Dear Sir and Madam,
UNCTAD's Division on Investment and Enterprise is today circulating a working
paper for broad-based feedback to support ongoing work on the theme of
FDI,
Tax and Development.
The paper aims to provide a baseline for the ongoing debate in the international
community on tax avoidance, with estimates for the contribution of multinational
enterprises (MNEs) to government revenues in developing countries, and
estimates for the impact of base erosion and profit shifting (BEPS):
- The total MNE contribution to developing country government revenues
is estimated at some US$730 billion annually. This represents on average
just over 10% of total government revenues.
- Tax-avoidance revenue losses associated with offshore investment links
are calculated at around US$100 billion. This is around one-third of the
corporate income tax part of the larger overall fiscal contribution of
MNEs.
- A significant share of cross-border corporate investment transits through
offshore investment hubs. An additional 10% of investment routed through
offshore hubs is associated with a 1 percentage point lower reported (taxable)
rate of return.
The paper provides an investment perspective on international tax avoidance,
leading to new insights on the links between investment and tax policies.
The study proposes a set of draft guiding principles for Coherent International
Tax and Investment Policies as a basis for public debate.
Finally, through its Technical Annexes, the paper responds to demand in
the international community for new ideas and approaches to examining the
fiscal impact of MNEs – including an explicit call in the G20 BEPS Action
Plan (Action Point 11). Methodological innovations proposed include the
Offshore Investment Matrix, the Contribution and FDI-Income
Methods for the calculation of MNE fiscal contributions, and the FDI-Income-Based
Revenue Loss Analysis.
With its work on FDI, Tax and Development, initiated in response to demand
from Member States, UNCTAD's Division on Investment and Enterprise aims
to complement ongoing work of the UN Committee of Experts on International
Cooperation in Tax Matters and the work of the OECD on BEPS, by providing
an investment and development perspective.
We request feedback on our working paper, and in particular on the proposed
guidelines for Coherent International Tax and Investment Policies, through
our Investment Policy Hub (http://investmentpolicyhub.unctad.org/).
Best regards,
James Zhan
Director
Investment & Enterprise
United Nations Conference on Trade & Development