CESifo and the 2015 IIPF Congress

CESifo, the Ifo Institute and the International Institute of Public Finance (IIPF) make a powerful and fruitful mix. The scientific organization of the latest IIPF Congress, held in late August in Dublin, was chaired by Panu Poutvaara, Director of the Ifo Centre for International Comparisons and Migration Research, and Dhammika Dharmapala (University of Chicago), both long-time Fellows at the CESifo Research Network. The local organising committee, in turn, was chaired by Ron Davies (University College Dublin), also a long-time CESifo Fellow.

The more than 400 participants over two days of deliberations addressed issues revolving around taxation in the global economy, with keynote lectures delivered by Rosanne Altshuler (Rutgers University), Ruud de Mooij (IMF), Mihir Desai (Harvard Business School), and Michael Devereux (Director of the Oxford University Centre for Business Taxation and a former IIPF President).

A central insight of the keynote speeches was that various international agreements that have aimed at preventing double taxation can result in double non-taxation, as firms adjust their corporate structure and transactions to minimize their tax burden.

Some examples mentioned:

• A multinational firm in country Athat exempts dividends received from foreign subsidiaries might establish a subsidiary in a tax haven H. This subsidiary would then lend money to another subsidiary in country B at a high interest rate. As interest payments are tax deductible, this allows the firm to avoid making taxable profits at B. Subsidiary in H would then pay dividends to the parent company in A, with profits generated in B not being taxed.

• A multinational company could place its patents and trademarks in a subsidiary in a country that offers such income a favourable tax treatment, and then divert profits from other countries there as licensing fees and the like.

• A firm could use complicated financial contracts such that payments are treated in the country from which the payment is made as interest payment and in the country in which it is received asa dividend payment, to take advantage of different tax rules (interests payments being tax deductible when profits are calculated, while most countries exempt dividend income received from foreign subsidiaries from profit taxation, with the US as a prominent exception).

On the discussion on whether corporate taxation can (and should) survive at all, Michael Devereux suggested an intriguing system inspired by VAT taxation, in which firm taxation would be based on payment flows, but with an important difference: the value added of the firm would be calculated treating both the inputs it buys and the wage costs it pays as deductibles. The idea is so striking that it will surely give rise to a lively debate.

The conference, the most important in its field, had no less than 91 sessions that reviewed 356 presentations. The only way to accommodate such a number of presentation was to hold 13 parallel sessions per timeslot.

There were altogether 427 registered participants. When accompanying persons and keynote speakers are taken into account, the number swells to 486 participants.

An important innovation in this year's Congress was the GIZ Master Class, sponsored by Germany’s Federal Agency for International Cooperation (GIZ). Selected participants from developing countries in Africa and Asia presented their papers to get comments from an expert, typically with one expert and two presenters. This was followed by a poster session for further interaction. The aim of the master class is to make IIPF more global, increasing the number of presenters from outside Europe, USA, Canada and Japan.

The "IIPF Peggy and Richard Musgrave Prize", the main distinction awarded at the conference, was given to Joana Naritomi, London School of Economics and Political Science, for her paper Consumers as tax auditors. The prize committee consisted of Ruud de Mooij, Dhammika Dharmapala and Panu Poutvaara.