Michael P. Devereux

Michael P. Devereux
University of Oxford | OX · Saïd Business School

About

200
Publications
38,149
Reads
How we measure 'reads'
A 'read' is counted each time someone views a publication summary (such as the title, abstract, and list of authors), clicks on a figure, or views or downloads the full-text. Learn more
7,907
Citations

Publications

Publications (200)
Chapter
Full-text available
This chapter sets out the key conceptual issues that arise in designing a business-level tax on profit in an international setting. It is in four parts—each addressing a basic question. First, what is meant by a tax on profit? We identify different approaches to taxing profit and show that there are a number of equivalences between taxes. Second, w...
Chapter
Full-text available
This chapter describes and evaluates the current regime for taxing the profit of companies in an international setting. It explains its basis in domestic law and international treaties and sets out three of its distinguishing features: the distinctions between residence and source, between active and passive income, and its basis of separate accoun...
Chapter
This chapter sets out and evaluates our second main proposal: the Destination-based Cash Flow Tax (DBCFT). This has two basic components: (a) a ‘cash flow’ element, which gives immediate relief to all expenditure, and (b) a ‘destination-based’ element, which introduces border adjustments of the same form as under the value added tax (VAT): exports...
Chapter
This chapter sets out our first detailed reform proposal: the Residual Profit Allocation by Income (RPAI). This is one of a family of schemes based on separating multinational profit into ‘routine’ and ‘residual’ profit, a distinction that exists under the current system. The RPAI allocates the right to tax routine profit to the country where funct...
Chapter
In this chapter we explain the broad approach taken in the two detailed proposals set out in Chapters 6 and 7, namely the RPAI and DBCFT respectively. We discuss the extent to which international coordination would be required, or desired. We then consider the costs of transition to a new system. In broad terms, we can compare incremental reforms w...
Book
This book undertakes a fundamental review of the existing international regime for taxing business profit. It steps back from the current political debates on how to combat profit shifting and how taxing rights over the profits of the digitalized economy should be allocated. Instead, it starts from first principles to ask how we should evaluate a t...
Chapter
Full-text available
This chapter sets out and evaluates a number of possible reform options; we group options by four broad locations in which profit could be taxed. First, profit could in principle be taxed in the country of residence of the owners of the business. A second option is the country of residence of the parent company or business headquarters. A third opt...
Chapter
This book undertakes a fundamental review of the existing international regime for taxing business profit. It steps back from the current political debates on how to combat profit shifting and how taxing rights over the profits of the digitalized economy should be allocated. Instead, it starts from first principles to ask how we should evaluate a t...
Chapter
This book undertakes a fundamental review of the existing international regime for taxing business profit. It steps back from the current political debates on how to combat profit shifting and how taxing rights over the profits of the digitalized economy should be allocated. Instead, it starts from first principles to ask how we should evaluate a t...
Article
Full-text available
This paper reviews developments since the 1970s in economic thinking about the design of taxes on business profit. It charts developments from proposals for a cash flow tax from the Meade Committee, to refinements of this in the form of an ‘Allowance for Corporate Equity’ and the levying of the cash flow tax in the country of destination. It descri...
Article
Following the 2007-2008 financial crisis, a large number of countries introduced levies on bank borrowing intended to reduce risk in the financial sector. This paper studies the behavioral responses to bank levies and finds that banks exposed to levies increased their reliance on equity funding, but at the same time increased the risk of their asse...
Article
Using UK corporation tax returns, we provide evidence on the effects of accelerated depreciation allowances on investment, exploiting exogenous changes in the qualifying thresholds for first-year depreciation allowances (FYAs) in 2004. The investment rate of qualifying companies increased by 2.1–2.5 percentage points relative to those that did not...
Article
Digitalization exacerbates the problems faced by the existing system for taxing corporate profit in an international context. It does so by making it much easier for all aspects of a company to be spread around the world: its shareholders and creditors, its operations and its consumers. As many of these problems ultimately stem from the fact that t...
