Taxing multinational corporations raises significant government revenue to support progress towards the Sustainable Development Goals (SDGs). This study examines Philips, a multinational corporation that publicly reports country-by-country data on revenue, profits, taxes, employees and tangible assets, using the Government Revenue and Development Estimations (GRADE) econometric model to estimate the development impact of its corporate income tax contributions. Tax payments do not always reflect actual economic activity in host countries due to profit shifting. This study also assesses the degree to which reported profits align with economic activity. Results indicate Philips’ tax payments make a meaningful positive contribution to sustainable development: government revenue equivalent to these payments enables over 1100 additional children to attend school daily and advances SDG progress on basic water (8100 people), sanitation (13, 400 people), clean fuels (28, 000 people) and electricity (1700 people). However, analysis reveals some misalignment between reported profits and economic activity across countries, suggesting unrealised potential in Philips’ development contribution. Modelling a reallocation of taxing rights to host countries where economic activity occurs using unitary tax with formulary apportionment indicates that annual tax payments may average 78 million higher in constant 2015 USD, potentially enabling 900 more children to attend school and expanding access to basic water (6500 people), sanitation (9600 people), clean fuels (22, 600 people) and electricity (7400 people). These findings highlight the value of transparent country-by-country reporting as a foundation for evidence-based tax policy reform and the significant development gains from Philips’ tax payments and greater gains if profits were better aligned with economic activity.
Etter‐Phoya et al. (Tue,) studied this question.