Corporate tax avoidance and sales: micro evidence and aggregate implications

Julien Martin, Mathieu Parenti () and Farid Toubal
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Mathieu Parenti: Université Libre de Bruxelles and CEPR

No 16, Working Papers from EU Tax Observatory

Abstract: This paper investigates the influence of corporate tax avoidance (CTA) on firm-level sales, and its aggregate implications. CTA gives a competitive advantage to avoiding firms, which affects the distribution of sales in the economy. We find a causal impact of CTA on sales in US firm-level data. CTA increased more among the largest firms, which has reinforced their dominant position. A quantitative exercise reveals that the strength of CTA in shaping changes in the distribution of sales varies across industries. In industries like computers or chemicals, CTA can explain up to 10%-30% of the increase in concentration from 1994 to 2017. Further analysis shows the impact of CTA-induced distortions on industrial output is relevant at a macroeconomic scale.

Keywords: Tax Avoidance; Distorted Sales; Industry Concentration; IRS Audit Probability (search for similar items in EconPapers)
JEL-codes: D22 D4 F23 H26 L11 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2023-04
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Related works:
Working Paper: Corporate tax avoidance and sales: micro evidence and aggregate implications (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:dbp:wpaper:016

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