The Centre for Business Taxation conducts independent academic research into tax policy.

Oxford International Tax Group

Oxford International Tax Group

Formed in 2013 by Professor Michael Devereux, this group brings together economists and lawyers from across the world to reconsider the fundamentals of the international tax system and propose more considered reforms. 

The members of the group are:

Alan J. Auerbach (UC Berkeley)

Michael P. Devereux (Oxford, Chair)

Michael J. Keen (IMF)

Paul Oosterhuis (Skadden, Arps, Slate, Meagher & Flom LLP)

Wolfgang Schön (Max Planck Institute, Munich)

John Vella (Oxford)

The group aims to:

  • set out and examine fundamental issues of principle and practice in the taxation of business profit and the allocation of taxing rights over such profit amongst countries, paying attention to the interests and circumstances of advanced and developing countries
  • evaluate the existing system and potential reform options

In its forthcoming book, the group will set out in detail two reform options. One is the destination-based cash flow tax (see the draft chapter on this below). The second is a Residual Profit Allocation by Income. In March 2019, the group posted a draft chapter setting out this option. 

Access the draft chapter.

Events and publications

The group has held two conferences to present its work in Oxford and Washington DC and has also published two draft chapters:

The group is grateful for financial support from the Nuffield Foundation, the Burch Center and the Max Planck Institute.

International Tax Cooperation

Group photo
Delegates at International Tax Cooperation Conference

The challenges and opportunities of multilateralism

International Tax Cooperation: the challenges and opportunities of multilateralism

This conference, held on 10-11 December 2018, was supported by the British Academy as part of its Rising Star Engagement Award which was awarded to Dr Anzhela Cédelle.

International tax cooperation is undergoing a period of rapid transformation. The global efforts led by the G20 and the OECD, which were designed to address base erosion and profit shifting (BEPS) and enhancing tax transparency, have shaken up traditional institutional and legal approaches. This conference aimed to engage academics (both established and early career), policymakers and representatives of international organisations in the evaluation of recent developments in international tax cooperation and explore the challenges and opportunities created by multilateral approaches.

View full programme and some of the papers presented.  

Research highlights

Destination-based cash flow tax

The destination-based cash flow tax (DBCFT) is intended to replace a tax on corporate income or profits. Our research has explored whether DBCFT, if adopted by one or more states, would fit with existing double tax treaties.

The treatment of a DBCFT under a double tax treaty depends crucially on whether a DBCFT is within the scope of the 'taxes covered' provisions which are typically included in tax treaties, and in relation to which the various provisions of the treaty are intended to operate. 

Measuring corporation tax across countries

Anecdotal evidence suggests that uncertainty about taxes on profit is important in determining the investment and location behaviour of business. This view is supported by substantial theoretical literature. However, there is very little solid empirical evidence.

In 2016, the Centre conducted a survey of senior tax professionals in large businesses and in professional firms on the uncertainty of corporation tax in major countries. This work formed the basis of a subsequent study undertaken by the OECD.

A total of 88 respondents from businesses in 10 countries answered questions about 25 countries. Over 10% of the world’s businesses, with turnover in excess of $5 billion, were respondents.


How much tax do different types of company pay in?

Katarzyna Habu, a former researcher at the Centre, explored the question of how much corporation tax different types of company pay in the UK. This research used UK corporate tax returns made available by HMRC in its Datalab. 


Proposals to tax profits in the digitalised economy

Digitalisation of the economy has brought the international corporate tax debate to a critical point, with different reform options being considered by the 122 countries participating in the OCED’s Inclusive Framework. One group of countries favours reform targeted at certain highly digitalised businesses, a second group favours system-wide reform and a third argues that there is no immediate need for further reform. This issue will dominate the international corporate tax policy debate for the next few years and its outcome could have a lasting effect on the international corporate tax system. The situation has been addressed in two CBT papers.


Devereux, M. & Vella, J., June/July 2018. Implications of digitalisation for international corporate tax reform in Gupta, S. et al., eds. Intertax, 46(6&7), pp.550-559.

Devereux, M. & Vella, J., 2018. Taxing the digitalised economy: targeted or system-wide reformBritish Tax Review, 4, pp.387-406.

