IMF Working Papers

Territorial vs. Worldwide Corporate Taxation: Implications for Developing Countries

By Thornton Matheson, Victoria J Perry, Chandara Veung

October 3, 2013

Download PDF

Preview Citation

Format: Chicago

Thornton Matheson, Victoria J Perry, and Chandara Veung. Territorial vs. Worldwide Corporate Taxation: Implications for Developing Countries, (USA: International Monetary Fund, 2013) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Global investment patterns mean that effective taxation of foreign investors is of increasing importance to the economies of lower income countries. It is thus of considerable concern that the historical framework for cross-border income tax arrangements is not always well suited to allow low-income countries (LICs) effectively to generate tax revenues from profits on foreign direct investment (FDI). Several aspects of this framework contribute to the problem. This paper discusses, in particular, the likely effect of a shift by major economies from the system of worldwide corporate taxation toward a territorial system on the volume, distribution, and financing of FDI, focusing on LICs. It then empirically analyzes bilateral outbound FDI data for the UK for 2002–10 to determine whether the move to territoriality made corporations more sensitive to hostcountry statutory tax rates. Supporting evidence for this hypothesis is found for FDI financed from new equity.

Subject: Balance of payments, Corporate income tax, Foreign direct investment, Income, Labor, National accounts, Taxes, Wages, Withholding tax

Keywords: CIT, CIT rate, CIT reduction, Corporate income tax, Country shift, Equilibrium rate, FDI flow, Foreign direct investment, Foreign direct investment in developing countries, Global, High-CIT rate, Host country rate, Income, Income effect, International corporate income tax, International taxation, Investing country, OECD country, Rate, Tax rate, Territorial taxation, Territoriality dummy, Unweighted OECD CIT average, Wages, Withholding tax, Worldwide taxation, WP

Publication Details

  • Pages:

    25

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2013/205

  • Stock No:

    WPIEA2013205

  • ISBN:

    9781484329764

  • ISSN:

    1018-5941

You May Also Be Interested In...

Managing Tax Incentives in Developing Countries

November 21, 2024

EBA-Lite 3.0 Model and Methodology

November 18, 2024

Libya: Technical Assistance Report-Redesign of Income Tax Forms

November 15, 2024

Growth Convergence and Public Finances of India and its States

November 15, 2024