Fixing International Corporate Taxation—Not Just a Problem for Advanced Economies


Mick KeenBy Michael Keen

It’s hard to pick up a newspaper these days (or, more likely for readers of blogs, to skim one online) without finding another story about some multinational corporation managing, as if by magic, to pay little corporate tax. What lets them do this, of course, are the tax rules that countries themselves set. A new paper takes a closer look at this issue, which is at the heart of the IMF’s mandate: the way tax rules spill over national boundaries, and what this means for macroeconomic performance and economic development. These effects, the paper argues, are pretty powerful and need to be discussed on a global level.

Follow the money

Take, for instance, international capital movements. Though tax is not the only explanation, the foreign direct investment (FDI) positions shown in Table 1 are hard to understand without also knowing that  tax arrangements in several of these countries make them attractive conduits through which to route investments. In its share of the world’s FDI, for example, the Netherlands leads the world; and tiny Mauritius is home to FDI 25 times the size of its economy.

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Imagining If Key Foreign Banks Start Reducing Their Exposure in Asia


By Anoop Singh

European banks play an important role in supplying credit to several Asian economies. What happens if they start reducing their exposure to the region?

The largest borrowers from European banks are Australia, Hong Kong SAR, Korea, Malaysia, New Zealand, Singapore, and Taiwan Province of China, while China, India, and the economies of South East Asia generally have smaller liabilities.

Among European banks, those from the United Kingdom have a particularly significant presence in Asia. For most regional economies, the nonbank private sector—businesses and households—is the main recipient of credit from foreign banks as a whole.

Prominent role

European banks play a prominent role in the areas of trade credit and specialized project financing. In several Asian economies, however, lending by local subsidiaries and branches is funded primarily by local deposits, reducing potential deleveraging pressures.

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