Article
This paper considers the implications of the destination-based cash flow tax (DBCFT) for three common ways of shifting taxable profits between countries: through manipulation of transfer prices, the use of debt, and locating intangible assets in low taxed jurisdictions. It shows that none of these planning devices would be available under a DBCFT,...
Article
We investigate how companies’ capital structure is affected by corporate income taxes using confidential company-level tax returns for a large sample of UK firms. Exploiting variation in companies’ marginal tax rates, we find a positive and substantial long-run tax effect on leverage. Leverage responds more to decreases in the marginal tax rate, an...
Article
This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the d...
Chapter
This paper analyses some options for the introduction of new taxes on the financial sector, and in particular analyses the Financial Activities Tax (FAT) and the Financial Services Contribution (FSC). The paper first summarizes briefly the origins of the recent financial crisis, then sets out possible objectives for financial sector taxes, in terms...
Article
The most significant problems with the existing system for taxing the profit of multinational companies stem from two related sources. First, the underlying ‘1920s compromise’ for allocating the rights to tax profit between countries is both inappropriate and increasingly hard to implement in a modern economic setting. Second, because the system is...
Article
We estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate using the population of UK corporation tax returns. We analyze bunching in the distribution of taxable income at kinks in the marginal rate schedule. We decompose this elasticity into an elasticity of total income with respect to the corporatio...
Article
The growing importance of border-crossing economic activity has far-reaching implications for the design and reform of tax systems. This chapter discusses the taxation of border-crossing flows of income and international trade and the way in which countries adjust to the pressures of tax competition, including efforts to coordinate taxation at the...
Article
To prevent profit shifting by manipulation of transfer prices, tax authorities typically apply the arm's length principle in corporate taxation and use comparable market prices to 'correctly' assess the value of intracompany trade and royalty income of multinationals. We develop a model of heterogeneous firms subject to financing fri...
Article
Full-text available
This paper uses firm-level data to investigate the impact of taxes on the international location of targets in M&A. In principle, a higher tax rate in the target's country could make an acquisition there more likely, less likely, or have no effect at all. We combine financial and ownership data for companies in ORBIS in 2005 with domestic and cross...
Article
Full-text available
This paper considers the proposals of the Mirrlees Review to introduce an allowance for corporate equity (ACE) in the corporation tax system. It assesses how an ACE would affect various dimensions of corporate decision making. Broadly, the ACE would introduce neutrality in decisions as to the scale of investment and the source of finance. But it wo...
Article
This paper examines the likely impact of a proposed formula apportionment system for corporation taxes in the European Union on the inbound investment of US multinational companies. We pay attention to tax planning strategies that may be employed by US multinationals and investigate whether effective tax rates in Europe of US companies differ from...
Chapter
This chapter analyses the economic situation in the UK as it attempts to recover from the financial and economic crisis that began in 2008. In particular, we focus on the probability that the fiscal consolidation, introduced by the new coalition government in 2010, is likely to be expansionary or contractionary. To analyse this we first briefly sur...
Article
Full-text available
We model the effects of consumption-type taxes which differ according to the base and location of the tax. Our model incorporates a monopolist producing and selling in two countries with three sources of rent, each in a different location: a fixed factor (located with production), mobile managerial skill, and a monopoly mark-up (located with consum...
Article
Full-text available
We examine whether discretionary government grants influence the location of new plants, and how effective these incentives are in the presence of agglomeration and urbanisation externalities. We find evidence that regional industrial structure affects the location of new entrants. Firms in more agglomerated industries locate new plants near to oth...
Article
Full-text available
We review the empirical literature on competition in source-based taxes on corporate income. Drawing an analogy to the competition models for the goods market indicates how evidence for the existence of tax competition can be provided, and highlights that tax competition can take many forms. With this in mind we classify the empirical literature, a...