Devereux, M. The Digital Services “Sutton” TaxCBT Blog.

Vella, J. Taxing Digital Business: a Plea for Holistic ThinkingCBT Blog.

How well do the income allocation rules work together after BEPS?

The OECD’s Base Erosion and Profit Shifting (BEPS) project made a number of very significant changes to the transfer pricing rules. These rules operate to regulate (by reference to the arm’s length principle) the pricing of transactions and arrangements between separate legal entities in the same multinational group. The effect of other changes made in the BEPS project has been to widen the circumstances in which one legal entity might be regarded as constituting a 'permanent establishment' (in effect, a taxable branch) of another. 

All of these changes raise the question of how the two sets of income allocation rules (the transfer pricing rules and the attribution rules) fit together. That is the question that is explored in this paper. Following the relevant BEPS changes, the interplay of these two sets of income allocation rules is technically very complex. Those provisions are especially relevant in the case of complex global business models and structures. 

The analysis concludes that a number of critical problems have not been considered by the further OECD guidance. For example, there are various problems relating to the treatment of risk that the new guidance simply ignores. The practical consequences of this situation are important, not least because of the need for clear and relevant OECD guidance as a mechanism to reduce cross border disputes.


Andrus, J. & Collier, R., 2017. OECD Discussion Draft: additional guidance on the attribution of profits to permanent establishments, British Tax Review, 5, pp509-517.

The challenges for developing countries of implementing the ALP in practice

This paper seeks to assess the (highly practical) matter of whether the OECD’s BEPS project has helped, or alternatively hindered, the task for developing countries of applying transfer pricing rules pursuant to the arm’s length principle (ALP). 

The paper discusses the fact that material tracts of the BEPS output were arguably of only distant relevance in the context of the immediate, mainstream issues facing developing states. Nonetheless, the effect of the transfer pricing changes that are relevant to developing states is to introduce material complexity into the required administration of the transfer pricing rules. For example, the revised approach from BEPS places a much greater emphasis on the actual conduct of the parties. This increased importance of actual conduct clearly makes the process of administering the transfer pricing rules significantly more onerous. 

The paper analyses a number of other developments in the BEPS project that are considered to be helpful to the position of developing states. However, there are two factors which in combination will prove highly problematic for developing countries. First, there is the inevitable escalation of sophistication in the transfer pricing techniques used by (at least some) multinational companies, which will presumably then require corresponding responses by tax authorities, leading in turn to more sophisticated multinational responses, and so on. Second, there is the task of dealing with the ever-increasing complexity in what is required to comply with the ALP. The paper argues that this complexity needs to be addressed in its own right. Given their higher reliance on corporate income tax and challenges with developing resources to administer the ALP, this is a debate in which developing countries have a special interest.

Collier, R., 2018. The Impact of the OECD/G20 Base Erosion and Profit Shifting Project on the Task for Developing Countries of Applying the Arm’s Length Principle in Practice, Bulletin for International Taxation, 72(4/5), pp325-330.

How important are expectations about future tax policy for firms’ location choice?

There is a great deal of economic research, which attempts to identify the effects of the current tax system, and especially the current tax rate, on the behaviour of economic agents. One important issue that has been studied is the impact of the current tax rates on business location choices.

This paper explores whether firms take potential future tax rate changes into account when making their location choice today. This is difficult to evaluate since firms’ expectations about future tax policy are not observed. This research exploits the fact that – once a location decision has been made – governments have the opportunity to tax the resulting business profit at a higher rate the less mobile is the business (so that it cannot move away to avoid the tax).

By studying a highly immobile firm type – wind turbines – after 2000 in Germany, the research is able to show that German municipalities increased the tax rate on business profits the more wind turbines were located in their jurisdiction. In the second part of the analysis, the research then shows that non-turbine firms were less likely to enter jurisdictions with a high risk of wind turbines entering in the future. This is consistent with the non-turbine firms anticipating a higher tax rate in the future. 

The research contributes to our understanding of the impact of tax on business behaviour in two ways. First, it highlights that current tax policy has to be credible to be effective. In the setting examined, governments could not credibly commit not to raise the tax rate in the future. Second, the research highlights that for empirical work the current tax rate is not necessarily a good proxy for business expectations of the future tax rate.


