Estimating the Revenue Costs of Tax Treaties in Developing Countries

22 Pages Posted: 6 Jun 2020

See all articles by Petr Jansky

Petr Jansky

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies

Marek Šedivý

affiliation not provided to SSRN

Date Written: June 2019

Abstract

(12764) Petr Janský Marek Šedivý Tax treaties between countries influence how much tax revenues governments receive from multinational enterprises. These treaties often reduce the withholding tax rates on outgoing dividend and interest payments. We provide illustrative estimates of costs for these two taxes for 14 developing countries in sub‐Saharan Africa and Asia in a first multi‐country comparison of this kind. These might be overestimates because we assume that foreign direct investments are not influenced by the tax treaties. We estimate that the highest potential tax revenue losses are within hundreds of millions US$ and around 0.1% of GDP, with Philippines incurring the highest losses both in US$ and relative to GDP. We also find that around 95% of the losses is due to dividends and that only four investor countries—Japan, Netherlands, Switzerland and Singapore—are together responsible for more than half of the losses. We discuss the limitations of these estimates and how future research could improve their quality as well as coverage.

Keywords: developing countries, double taxation agreement, foreign direct investment, multinational enterprises, tax treaty, withholding tax

Suggested Citation

Jansky, Petr and Šedivý, Marek, Estimating the Revenue Costs of Tax Treaties in Developing Countries (June 2019). The World Economy, Vol. 42, Issue 6, pp. 1828-1849, 2019, Available at SSRN: https://ssrn.com/abstract=3620331 or http://dx.doi.org/10.1111/twec.12764

Petr Jansky (Contact Author)

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://ies.fsv.cuni.cz/en/staff/jansky

Marek Šedivý

affiliation not provided to SSRN

No Address Available

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
105
PlumX Metrics