Challenges of Monitoring Tax Compliance by Multinational Firms: Evidence from Chile

Sebastián Bustos, Dina Pomeranz, José Vila-Belda and Gabriel Zucman

AEA Papers and Proceedings, 2019, vol. 109, 500-505

Abstract: This paper reviews common challenges of taxing multinational firms, using Chile as a case study. We briefly describe key international tax avoidance methods: profit shifting to low-tax jurisdictions through transfer pricing and debt shifting. We discuss the prevalent policy to tax multinationals—the arm's length principle—and alternative proposals using apportionment formulas. Novel data from Chile show that multinationals make up a large share of GDP but report lower profit and effective tax rates than local firms. In 2011, Chile implemented a reform following OECD guidelines to enforce the arm's length principle. We discuss potential effects on tax collection and welfare.

JEL-codes: F23 H25 H26 O23 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/pandp.20191045
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Citations: View citations in EconPapers (3)

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