Article
Full-text available
We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT). We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU...
Article
Since the beginning of the financial crisis numerous proposals have been made for the reform of public policies towards banks and other financial companies. Many individual governments have already taken action, and several official international bodies have also been active in considering reform. Reform proposals have taken two forms. One form is...
Article
Full-text available
The European debt crisis followed the US financial crisis with a delay of one and a half years. While its first signs were visible in November and December of 2009 when the rating agency Fitch downgraded Ireland and Greece, it culminated on 28 April 2010 when the intra-day interest rate for two-year Greek government bonds peaked at 38 percent. Sinc...
Article
This paper explores the economic consequences of proposed EU reforms for a common consolidated corporate tax base. The reforms replace separate accounting with formula apportionment as a way to allocate corporate tax bases across countries. To assess the economic implications, we use a numerical computable general equilibrìum (CGE) model for Europe...
Article
Full-text available
This study analyzes the effects of right-wing extremism on the well-being of immigrants based on data from the German Socio-Economic Panel (SOEP) for the years 1984 to 2006 merged with state-level information on election outcomes. The results show that the life satisfaction of immigrants is significantly reduced if right-wing extremism in the nativ...
Article
Full-text available
We propose a methodology for assessing the neutrality of corporate tax reform proposals in an open economy. The methodology identifies variation in effective tax rates to assess the proximity of a tax system to capital export neutrality (CEN) and to market neutrality (MN, which holds if all potential competitors in a single market face the same eff...
Article
Full-text available
The US economy is arguably following an unsustainable trajectory. The main indicators of this are a large current account deficit, a large federal budget deficit and trend-wise increasing costs of Social Security and Medicare. In this chapter, we will discuss these observations and to what extent the financial and economic crisis may have changed t...
Article
Full-text available
There are many important dimensions of the, hopefully overcome, financial crisis that have appeared in the vast debate that it has originated: its unprecedented size at least in the post World War II period; the fact that, contrary to many other financial crises (but similar to the 1929 collapse) it originated and had its epicenter in the US; its n...
Article
Full-text available
The globalisation of economic activity and the growing importance of multinational corporations have far-reaching consequences for national tax policies. Since 1995, the average corporate tax rate in the EU has fallen from 35% to 23%. In addition, differences and incompatibilities between the national systems of corporate income taxation distort in...
Article
Full-text available
We investigate the extent to which the corporation tax can act as an automatic stabilizer by smoothing the effects on investment of shocks to income. The main stabilizing effect would be through a reduced tax liability affecting the internal funds avail- able for investment by credit-constrained companies. We present evidence for the United Kingdom...
Article
Full-text available
Profit shifting due to manipulation of transfer prices erodes the corporate tax base in high tax countries. To protect tax revenues, governments typically apply the arm's length principle to 'correctly' assess the value of intracompany trade and royalty income based on observed market transactions such as in comparable outsourcing relationships. We...
Article
Full-text available
Foreword, Executive Summary, Chapter 1: The European Economy: Macroeconomic Outlook and Policy, Chapter 2: The Financial Crisis, Chapter 3: Private Equity, Chapter 4: France
Article
Full-text available
The financial crisis triggered by the bursting of the US real-estate bubble has spread over the entire world to different degrees and markedly slowed down world economic growth in 2008. This year, all major regions in the world will be in recession.
Article
Full-text available
This study analyzes the effects of right-wing extremism on the well-being of immigrants based on data from the German Socio-Economic Panel (SOEP) for the years 1984 to 2006 merged with state-level information on election outcomes. The results show that the life satisfaction of immigrants is significantly reduced if right-wing extremism in the nativ...
Article
This paper explores the economic consequences of proposed EU reforms for a common consolidated corporate tax base. The reforms replace separate accounting with formula apportionment as a way to allocate corporate tax bases across countries. To assess the economic implications, we use a numerical computable general equilibrium (CGE) model for Europe...
