Ruud A. de Mooij

Ruud A. de Mooij
International Monetary Fund · Fiscal Affairs Department

PhD

About

240
Publications
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6,830
Citations

Publications

Publications (240)
Article
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Policy-makers are struggling to accommodate cryptocurrencies within tax systems not designed to handle them; this paper reviews the issues that arise. The greatest challenges are for implementation: crypto’s pseudonymity is an inherent obstacle to third-party reporting. Design problems arise from cryptocurrencies’ dual nature as investment assets a...
Article
Residual profit allocation (RPA) schemes have come to prominence in discussions of international tax reform but with almost nothing known about their economic impact. These schemes tax multinationals by allocating their “routine” profits to source countries and sharing their remaining “residual” profit across countries on some formulaic basis. This...
Chapter
Strains on the current international system for taxing multinational enterprises have become ever more evident. This has sparked a global debate on how to reform the international tax framework, with proposals including simplified formulary methods. The authors discuss the merits and challenges of methods of formula apportionment and residual profi...
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This chapter discusses the theory and practice of tax design to achieve an efficient and equitable outcome in support of inclusive growth. It starts with a discussion of the key principles from tax theory to guide practical tax design. Then, it elaborates on the practice of tax policy making, thereby discussing key choices in the structure of the p...
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Rising inequality and widespread poverty, social unrest and polarization, gender and ethnic disparities, declining social mobility, economic fragility, unbalanced growth due to technology and globalization, and existential danger from climate change are urgent global concerns of our day. These issues are intertwined. They therefore require a holist...
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The Dutch tax system distorts economic decisions, treats equal economic positions unequally, and is extraordinarily complex. Following in the footsteps of the Mirrlees Review, prominent economists from academia and the policy arena, at home and abroad, provide evidence-based independent analyses of the system’s shortcomings, as well as detailed pol...
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Thin capitalization rules (TCRs) aim to mitigate profit shifting by multinational corporations (MNCs) but, by raising the cost of capital for affected affiliates, can also negatively affect real investment. Exploiting unique panel data on multinational companies in 34 countries during 2006-2014, we estimate that the size of this adverse investment...
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Thin capitalization rules (TCRs) aim to mitigate profit shifting by multinational corporations (MNCs) but, by raising the cost of capital for affected affiliates, can also negatively affect real investment. Exploiting unique panel data on multinational companies in 34 countries during 2006–2014, we estimate that the size of this adverse investment...
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This paper discusses the theory and practice of tax design to achieve an efficient and equitable outcome, i.e. in support of inclusive growth. It starts with a discussion of the key principles from tax theory to guide practical tax design. Then, it elaborates on more granular tax policy, discussing key choices in the structure of the personal incom...
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Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest rela...
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This paper exploits a unique dataset (monthly observations on consumer prices and VAT rates for around 70 commodity groups in 17 Eurozone countries over 1999–2013) to identify the extent of pass through for several types of VAT change—including (a key concern, previously unaddressed) in the standard VAT rate. The impact on consumer prices proves to...
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Schemes of residual profit allocation (RPA) tax multinationals by allocating their 'routine' profits to countries in which their activities take place and sharing their remaining 'residual' profit across countries on some formulaic basis. They have recently and rapidly come to prominence in policy discussions, yet almost nothing is known about thei...
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Unilateral adoption of transfer pricing regulations (TPRs) may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006–2014, to find that MNC affiliates reduce their investmen...
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Formula apportionment as a way to attribute taxable profits of multinationals across jurisdictions is receiving increased attention. This paper reviews existing literature and discusses experiences in selective federal states to evaluate the economic properties of formula apportionment relative to the current international tax regime that is based...
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This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on the main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral, and corporate inversions. Moreover, it performs a meta‐analysis of th...
Article
Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate corporate default risk. We find that rules targeted a...
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This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the ext...
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Until 2018, Belgium had a unique corporate income tax system due to its notional interest deduction, also known in public finance literature as the allowance for corporate equity. At the same time, it had one of the highest corporate tax rates in Europe at 34 percent. The latter came under severe pressure to reform and, as of 2018, the government h...
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International corporate tax issues have now risen to prominence in public debate. But while there is considerable empirical evidence for advanced countries on the crosscountry fiscal externalities at their heart, there is almost none for developing countries. This paper uses panel data for 173 countries over 33 years to explore their magnitude and...
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Understanding the impact on banks' capital structures of tax biases toward debt finance is critical to assessing policy responses to socially excessive bank leverage-but there is no empirical evidence of its extent. Guided by some simple theory, this paper explores this impact for a large panel of banks in 82 countries. On average, the tax sensitiv...
Chapter
The financial crisis has triggered new debates on regulation and taxation of the financial sector. Economists and policy makers were challenged to understand the sequence of events and the complex interactions between financial markets and the real economy—often not captured by economic models. The literature on banking and finance has paid almost...
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Analytical and empirical perspectives on the interplay of taxation and regulation in the financial sector. The global financial crisis has prompted economists to rethink fundamental questions on how governments should intervene in the financial sector. Many countries have already begun to reform the taxation and regulation of the financial sector—i...
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Analytical and empirical perspectives on the interplay of taxation and regulation in the financial sector. The global financial crisis has prompted economists to rethink fundamental questions on how governments should intervene in the financial sector. Many countries have already begun to reform the taxation and regulation of the financial sector—i...
Article
