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6161. Profit shifting by multinational corporations: Evidence from transaction-level data in Nigeria

Author:
Bathusi Gabanatlhong, Javier Garcia-Bernardo, Paulinus Iyika, and Miroslav Palanský
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Research on profit shifting by multinational corporations in developing countries is limited due to a lack of data. In this paper we use, for the first time, novel administrative data on the transactions of multinational corporations operating in Nigeria vis-à-vis related parties in other jurisdictions. The data provides a breakdown of these intra-group transactions into seven categories: (1) tangible goods, (2) services and fees, (3) royalties, (4) interest, (5) dividends, (6) reimbursements, and (7) other. We develop a methodology that uses this data to identify which transactions are most often used by multinationals to shift profits out of Nigeria and estimate their relative importance. We find that profits reported in Nigeria are highly sensitive to the hypothetical tax that would be paid on a transaction’s value in the partner jurisdiction: a 1 per cent increase in the hypothetical tax on outgoing transactions is associated with a 0.28 per cent increase in reported profits in Nigeria. Payments for services and fees, royalties, and interest going from Nigerian companies to affiliates in low-tax countries are the most important channels of profit shifting in Nigeria. We argue that our approach can be used to inform low-cost policy interventions and increase audit efficiency with potentially strong effects on corporate income tax collection.
Topic:
Multinational Corporations, Profit, Transactions, and Tax Havens
Political Geography:
Africa and Nigeria

6162. Corruption and crisis: do institutions matter?

Author:
Shrabani Saha and Kunal Sen
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
While the short-term effects of the COVID-19 pandemic on lives and livelihoods are well understood, we know little about the effect of the pandemic for longer-term outcomes such as corruption. We look at the historical data on political and economic crises to assess what we can learn from the long-term effects of past crises on corruption. We hypothesize that strong rule of law institutions may ameliorate the possible adverse effects of political and economic crises on corruption. We test our hypotheses using panel data for over 100 countries during the years 1800– 2020. The results suggest heterogeneous effects depending on the type of crisis and how we measure it. We find that rule of law institutions can control corruption in cases of political violence and economic slowdown, but the effect is not seen for democracy breakdowns, coups, armed conflict and civil war, and economic crisis such as currency and debt crisis.
Topic:
Corruption, Politics, Rule of Law, Institutions, Data, COVID-19, and Economic Crisis
Political Geography:
Global Focus

6163. Exploring social policy trajectories in Mainland Tanzania: Driving for gender-inclusive development?

Author:
Roosa Lambin and Milla Nyyssölä
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In July 2020, the United Republic of Tanzania gained the status of a lower-middleincome country. This came after two decades of significant social policy reforms and transformations in the country’s economic structures. This paper explores social policy trajectories in Mainland Tanzania with a gender lens, to better understand the contributions of these developments to inclusive development. More precisely, we examine past and current policy developments across the areas of health policy, social protection, and employment policy, and the level, reach, and quality of government social policy delivery to working-age women. The paper draws on a scoping review of diverse secondary materials, including academic publications, government policy documents, relevant statistics, and other types of literature. The findings indicate that despite significant advancements in the legal frameworks and increasingly gender-responsive government policy plans, Tanzanian social policy delivery remains two-tiered, with differences in provisions for women in the formal and informal sectors. Additionally, women continue to be largely overlooked in the broader industrialization and development strategy, which hinders the achievement of inclusive development in Tanzania.
Topic:
Development, Social Policy, Inclusion, and Gender
Political Geography:
Africa and Tanzania

6164. Profit shifting by multinational corporations in Kenya: The role of internal debt

Author:
Roseline Misati, Kethi Ngoka, Anne Kamau, and Maureen Odongo
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Illicit financial flows directly impact a country’s ability to raise, retain, and mobilize its own resources to finance sustainable development. Against a backdrop of a weak public financial position attributed to capital flight, tax avoidance, and dependence on corporate income taxes, governments in Africa face impediments to their efforts to widen the tax base. Using firm-level annual data from 2015–19 from multinational corporations’ audited financial statements, we assess the scale of profit shifting by those corporations with a presence in Kenya. Using a panel analysis, the study delves into the incentives for profit shifting, focusing on internal debt. It finds that a 10 per cent increase in the difference between Kenya’s corporate tax rate and that of the lending corporation’s home country increases the internal debt ratio by between 1 and 2 per cent. The results provide a basis for the design of targeted tax and revenue administration reforms against the backdrop of rising revenue needs.
Topic:
Multinational Corporations, Tax Systems, Profit, and Corporate Tax
Political Geography:
Kenya and Africa

