this basic framework as required by the policy debate.

Schedule of work
2017 - Expanding theoretical and practical background (literature review, discussing with supervisors, participating in meetings with experts from the World Bank and discussions on the Action Plan on BEPS). Gaining further training in state of the art research methods and models for theoretical and empirical work through the doctoral training modules in Essex;
2018 - Designing of the model (in discussion with Essex and WB supervisors and participating the WB discussions and expertise);
2019 - Testing the model using the Data Base of the World Bank, calibration of the model;
2020 - Discussion of the model's results and findings with supervisors and experts of the World Bank. Development of recommendation on information management based on the findings.

Publications

10 25 50

Studentship Projects

Project Reference Relationship Related To Start End Student Name
ES/P00072X/1 01/10/2017 30/09/2027
1957162 Studentship ES/P00072X/1 01/10/2017 30/09/2020 ERKIN SAGIEV