By how much will faster economic growth boost government revenue? This paper estimates short- and long-run tax buoyancy in OECD countries between 1965 and 2012. We find that, for aggregate tax revenues, short-run tax buoyancy does not significantly differ from one in the majority of countries; yet, it has increased since the late 1980s so that tax...
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This paper explores how corporate income tax reform can help Japan increase investment and boost potential growth. Using international and Japan-specific empirical estimates of corporate tax elasticities, investment is predicted to expand by around 0.4 percent for each point of rate reduction. International consensus estimates suggest further that...
Chapter
This chapter discusses the tax side of fiscal adjustments. It first explores the idea, prominent in troubled Euro area countries, of a “fiscal devaluation”—that is, shifting from social contributions to the value added tax (VAT) as a way to mimic a nominal devaluation. The chapter then assesses the wider scope for using a VAT to achieve a fiscal co...
Article
That most corporate tax systems favor debt over equity finance is now widely recognized as, potentially, amplifying risks to financial stability. This paper makes a first attempt to explore, empirically, the link between this tax bias and the probability of financial crisis. It finds that greater tax bias is associated with significantly higher agg...
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This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds that there is no significant difference. The marginal tax effect for both banks and non-banks is close to 0.2. However, the responsiveness differs considerably across the size distribution an...
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Legal, administrative and economic considerations offer no compelling reason for the current tax advantage of debt finance in many countries. Instead, this ‘debt bias’ creates significant inequities, complexities and economic distortions. These are likely to be larger than previously thought, especially in the financial sector. To tackle debt bias,...
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This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and (ii) whether international corporate tax differentials vis-a-vis...
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This paper analytically derives the conditions under which the slope of the tax reaction function is negative in a classical tax competition model. If countries maximize welfare, we show that a negative slope (reflecting strategic substitutability) occurs under relatively mild conditions. Simulations suggest that strategic substitutability occurs u...
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Understanding the impact of the asymmetric tax treatment of debt and equity on the capital structures of financial institutions is critical to shaping and assessing responses to the problem of excessive leverage that underlay the 2009 financial crisis - but there is no empirical evidence to draw on. Guided by a simple model of banks? financing deci...
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The ageing of the population imposes a considerable burden on long-term public finances in most industrialized countries. Generational accounting has been used across the world to assess the generational imbalance associated with current public policies. In this study, we incorporate Dutch generational accounts in an open economy overlapping genera...
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Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this va...
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This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public funds. The reason is that the marginal cost of public fund...
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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...
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Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series repl...
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We assess the economic impact of introducing consolidation with formula apportionment in the European Union and consider alternative enhanced cooperation agreements. We find that the consolidation is likely to yield a small aggregate welfare gain in Europe. However, not all countries benefit. A coalition of winning countries reduces the welfare gai...
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A flat tax rate on labour income has gained popularity in European countries. This article assesses the attractiveness of such a flat tax in achieving redistributive objectives with the smallest distortions to employment. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the dat...
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This paper analyzes enhanced cooperation agreements in corporate taxation in a three country tax competition model where countries differ in size. We characterize equilibrium tax rates and the optimal tax responses due to the formation of an enhanced cooperation agreement. Conditions for strategic complementarity or strategic substitutability of ta...
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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...
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Abstract This paper analyses the impact of corporate taxes on structural unemployment, using an applied general equilibrium model for the European Union. We find that the unemployment and welfare effects of corporate taxes differ considerably among European countries. The magnitude of these effects rises in particular in the broadness of the corpor...
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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...
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Previous empirical studies on the effect of age on productivity and wages find contradicting results. Some studies find that if workers grow older there is an increasing gap between productivity and wages, i.e. wages increase with age while productivity does not or does not increase at the same pace. However, other studies find no evidence of such...
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...
Chapter
How much tax coordination is desirable in the European Union — and of what type? This chapter seeks to address these issues by taking as guiding principles the notions of subsidiarity and proportionality that have been central in wider discussions of the appropriate architecture of European Union policy making. We start by considering what the lite...
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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...
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Corporate taxes exert a variety of effects on business behaviour. A wealth of empirical evidence assesses the magnitude of these behavioural margins of taxation. This article offers an up-to-date review and aims to provide common ground by computing for each distortion the semi-elasticity of the corporate tax base. We pay particular attention to in...
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European governments aim to raise labour supply, cut unemployment and, at the same time, maintain social cohesion. Yet, economists have stressed the trade-off between these objectives. This paper reviews the key policy insights from optimal tax theory to identify options for reform in the tax-benefit system that can potentially improve the equity-e...
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This paper performs a meta-analysis of empirical estimates of uncompensated labour supply elasticities. For the Netherlands, we find that an elasticity of 0.5 for women and 0.1 for men is a good reflection of what the literature reveals. The elasticity for men hardly differs between countries, but for women some cross-country variation is found. Th...
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In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on legal form of business to analyze income shifting via incorporation. The results sugge...
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This paper has been awarded the Peggy and Richard Musgrave Award 2007 . See http://www.iipf.org/msgpz.htm. The discussion paper has resulted in a publication in International Tax and Public Finance .

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