6165. Whose intergenerational mobility? A new set of estimates for Indonesia by gender, geography, and generation

Author:
Diding Sakri, Andy Sumner, and Arief Anshory Yusuf
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Various scholars have estimated levels of intergenerational mobility in OECD countries. Fewer estimates are available for developing countries, where mobility arguably matters more due to starker differences in living standards. This paper presents new estimates of mobility for a developing country, namely Indonesia. The estimates are based on data from five waves of the Indonesian Family Life Survey, a longitudinal analysis of socio-economic status which began in 1993. We constructed a pooling sample consisting of 9,445 matching pairs of children and their parents. The paper estimates relative mobility using the intergenerational elasticity of income. We find that although, overall, the intergenerational elasticity of income is low compared with other developing countries, the level of mobility in Indonesia differs markedly by children’s gender and across provinces and generations.
Topic:
Mobility, Family, Survey, and Longitudinal Analysis
Political Geography:
Indonesia and Southeast Asia

6166. Cybersecurity for innovative small and medium enterprises and academia

Author:
Franklin D. Kramer, Melanie J. Teplinsky, and Robert J Butler
Publication Date:
01-2022
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Innovation is fundamental to United States global leadership, critical both for the economy and for national security. Yet the resilience of the US innovation ecosystem against adversary cyber espionage and attack—most specifically from China—has not received the attention required, particularly given the essential innovation roles played by small and medium-sized enterprises (SMEs) and by academia. In response to that challenge, this report sets forth a proposal for expert-provided cybersecurity resilient architectures for SMEs and academia that are engaged in the development and operation of key emerging and advanced technologies. Such cybersecurity resilient architectures would be operated by the private sector and funded through the establishment of transferable cybersecurity investment tax credits. The use of such architectures for the protection of emerging and advanced technologies would play a key role in ensuring that the United States maintains its worldwide innovation leadership.
Topic:
Cybersecurity, Innovation, Academia, and Resilience
Political Geography:
China, Asia, North America, and United States of America

6167. What do we know about cyber operations during militarized crises?

Author:
Michael Fischerkeller
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
The Department of Defense (DoD) will soon kick off the drafting of its cyber strategy and cyber posture review to align US cyber capabilities and operating concepts with the foreign policy objectives of the Joseph Biden-Kamala Harris administration. Given that the administration describes China as the “pacing threat,” debates over the best use of cyber operations and campaigns will likely be framed by US-China interaction in day-to-day competition, and by a potential militarized crisis and war over the status of Taiwan. This essay focuses on how cyber operations employed during militarized crises are likely to impact escalation management. Policymakers may be attracted to the idea that cyber operations could serve as de-escalatory offramps in a crisis. Such expectations should be tempered, if not completely set aside, for two reasons. First, there is no experience with cyber operations employed during a militarized crisis between two nuclear-armed peers. Absent direct experience, all one can rely on is academic research. Yet, secondly, deductive and empirical academic research provides no basis for confidence that cyber operations are either de-escalatory or non-escalatory in the context of militarized crises.
Topic:
Foreign Policy, Cybersecurity, Crisis Management, and Militarization
Political Geography:
China, Taiwan, Asia, North America, and United States of America

6168. The Afghan refugee crisis: How to resurrect the global refugee resettlement coalition

Author:
Rory Stewart
Publication Date:
02-2022
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Six months after the fall of Kabul, the humanitarian situation in Afghanistan has deteriorated at an alarming rate. The threat of famine and economic collapse looms over the entire country. Consequently, many Afghans are fleeing both these appalling conditions and the oppressive Taliban that now control the country. However, Afghan asylum seekers will be facing difficult circumstances even after they leave their country. The global resettlement order remains severely atrophied after the refugee crisis of the mid-2010s, leaving it unable to face the challenge in a rise in Afghan refugees or for other future refugee crises. As the humanitarian tragedy in Afghanistan intensifies, a new global refugee resettlement coalition has to be formed to address the escalating refugee crisis. The primary objectives of this report, written by Rory Stewart, Senior Fellow at Yale University’s Jackson Institute and former UK development minister, are to: outline the ways in which states have already attempted to respond to the Afghan refugee crisis; discuss realistic and measured ways to address the refugee crisis without undermining border security; improve transatlantic and global coordination in reinvigorating standards on refugee resettlement across the world. This report outlines how the refugee resettlement coalition can be restructured. Beginning with the United States, United Kingdom, and coalition of likely EU member states (such as France, Germany, Benelux, and the Nordic countries), these countries can resettle approximately 320,000 refugees annually. This would happen if each country committed to taking in 0.05% of their respective populations each year: 33,026 for the United Kingdom, 166,400 for the United States, and 120,000 for the likely coalition of willing EU member states. The report also explains how the humanitarian situation in Afghanistan has deteriorated significantly since the fall of Kabul, why Afghans are leaving their home country in increasing numbers, and why the international community must reinvigorate the global resettlement coalition to address this crisis and future refugee crises.
Topic:
Refugee Crisis, Resettlement, Asylum, and Humanitarian Crisis
Political Geography:
Afghanistan and South Asia

