Interest in analyses of spillover effects, (the direct impact of one country’s tax policy on
another country’s tax base, tax policy and economic activity), has been growing since the
IMF sought to define the term, and proposed econometric methods for evaluation (IMF,
2014.) The basic proposition justifying spillover analysis, is that countries’ tax regimes can
produce profit shifting and tax base erosion, as well as other forms of tax competition that
erode the revenue raising capacity of governments, while detrimentally effecting levels of
real economic activity in other jurisdictions through various forms of capital flight
Remember how money never moves around because of tax? Now we’ve got capital flight because of tax.