Langenmayr, D., & Simmler, M., December 2017. Why the current tax rate tells you little: Competing for mobile and immobile firms, CESifo Working Paper, 6904, pp1-41.

How would a destination-based tax fit with existing double tax treaties?

This paper discusses how a DBCFT, if adopted by one or more states, would fit with existing double tax treaties.

The provisions of most double tax treaties are based on the OECD Model Tax Convention on Income and on Capital, reflecting the assumption that both contracting states operate a traditional income tax system. Given that a DBCFT is economically equivalent to a VAT combined with a reduction in payroll taxes, it is not surprising that, as the discussion in the paper shows, treaties are poorly equipped to accommodate a DBCFT.

The treatment of a DBCFT under a double tax treaty depends crucially on whether a DBCFT falls within the scope of the 'taxes covered' provisions which are typically included in tax treaties, and in relation to which the various provisions of the treaty are intended to operate. The analysis on this point is not straightforward and the paper therefore considers the relevant implications in the situation both where the DBCFT is covered, and where it is not.

The discussion identifies a number of existing difficulties with the OECD Model Treaty which have a wider relevance than simply to the status of the DBCFT for treaty purposes. For example, there is a discussion of the vague and imprecise standards for assessing the nature of a tax on 'income' for treaty purposes. The paper also considers the key policy considerations. This includes the likely treaty policy of states enacting a DBCFT, as well as the implications for states with no DBCFT.


Collier, R. & and Devereux, M., July 2017. The Destination-Based Cash Flow Tax and Double Tax Treaties, Oxford University Centre for Business Taxation Working Paper, 17/06. 

An abbreviated version of the paper was published: December 28, 2017. The Border-Adjusted Tax and Tax TreatiesTax Notes International, 88.

How far do R&D tax incentives stimulate R&D?

This paper used confidential UK corporation tax returns data made available in the HMRC Datalab to study the impact of a 2008 reform that indirectly made more generous R&D tax credits available to many additional medium-sized enterprises, when the official definition of ‘small and medium-sized enterprises’ was changed. The quasi-experimental research design placed the medium-sized firms that gained access to the SME scheme only after the reform in the ‘treated group’, while firms just above the new threshold with more than 500 employees were placed in the ‘control group’.

Controlling for other factors around the time of the reform including the global financial crisis, the researchers have found that the treated firms (employing between 250 and 500 employees) increased their R&D spending by around 30 percent. This increase implies that the reform generated around £1 in R&D expenditure for every £1 foregone in corporation tax. The researchers also found that the effects differ between different types of firms.

Guceri, I & Liu, L., 2019. Effectiveness of Fiscal Incentives for R&D: Quasi-experimental evidence. American Economic Journal: Economic Policy, 11 (1). pp.266-291

Is the destination-based cash flow tax open to avoidance?

An important issue for the destination-based cash flow tax (DBCFT) is its robustness to tax avoidance. A research project in this area has generated two published two research papers. The first paper, “International Tax Planning under the Destination Based Cash Flow Tax” considered the robustness of the DBCFT to three common ways of shifting taxable profits between countries: through manipulation of transfer prices, the use of debt, and locating intangible assets in low taxed jurisdictions. It shows that none of these profit-shifting strategies would be available under a DBCFT, if adopted by all countries. This is because intra-group payments between two countries would not affect tax liabilities in either country. If adopted unilaterally, however, there would be an incentive to shift profit – but this would be to the adopting country, at the expense of non-adopting countries.

The second paper, “Gaming Destination Based Cash Flow Taxes”, complements the first by considering domestic tax avoidance under a DBCFT. It does not reach a strong conclusion on whether the DBCFT is more robust to domestic avoidance than the typical corporate tax system currently found in most countries. But the analysis undertaken suggests that it is not more vulnerable. This paper also reaffirms the conclusion of the first: that the DBCFT appears more robust to international tax avoidance than the existing system. It does so by carefully examining the planning strategies proposed when the tax was under consideration in the USA in 2017. The paper argues that the proposed strategies either do not work under a properly designed DBCFT, do not work against the interest of the adopting country, or constitute evasion rather than avoidance.