6169. US-China vaccine diplomacy: Lessons from Latin America and the Caribbean

Author:
María Eugenia Brizuela de Ávila, Bosco Marti, Riyad Insanally, and Claudia Trevisan
Publication Date:
02-2022
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
COVID-19 has laid bare the competing strategies and practices of the United States and China to amass further clout in Latin America and the Caribbean (LAC). In many ways, the pandemic is quickly accelerating a regional trend seen over the last decade: China uses its growing economic and diplomatic muscle to provide an alternative to US activities and interests. The implications of diverging COVID-19 responses, notably at the onset of the pandemic’s rise in the region, will reverberate beyond the health sector. What might the differing US and China pandemic approaches portend for future influence in the region? For the United States and China, the pandemic has opened new opportunities to deepen regional ties. Both countries’ assistance eventually centered on vaccine diplomacy, but China was first out of the gates in offering vaccinations beyond its borders. For LAC, its interactions with the United States and China during the pandemic are emblematic of broader trends: China provides an alternative to LAC during crisis moments; and regional leaders use US-Chinese competition to their advantage. Both instances are visible in the region, including in the four geographic areas analyzed in the following pages: Central America, Trinidad and Tobago (T&T), Brazil, and Mexico. In each case, distinct US and Chinese engagement at various stages of the pandemic—along with the host countries’ own actions and reactions—have yielded short-term results and some that are likely to persist. In Central America, China provided strategic diplomatic messaging alongside vaccine shipments, but the United States donated more vaccines. In T&T, Chinese vaccines were accompanied by a new loan, and the country’s prime minister applied a pragmatic approach to acquire vaccines from both the United States and China. For Brazil, laboratory-to-laboratory agreements highlighted a different version of vaccine diplomacy: one that occurs at the subnational level. In Mexico, numerous diplomatic exchanges occurred alongside substantial vaccine purchases from US and Chinese manufacturers. Vaccine-related diplomacy also contributes to an evolving discussion about the different ways China and the United States more broadly engage the region—and vice versa. Starting from a low base, Chinese engagement with LAC has focused on and grown significantly in diplomacy, trade, and investment over the last decade. China is either the first- or second-largest trading partner for many countries in the Americas and a top source of foreign direct investment among its allies. Current US strategy in the region similarly reflects a new sense of deploying diplomatic tools to advance hemispheric prosperity, while doing so as part of a broader vision that reflects partnering to address global challenges—from climate change and the instability that sparks migration to shoring up democracy and addressing corruption. Overall, the region’s proximity, shared peoples, history, and borders with the United States provide greater depth and multidimensionality to the relationship. Consequently, vaccine diplomacy represents a greater marginal opportunity for China to broaden and deepen regional ties.
Topic:
Diplomacy, Bilateral Relations, Vaccine, and COVID-19
Political Geography:
China, Latin America, Caribbean, and United States of America

6170. THE DAY AFTER: Anticipating trouble in the event of a US withdrawal from Syria

Author:
Jomana Qaddour
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
With approximately nine hundred troops in northeastern and southeastern Syria, the United States ostensibly aims to prevent the reemergence of the Islamic State group (IS). The withdrawal of US forces from Afghanistan, initiated by the Trump administration and completed by the Biden administration, was followed by the rapid collapse of the pro-Western government of Afghanistan and its replacement by the Taliban. This has led to questions about what will happen if and when US forces withdraw from northeastern Syria. A new issue brief by Atlantic Council’s Senior Fellow Jomana Qaddour examines the social, political, and economic implications and the challenges to US presence in Syria. While the US military presence remains limited in number, this report also underscores how aggregate US influence is much more potent than a force number of nine hundred suggests. US troop presence has enhanced counterterrorism operations, obstructed IS and Iranian smuggling routes, and facilitated humanitarian aid and economic benefits to a population in Syria that would be languishing under even more dire conditions. It can be argued that it has also limited local violence and halted a resurgence of public IS activities. According to the most recent Syria policy review, US presence is limited to the goal of counterterrorism operations, which implies that it is a conditions-based, not calendar-based deployment. Those conditions should include local Syrian forces that can reasonably deny IS a safe haven from which to plot terrorist attacks against the United States and its allies. It is well known that the Assad regime is not likely to provide the necessary capability to assure the United States and its allies that it can prevent IS’s return. In reality, there is little room to positively read the reassertion of Syrian government control over northeastern Syria; and withdrawal from Syria would be a serious gamble for US national security concerns in Syria and the region.
Topic:
Foreign Policy, Armed Forces, Military Affairs, Islamic State, and Syrian War
Political Geography:
Middle East, Syria, and United States of America