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Wednesday, Might 17, 2023

Cui: The Mirage Of Cellular Capital

Wei Cui (British Columbia; Google Scholar), The Mirage of Cellular Capital:

Capital mobility has preoccupied students of worldwide taxation for greater than 30 years. In line with prevailing narratives, when capital is extremely cellular, international locations compete to draw funding, making a race to the underside; capital mobility additionally permits multinational enterprises (MNEs) to shift income. The enchantment of those narratives has culminated within the OECD’s proposed World Minimal Tax, which declares the goal of considerably curbing tax competitors. This paper suggests, nonetheless, that the importance of cellular capital for worldwide taxation could also be largely an phantasm.

4 deflationary arguments are superior. First, the rising significance of intangibles for MNEs makes capital much less, no more, cellular. Intangibles could seem cellular solely as a result of the rights to tax returns to them are arbitrarily assigned, however that could be a reality about tax legislation itself, not an unbiased undeniable fact that tax coverage responds to. Second, modelling revenue shifting as capital mobility generates conceptual confusion and is commonly factually inaccurate. Third, empirical proof for tax competitors could be very weak, and there are good explanations as to why. Fourth, the worldwide provisions of the CIT generate externalities that probably dominate these from the setting of charges and home tax base. The lens of capital mobility sheds little mild on such provisions, leaving the character of their externalities and the scope of any cooperative surplus poorly understood.

https://taxprof.typepad.com/taxprof_blog/2023/05/the-mirage-of-mobile-capital.html

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