What question did this study set out to answer?

To evaluate the economic design, historical precedent, and revenue implications of excess profit taxes (EPTs) targeting economic rent under modern multinational profit-shifting conditions.

September 1, 2022IMF Working PaperOpen Access

Excess Profit Taxes: Historical Perspective and Contemporary Relevance

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Authors

SHShafik HebousInternational Monetary Fund NVNate VernonInternational Monetary Fund DPDinar PrihardiniInternational Monetary Fund

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Implication

Economic analysis demonstrates that destination-based excess profit taxes generate substantial revenue from multinationals, indicating a viable path toward non-distortionary corporate rent taxation.

Key Points

To evaluate the economic design, historical precedent, and revenue implications of excess profit taxes (EPTs) targeting economic rent under modern multinational profit-shifting conditions.
Reviewed historical implementations of EPTs during crisis shocks and evaluated modern parallels with economic rent taxation frameworks.
Analyzed firm-level financial data to evaluate cross-border profit shifting and modeled the revenue impact of an add-on EPT using destination-based sales apportionment.
Firm-level empirical analysis indicates that the observed geographic distribution of excess profits is consistent with multinational profit-shifting strategies.
A 10 percent destination-based EPT on globally consolidated multinational accounts, allocated according to sales location, increases global corporate income tax revenues by 16 percent.
International tax coordination is identified as necessary to prevent tax competition and avoid circumvention through artificial profit reallocation.

Cite This Study

Hebous et al. (2022) studied this question.

synapsesocial.com/papers/6a035ea24f17ebd438653537 https://doi.org/10.5089/9798400221729.001

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Implication

Economic analysis demonstrates that destination-based excess profit taxes generate substantial revenue from multinationals, indicating a viable path toward non-distortionary corporate rent taxation.

Excess Profit Taxes: Historical Perspective and Contemporary Relevance

Discussion

Member takes

Implication

Key Points

Cite This Study

Excess Profit Taxes: Historical Perspective and Contemporary Relevance

Discussion

Member takes

Implication

Key Points

Cite This Study

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