Article
Full-text available
This paper measures the relative importance of quality and quantity effects of corporate taxation on foreign direct investment. Quantity is affected if corporate taxes reduce the equilibrium stock of foreign capital in a given country. Quality effects arise if taxes decrease the extent to which investment contributes to the corporate tax base and t...
Article
Full-text available
This chapter discusses the current issues of the French economy. It is obviously beyond the scope of this report to discuss all aspects. Our approach is therefore focussed on a central question: What is the current government trying to achieve economically and will it succeed? In order to address this question, we first provide some macroeconomic b...
Article
Full-text available
The financial turmoil that originated in 2007 and developed into an unprecedented crisis battering financial and real markets is the latest manifestation, on a grand scale and with new attributes, of a welldefined pathology in the process of market liberalization and integration in the post-Bretton Woods era. At the root of the crisis lies a fundam...
Article
Full-text available
The credit crunch was most likely viewed as a mixed blessing by many private equity executives. On the one hand, it signalled the end of the most favourable set of economic conditions the private equity industry had ever witnessed: abundant capital, low interest rates, increasing stock market values and a truly amazing willingness amongst banks and...
Article
This paper addresses broad issues concerning taxes on company profit in a globalized world in which companies, capital, and profit can move easily between countries. It considers reasons for national taxation of company profit in such a world, and reviews the development of such taxes in the OECD. The role played by tax havens is discussed and evid...
Article
This paper investigates whether OECD countries compete with each other over corporation taxes, and whether such competition can explain the fall in statutory tax rates in the 1980s and 1990s. We develop a model in which multinational firms choose their capital stock in response to an effective marginal tax rate (EMTR), and simultaneously choose the...
Article
Full-text available
This paper reviews economic principles for optimality of the taxation of international profit, from both a global and national perspective. It argues that for traditional systems based on the residence of the investor or the source of the income, nothing less than full harmonisation across countries can achieve global optimality. The conditions for...
Article
Full-text available
This paper assesses the efficiency properties of recent corporation tax reform proposals of the European Union to introduce international loss consolidation and formula apportionment. We extend the effective tax rate methodology of Devereux and Griffith (1999) to allow for a potential loss and use a large firm level data set to identify the distort...
Article
The European Commission proposes to replace the current system of taxing corporate income using separate accounting by a two-step 'consolidation and apportionment' procedure. This paper uses a large set of unconsolidated firm-level data to assess the likely impact on corporate tax revenues in each member state. Taking pre-tax profit as given, overa...
Article
Full-text available
Foreword, Executive Summary, Chapter 1: The European Economy: Macroeconomic Outlook and Policy, Chapter 2: How much real dollar depreciation is needed to correct global imbalances?, Chapter 3: The effect of globalisation on Western European jobs: curse or blessing?, Chapter 4: Industrial policy, Chapter 5: Global warming: The neglected supply side,...
Article
This chapter presents the macroeconomic forecast and analyses monetary and fiscal policy in Europe. Because of the uncertainty about macroeconomic developments in the US and how they will be transmitted to the rest of the world as well as the uncertainty about how decoupled growth in emerging economies has become from the US cycle, a global perspec...
Article
Full-text available
A crucial issue for macro developments in Europe is how large and persistent the depreciation of the US dollar against the euro will be. This chapter offers an in-depth analysis of this.
Article
Full-text available
This chapter analyses the impact of increased economic integration with low-wage economies on Western European jobs: the message is that when taking all effects into account, globalisation is more likely in the end to raise rather than to reduce employment, because it will help making labour markets more flexible. The challenge for policy is to cou...
Article
Full-text available
This chapter addresses one of the most long-term issues for mankind: global warming. The chapter points out that most existing analyses have neglected the supply side. Without a proper analysis of supply-side effects, demand-reducing measures, which are generally regarded as selfevident solutions (such as emission permits, taxes on fossil fuels and...