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ATP Identification Using Balance of Payments Data: Case of the Czech Republic

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  • Jan Pavel
  • Jana Tepperová

Abstract

Multinational enterprises apply aggressive tax planning (ATP) to optimize global tax liability usually by combining parameters of different tax systems in both national jurisdictions and double tax treaties. At a macroeconomic level, the implementation of various optimization schemes affects the given values of the balance of payments. By conducting econometric analysis, the present paper examines the extent to which selected optimization schemes can be traced in the Czech Republic's balance of payments. The results show that payments for counselling services and royalties flow mostly to locations with low corporate tax rates, which may suggest an attempt to shift the tax base. Moreover, dividend and interest yields tend to move to countries with high foreign direct investments (FDIs) and balanced ratios between FDIs received and made, indicating that they are only conduit (transit) countries through which profits are transferred to another destination.

Suggested Citation

  • Jan Pavel & Jana Tepperová, 2021. "ATP Identification Using Balance of Payments Data: Case of the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(1), pages 3-19.
    • Handle: RePEc:prg:jnlpep:v:2021:y:2021:i:1:id:757:p:3-19
    DOI: 10.18267/j.pep.757
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    More about this item

    Keywords

    BEPS; balance of payments; corporate taxation; FDI; tax planning;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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