In 2018, South Korea reduced a long-standing tax credit for automation investments. This tax credit reduction increases tax costs, is a negative tax incentive on robot installations and resembles the introduction of an indirect robot tax. We analyze the impact of this reform on corporate investment behavior and employment of South Korean firms. We use company-level data on South Korean firms and apply a difference-in-differences setting, exploiting both variation with regard to treatment and variation in robot densities across industries. We find consistent negative effects of the reform on investment and employment and positive effects on investment quality. Our results show first empirical implications of a robot tax for companies.

We use matched employer-employee data to study how tax policies that lower the cost of capital impact workers during periods of sectoral decline. The policy we study, bonus depreciation, was implemented by the United States government in 2001, coinciding with significant employment declines in manufacturing. Using difference-in-differences event study methodologies, we estimate the effects of firm and market-level exposure to the policy on long-run worker earnings and employment. We then explore how sectoral transformation mediates the effects of bonus depreciation on worker outcomes by exploring heterogeneity across worker occupation, demographics, and exposure to salient drivers of manufacturing decline.

We investigate firms’ decisions to claim investment tax incentives following the 2014 tax reform in Japan and their impacts on economic outcomes. Our novel instrumental variable, the ratio of tax-eligible capital input costs to total costs at the industry level, explained the variation in firms’ tax claims. Financially constrained firms and those with tax loss carryforwards claimed the tax incentives less often than their counterparts. Tax claimants increased capital expenditures compared to pre-claim levels, with this effect being pronounced among financially constrained firms. However, tax claiming did not improve overall productivity. While we observe a rise in labor productivity, this result was due to a reduction in employment, not an increase in value added. Our findings suggest that when a relatively small proportion of firms—less than 20% in our analysis—claims tax incentives, focusing on actual claimants shows larger effects of tax incentives compared to the intent-to-treat approach.

In this paper we examine crowding-in and crowding-out of public and private sector investments in response to quasi-experimental variation in vertical transfers received by European Union regions. Leveraging a threshold in the allocation rule of EU Cohesion Policy funds, one of the largest regional policies globally, we conduct a Regression Discontinuity Design. Our findings indicate a crowding-out effect on public investments, ranging from 17 to 45 cents per Euro spent, primarily driven by a shift towards current expenditures. However, this effect is outweighed by substantial crowding-in of private sector investments, notably in construction, services, and the finance sector. Complementary Difference-in-Differences estimation provides some evidence for intertemporal substitution. Our results speak to the significance of complementarites between public and private investments in shaping fiscal multipliers, which holds important implication for the efficient design of the policy.

More innovative multinational enterprises (MNEs) find it easier to shift profits between their subsidiaries located in jurisdictions with different tax rates. While MNEs invest in R\&D and develop IP across multiple jurisdictions, they can strategically move profits arising from that IP from high to low-tax jurisdictions to reduce their overall tax bill. In this paper, we analyze and quantify the importance of two different strategies that MNEs use to move their IP to low-tax jurisdictions: selling a patent developed in a high-tax jurisdiction to a low-tax jurisdiction directly, or signing a cost-sharing arrangement between those two jurisdictions to cover the costs of developing further IP. Combining information on CSAs, patent applications and transactions, and tax payments of US MNEs using US tax returns data and Orbis Global IP data, we provide novel descriptive evidence on the use of both those strategies by MNEs.

The Tax Cuts and Jobs Act unlocked as much as $1.7 trillion of U.S. multinationals' foreign cash. We examine the real and financial response to this liquidity shock and find that firms did not increase capital expenditures, employment, R&D, or M&A, regardless of financial constraints. On the financial side, firms paid out only about one-third of the new liquidity to shareholders, and retained half as cash. This high retention was not associated with poor governance. The high propensity to retain positive liquidity shocks as cash, even among well-governed firms with limited financial constraints, is difficult to reconcile with existing theory.

We use administrative tax data from the IRS to study a tax avoidance strategy that reduces the cost of domestic research and development (R\&D). This strategy relies on cost sharing agreements that allow US multinationals (MNCs) to shift intellectual property to foreign affiliates. An unexpected tax ruling in 2005 created a loophole that allowed US MNCs to generate a tax shield by fully allocating stock compensation of employees to the domestic parent. In contrast to standard cost sharing allocations, this ruling increased the domestic tax deduction associated with R\&D expenses, which lowered the after-tax cost of R\&D. We study the effects of this ruling on market values, use of stock compensation, R\&D investment and relabeling of other costs as R\&D.

