From Tax Competition to Subsidy Competition

41 Pages Posted: 17 Apr 2020 Last revised: 11 Jan 2021

See all articles by Noam Noked

Noam Noked

The Chinese University of Hong Kong (CUHK) - Faculty of Law

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Date Written: 2020

Abstract

Recent international tax reforms provide an advantage to nontax subsidies over economically equivalent tax benefits. Under several international tax standards, multinational enterprises are generally better off when they receive non-tax subsidies instead of equivalent tax benefits. As a result, countries now have a stronger incentive to adopt non-tax subsidies in order to attract the investment of multinational enterprises. This tax-driven preference for non-tax subsidies could shape the landscape of international tax and subsidy competition in the future. This Article contends that this preference cannot be justified on policy grounds. To treat equivalent measures similarly, this Article proposes several changes in the international tax standards, as well as the design of the OECD’s recent proposal for a global minimum tax.

Keywords: Tax Competition; Subsidy Competition; BEPS; Global Minimum Tax; GloBE; Tax Incentives; R&D Incentives; Tax Benefits; Subsidies; Tax Competition

JEL Classification: K34

Suggested Citation

Noked, Noam, From Tax Competition to Subsidy Competition (2020). 42 University of Pennsylvania Journal of International Law 445 (2020), Available at SSRN: https://ssrn.com/abstract=3565835

Noam Noked (Contact Author)

The Chinese University of Hong Kong (CUHK) - Faculty of Law ( email )

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