The OECD’s first Corporate Tax Statistics publication is a useful compilation of prior OECD corporate tax statistics, plus extension of some statistics to close to 100 countries participating in the BEPS Inclusive Framework. It is a first step in what hopefully will be a more in-depth database and analyses of domestic and cross-border business taxation.
The report includes statistics on corporate tax collections, statutory marginal tax rates, effective tax rates, R&D tax incentives, and intellectual property tax regimes. The OECD has previously reported much of this data in other publications.
The data on total corporate tax revenue is missing two important factors from the OECD’s estimation of the annual global revenue loss from Base Erosion and Profit Shifting (BEPS). First, one needs to know how much total corporate tax collections come from purely domestic companies compared to multinational enterprises. Some countries, such as the U.S., have a good breakdown, but most countries could not provide the breakdown to the OECD for the 2015 BEPS Action 11 report. That information is available for the largest MNEs operating in each country from the Country-by-Country Report (CbCR) data. Second, the tax revenue data is after tax credits. In some countries, tax credits for various policy initiatives reduce corporate tax collections by 30%. For cross-country comparisons of corporate tax and comparisons of collections with statutory and effective tax rates, presentation of corporate tax collections both before and after tax credits would be beneficial.
The presentations of many statistics are based on the simple count of number of countries and unweighted averages. That means the U.S. and China are treated the same as Estonia and the Isle of Man. Average corporate tax rates, weighted by GDP, foreign direct investment, or exports/imports, are higher than unweighted averages that give equal weight to large and small economies.
The report notes why the ratio of corporate income tax to total revenues and GDP are influenced by a number of different factors. Hopefully future reports will compare corporate income tax to a better proxy of corporate income, such as national statistics’ corporate operating surplus.
The statistics on R&D incentives are from the OECD Directorate for Science, Technology and Innovation, which have been presented for years. The R&D tax incentives do not include the revenue lost from special low rates on “patent boxes”. Hopefully future reports will collect and add that information. More detail on the tax rates and bases of both R&D tax credits and “patent boxes” would be helpful.
The new report is an important first step since the forthcoming CbCR data should not be viewed in isolation to general corporate and cross-border business taxation. The CbCR data will definitely improve policymakers’ view of multinational enterprises’ activities in their countries, such as the mix of corporate revenue from purely domestic and large multinational enterprises, and key relationships between the financial statistics. The CbCR will also include data of large non-corporate global businesses. The CbCR data, however, will not be a panacea since the reports’ template doesn’t include intra-company royalties or interest, and BEPS will still need to be estimated to separate real economic effects of tax rate differentials from profit shifting.
Given the amount of other work the OECD’s Tax Policy and Statistics Division small team has had to do this past year (including digital tax issues), the first report is a good start from which to continue to build more detailed analysis of international business taxation. It was hoped that the first report would include some initial aggregated tabulations of the CbCR data. It is likely that CbCR data from a number of countries was not yet available or incomplete or messy due to its first year of collection. With an upcoming 2020 review of the CbCR template with possible revisions by the BEPS Inclusive Framework, early publication of aggregate data and assessment of the CbCR’s effectiveness in transfer pricing administration is important. [On January 29, 2019 during the OECD TaxTalk, Pascal Saint-Amans reported that the OECD will try to release some aggregated CbCR data to the G20 Finance Ministers meeting in June 2019.]
Individual countries should be encouraged to release unilaterally their CbCR aggregated tabulations in the format requested by the BEPS Inclusive Framework for OECD publication. In the case of the United States, fairly similar data is available from the Form 5471 from US-headquartered multinationals and their foreign affiliates. A comparison of the Form 5471 data with the CbCR data will highlight similarities and differences.
The OECD’s first Corporate Tax Statistics publication might be considered a report half-empty or half-full, since only the extension of corporate effective tax rate statistics to a larger number of countries is new data. Pulling together data in one publication and database is helpful, but also highlights how much more policymakers and policy analysts need to know about corporate and international business taxation. With the addition of future CbCR data and additional statistical measures, future publications will be even more worthwhile.