Estimating the revenue losses of international corporate tax avoidance: the case of the Czech Republic

Abstract

International corporate tax avoidance by multinational enterprises likely lowers the Czech Republic’s corporate income tax revenue, but it is not clear by how much. To clarify this I first review existing estimates of the revenue losses of international corporate tax avoidance to government revenue worldwide. I then discuss revenue estimates relevant for the Czech Republic and develop a few new, albeit only illustrative, ones. None of the existing research focused on the Czech Republic nor did the six recent international studies I examine provide reliable estimates for the Czech Republic. The extrapolations from these studies result in a revenue loss of a quite wide range with a median of 10% of current corporate income tax revenues. The other newly prepared estimates, based on firm-level and aggregate data, are of similar magnitude. I conclude with a discussion of these rough estimates as well as questions for further research and policy recommendations.

Keywords:

• Corporate income tax
• international taxation
• tax avoidance
• BEPS
• Czech Republic

Acknowledgement

I thank Annie Bartoň and Ondřej Kopečný for their comments.

Notes

1. More specifically, the sample consists of participants at a workshop on tax havens, organised in the Czech capital of Prague by the Czech branch of the International Fiscal Association on 10 May 2016. I conducted a survey among the participants asking them how much they think the Czech public finances lose annually due to BEPS and asking them to fill in their answers on a paper questionnaire (the questionnaire was in Czech and the question read ‘Kolik miliard korun ročně tratí české veřejné rozpočty kvůli BEPS?’, i.e. ‘How many billion CZK are the Czech Republic’s annual revenue losses due to BEPS?’ in English). The questionnaire asked them to fill in anonymously which sector they were from (public, private, academia, other) and their response to the question, in billion CZK.