Auerbach, A., Devereux, M.P., Keen, M. & Vella, J., (2017).  International Tax Planning under the Destination based Cash Flow Tax, National Tax Journal, December 2017, 70.4, pp. 783-802

Devereux, M.P., & Vella, J., (2018) Gaming Destination Based Cash Flow Taxes, Tax Law Review, 2018, 71,pp. 477-514

The impact of CFC rules

This research project examines how Controlled Foreign Corporation (CFC) rules affect the profit declared by multinational companies in low tax jurisdictions. CFC rules essentially allow the jurisdiction of residence of a parent company to tax the income of its subsidiaries in low-tax jurisdictions. This creates incentives for multinationals to move income away from those jurisdictions.

Typically, jurisdictions use a tax rate threshold to identify low tax jurisdictions (and hence subsidiaries). 

The paper also presents evidence that new subsidiaries tend to be placed in jurisdictions that are not subject to CFC rules, suggesting that the rules affect the location of both profits and real activity. These results suggest that CFC rules are therefore an effective tool.

Clifford, S., Taxing multinationals beyond borders: financial and locational responses to CFC rules Oxford University Centre for Business Taxation Working Paper 17/18

Carbon border taxes: part of the solution to tackle climate change?

The book written by Alice Pirlot analyses environmental border tax adjustments, including carbon border tax adjustments. These taxes are among the instruments that could be used to put a price on GHG emissions. Proposals in favour of such taxes have been discussed both in Europe and the United States but they have not been made into law. In comparison with other policy instruments that usually put a price on GHG emissions released during production, carbon border tax adjustments would be imposed on domestic and imported products based on their carbon footprint.

The book clarifies the objectives that policy-makers can pursue by means of environmental border tax adjustments. It provides information on possible designs of such taxes, which are very similar to VAT and excise duties with a focus on the environmental impact of products. The book analyses the legal framework surrounding environmental border tax adjustments, in particular international trade law. The researcher concludes by arguing that environmental border tax adjustments can be implemented in a way that is not incompatible with the law of the World Trade Organization. Overall, the book draws attention to the potential role that environmental border tax adjustments could play in countries’ policy mix to limit global temperature rise below 1.5°C.

Pirlot, A., 2017 Environmental Border Tax Adjustments and International Trade Law, Fostering Environmental Protection New Horizons in Environmental and Energy Law Series, Edward Elgar Publishing

Who benefits from subsidies for renewable energy?

Countries around the world subsidise investment in renewable energy sources (RES) as part of strategies to alleviate global warming. One often-overlooked dimension of such subsidies is who benefits from them. For example, in the case of wind turbines, is it the electricity producer or the owner of the windy plot of land? This research investigates this question in the context of a feed-in tariff, which guarantees a fixed wholesale price for green electricity for a certain period after the construction of a plant and obliges grid operators to accept the feed-in of green electricity and to compensate producers at a fixed price. Such a tariff was introduced in Germany in 2000. 

The research focuses on the price of agricultural land (the main site for wind turbines) before and after the introduction of the scheme. The research shows that agricultural land prices increased in areas with above average wind strength after 2000, which suggests that at least part of the subsidy is capitalised into land prices and thus benefits land owners. To quantify the land owners’ share of the subsidy, the research constructs a measure of the potential income of wind turbines in a particular area, and hence the size of the subsidy. This suggests that land prices increased by almost 20% of expected wind turbine profits or 10% of the expected subsidy paid. The research finds that agricultural income in Germany increased by 4% between 2000 and 2007 due to the subsidies. 

These results have two main implications. First, since a non-negligible part of RES subsidies is reaped by land owners, there is a case for using land taxes to finance the subsidy. Second, RES subsidies also have implications for other land and property prices. A higher value of agricultural land reduces the likelihood that the land is used for residential or commercial purposes. As a result, residential and commercial property prices are higher in areas with suitable conditions for RES electricity production.

Haan, P  & Simmler, M., 2018. Wind-electricity subsidies - A windfall for land owners? Evidence from a feed-in tariff in Germany. Journal of Public Economics 159, pp. 16-32.