Effects of Corporate Transparency on Tax Avoidance: Evidence from Country-by-Country Reporting

Tijmen Tuinsma (), Kristof De Witte, Petr Janský, Miroslav Palanský and Vítězslav Titl
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Tijmen Tuinsma: Leuven Economics of Education Research, Katholieke Universiteit Leuven, Leuven, Belgium.
Miroslav Palanský: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic

No 2023/04, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Private Country-by-Country Reporting (CbCR) is a measure against tax avoidance by large multinationals, implemented throughout the EU in 2016. Multinational companies with an annual revenue over EUR 750 million have been required to report their global activities on a country-by-country basis to tax authorities. Using this cutoff in a sharp regression discontinuity design, we find causal evidence for an increase in effective tax rates for affected companies, indicating an increase in tax compliance. We estimate the increase in effective tax rates at 5 to 6 percentage points locally. However, significant cross-sectional variation is present: the most aggressive multinationals with tax haven affiliates are at most moderately affected, while almost the full effect is concentrated in medium-aggressive firms. From a policy perspective, the results suggest that while CbCR was effective in combating some forms of tax avoidance, profit shifting opportunities in tax havens mostly negate this effect.

Keywords: corporate tax avoidance; tax havens; financial transparency (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2023-02, Revised 2023-02
New Economics Papers: this item is included in nep-acc, nep-eec, nep-law and nep-pbe
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Citations: View citations in EconPapers (1)

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