Fiscal Consequences of Corporate Tax Avoidance

Katarzyna Bilicka (), Evgeniya Dubinina () and Petr Jansky ()
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Katarzyna Bilicka: Utah State University, NBER, CEPR & Oxford Centre for Business Taxation
Evgeniya Dubinina: Institute of Economic Studies, Faculty of Social Sciences, Charles University
Petr Jansky: Institute of Economic Studies, Faculty of Social Sciences, Charles University

No 18, Working Papers from EU Tax Observatory

Abstract: We study the consequences of multinational tax avoidance on the structure of government tax revenues. To motivate our analysis, we show that countries with high revenue losses due to profit shifting have lower corporate tax revenues and rates and higher indirect tax revenues and rates. To establish causality, we use German municipal data and analyse how changes in municipal trade tax rates levied on corporate profits affect local tax revenue structure. Following a trade tax rate increase, we find that municipalities with high exposure to aggressive multinationals experience a significant decline in trade tax revenue levels and shares.

Keywords: Corporate Tax Avoidance; Profit Shifting; Multinational Corporations; Government Tax Revenue Structure (search for similar items in EconPapers)
JEL-codes: E62 H26 H71 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2023-06
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