Fourth International Annual MaTax Conference Focuses on Tax System Design

On 20 and 21 September 2017, the Leibniz ScienceCampus Mannheim Taxation (MaTax), together with ZEW and the University of Mannheim, hosted the fourth international annual MaTax conference on taxation research. The two-day conference offered participants a broad and diverse programme including 32 talks and two keynote lectures. In his opening speech, MaTax director and ZEW research professor Christoph Spengel addressed the 70 or so international researchers in attendance and expressed his delight over the overwhelmingly positive response the MaTax conference has continued to receive.

The two keynote speeches raised conceptual issues regarding the design of tax systems and potential solutions which the audience were then invited to debate. Professor Michael Devereux from the University of Oxford, UK, opened his keynote lecture with a discussion of why corporate profits should be taxed and what form this taxation should take. After summarising the principles of international taxation, he then went on to address current problems in this field of research. Specifically, he listed tax avoidance, inefficiency, complex and precarious implementation as well as incentives for companies to engage in price-cutting competition as four particularly problematic issues in international tax policy. Finally, Professor Devereux presented the concept of a “destination based cash flow tax”, a kind of corporation tax imposed on cash flows at the location of final consumption, as a comprehensive solution to the issues previously mentioned.

In the second keynote lecture, Professor James Hines from the University of Michigan, USA, claimed that frequent demands to expand the tax base and lower tax rates cannot be justified by efficiency or equality considerations. His argument was largely based on personal income taxation in the United States, which is characterised by extensive deductible expenses. One potential advantage of getting rid of these deductions and thus expanding the assessment base, according to Professor Hines, is that tax revenue will increase and there will be fewer incentives for people to exploit these tax-supported conditions. At the same time, he pointed out that taking such a step would reduce the efficiency of the tax system if certain kinds of activity are subsidised for a good reason. Furthermore, even if the nominal tax rate is lowered, the marginal tax rate on generated income could increase due to lower deductions. He then summarised the three main arguments for keeping a variety of tax deductions: First, to ensure the flexibility of the tax system to adapt to individual circumstances, for example in the case of childcare costs. Secondly, to have the possibility to impose low taxes on very elastic activities, for example for the exemption of foreign income. Thirdly, to subsidise activities that enhance efficiency, as in the case of tax breaks for research and development.

MaTax offers the scientific community a platform to exchange high-level research knowledge on current tax issues

Apart from the two keynote lectures, participants at the fourth MaTax conference were also able to enjoy 32 talks organised in ten sessions, all of which were carefully chosen by the organising committee from a large number of applications from around the world. The extremely diverse programme of talks included current, largely empirical research on topics ranging from tax avoidance to tax collection and administration, the identification of behavioural responses to taxation and the main determinants of tax policy. The conference participants were eager to engage in lively discussions and seized the opportunity to exchange their ideas and research findings. There are already numerous events planned for the coming year, many of which will draw on international cooperation. MaTax is funded jointly by ZEW, the University of Mannheim, the State of Baden-Württemberg and the Leibniz Association, of which ZEW is a member. The ScienceCampus further collaborates with the Institute for Financial and Tax Law of Heidelberg University. MaTax currently involves 15 professors and 70 junior researchers.