In this study, we shed light on the combined effect of corporate income tax incentives and other government policies on multinational corporations’ (MNCs) strategic location of intellectual property. Using granular affiliate-level data for MNC financials and patent ownership locations, we show that stricter employment protection laws and regulatory burdens mitigate the attractiveness of low-tax countries while tax benefits for highly-skilled workers do not affect the attractiveness of low-tax countries in MNCs’ patent location decisions. Additional tests based on the size of MNCs, migrant labor mobility, and variation over time reveal interesting additional subtleties in the interactions between government tax and non-tax policies and patent location choices. Our study contributes to the tax policy debate over cross-border competition for innovative activities by extending the analysis beyond the main effects of corporate income taxes and other government policies on firm’s patent location decisions.

This paper investigates the extent of cryptocurrency investment in Norway. First, we use Norwegian tax records to investigate the cryptocurrency portfolios reported for tax purposes. All Norwegian taxpayers are obliged to report the market value of their cryptocurrency at year-end. The tax records reveal that almost 1 percent of Norwegian taxpayers declare owning cryptocurrencies. We show that, although distinctly younger, cryptocurrency owners are similar to owners of other kinds of assets in terms of wealth. Nonetheless, as cryptocurrencies are self-reported, the figures observed in tax returns are likely under-reported. In the second part of the paper, we attempt to account for this by merging tax record abstracts of all Norwegian taxpayers in 2021 with the list of depositors on the cryptocurrency platform Celsius as of April 2022. Less than half of the Norwegian taxpayers with a Celsius account reported any cryptocurrency wealth to the tax administration three months prior.

Here we introduce the largest and most detailed dataset to date of long-term change in the global IFF regulatory landscape—the Regulation of Illicit Financial Flows (RIFF) dataset. Compiled with support from the UK FCDO GI-ACE program, and assistance from the FSI team at the Tax Justice Network, the RIFF provides annual data on 22 regulatory indicators, in 61 key jurisdictions, for 1990-2020. Analyzing this new world map of long-term IFF regulatory change, we find evidence of broad international regulatory convergence, across offshore jurisdictions and OECD countries, in AML/CFT compliance and international information exchange. However, these areas of convergence are layered on top of a persistent offshore-onshore divide in statutory banking secrecy, and the scope and accessibility of beneficial ownership data, wherein lapses also persist in key OECD members. This is likely to have a particular impact on the investigative efforts of non-governmental actors, including journalists and civil society organizations.

Cryptocurrencies pose a new threat to tax enforcement. Their anonymous nature leaves tax authorities with few enforcement tools. In this paper, we provide the first direct evidence of cryptocurrency owner characteristics by matching transaction data from cryptocurrency platforms with tax records. We find a tax non-compliance of 93% and behavioral effects of increased tax enforcement.

We present direct evidence that firms serve as tax-free consumption vehicles. Drawing on a unique combination of data from an electronic invoicing program in Portugal (“e-Fatura”) we show that individuals who control firms shift 36% of their monthly personal expenditures to firms and 31% of their household expenditures. The effects are driven by owner-managers of small closely-held firms through expenditure categories that lie on the border between business and final consumption, but spread among business managers all over the income distribution. Our results suggest that government revenue losses due to consumption through the firm amount to 1% of the GDP. Reallocating tax savings and personal expenditures hidden within firms to reported household income of business managers increases the Gini by one percentage point, and the top 1% income share by half percentage point.

Recent evidence suggests that social mobility has declined in many developed countries despite some of them pursuing proactive redistribution policies. In this paper we characterize the optimal mix of income tax and education policies that a government should adopt to maximize a long-term social objective that includes considerations for income redistribution and upward mobility. We show that switching from an elitist to a meritocratic education system, or from a short-term to a long-term vision of social welfare, fosters upward mobility but it can sometimes lead to increased inequality.

We investigate the relationship between inequality and public education funding in a model of probabilistic voting where the private option is available and voting participation di¤ers across income groups. A change in inequality can have opposite

effects at di¤erent income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non- monotonic effects. These novel theoretical predictions, with support in U.S. school district-level data, reconcile previous contradictory results in the political economy literature on redistribution and inequality.

In this paper, we introduce novel estimates of wealth inequality, integrating the standard household wealth concept with newly assessed individual human capital. Using microdata and national accounts from numerous countries since 1979, we explore the distribution across age, gender, education, and occupation. Our analysis reveals two key findings: human capital is more evenly distributed than financial capital, and total wealth, the sum of human and financial capital, is significantly more equal than financial wealth alone. This study offers a groundbreaking perspective on global wealth dynamics, emphasizing the critical, yet often overlooked, role of human capital in wealth distribution.

Existing literature shows that re-distribution does not play an important role for determining optimal income tax rates when skilled agents invest in education. This paper departs from the literature by adding government policy on subsidies and regulation of higher education. I conclude that in the short run optimal income tax rates are crucially influenced by the re-distribution issue. Moreover, the conclusion about optimal declining or rising marginal tax rates at the top is mostly determined by educational income inequality. For empirically plausible simulations under an inequality averse social planner, a more unequal educational economy justifies rising marginal tax rates at the top.