We extend research on the impact of BEPS Action 13 on profit-shifting behavior to include the role of the master file and local file (MFLF). Our evidence from confidential tax return data from The Indonesia Tax Authority shows that firms obligated to submit the MFLF have lower taxable income than firms that do not submit the documents. Reflecting its impact on firms, it indicates that firms continue profit-shifting behavior. Furthermore, we provide evidence of channeling profit-shifting through intra-group transactions, such as sales and purchases, payment of debt and service remuneration via related-party transactions. The outcomes provide valuable insights into profit-shifting behavior vis-à-vis private disclosure within emerging countries, offering pertinent information for accounting researchers and tax authorities.

In general, special tax regimes create inefficiencies and might destroy horizontal equity, Additionally, they also create opportunities to hide income and avoid taxes.

To study the magnitude of tax avoidance of special tax regimes in Chile and their effects on horizontal equity, I use administrative data from the Chilean IRS to simulate a tax reform that replaces them with a cash flow tax for small firms.

The results show that a reform of this type would have positive effects, especially in terms of horizontal tax equity as 85.6% of the profits from firms under presumptive taxes and 77.6% of the profits from the small firms under special tax regimes, belong to taxpayers in the top income decile.

Using administrative tax data from the Uganda Revenue Authority, this study shows as one of the first in a developing country setting that multinational corporations (MNCs) lower their corporate tax burden through two channels: lower effective tax rates and profit-shifting. MNCs pay an approximately 20 percentage points lower effective tax rate on their reported profits than large domestic corporations because of tax treaties and other benefits. However, they are also more likely to report losses than domestic firms. This is likely due to profit-shifting, as the lower the tax rate in the country of the global ultimate owner, the lower the reported profit of the affiliate in Uganda. Estimating effective tax rates in three alternative ways in combination with a profit-shifting analysis provides new insights on the stage at which tax revenues are forgone and methodologically highlights the possibilities of using administrative tax data for evidence-based policy making.

In this study, we examine the impact of Uganda’s transition from Thin Capitalization Rules (TCR) to Earnings Stripping Rules (ESR) in 2018 on corporate profit shifting behaviour. Our preliminary findings suggest that the adoption of ESR led to a significant decrease in both the leverage and interest expenses of treated companies. Notably, this shift was associated with a decline in real economic activity with both sales and investment going down after the reform. Despite these reductions, the ESR regime enabled Uganda to generate higher revenue compared to the TCR system. Additionally, our analysis indicates that ESR specifically targets firms with high leverage relative to earnings, in contrast to

TCR, which focuses on companies utilizing debt financing over equity financing.

What makes policymaking similar or different across local governments? In this paper, we explore the determinants of similarity in local policymaking and quantify the deviation of local budgets from expected norms based on local characteristics. Public budgets are considered the standard proxy for government policy, yet standard public economic research usually focuses on a few of the main budget accounting features. AI tools allow us to examine the full budget structure. We find that similarity is mostly associated with the size and demographic composition, rather than political characteristics. Next, we generate a Municipal Fiscal Divergence Index (MFDI), which quantifies the deviation of local budgets from expected norms based on local characteristics. We show that MFDI is associated with political incentives, i.e., it is lower in the year preceding an election, complementing the existing evidence on political budget cycle.

Using the Covid-19 pandemic as a natural experiment, we examine gender differences in public funds allocation to childcare in Italy, one of the first countries severely hit by the crisis. We analyze close mixed-gender races in Italian local elections in small municipalities without gender quotas from 2016 to 2023. Our findings show that pre-Covid-19 female mayors spent more on childcare than male mayors, in line with the substantive representation hypothesis. However, during the pandemic, the gender gap closed, as male politicians increased spending, a trend that continued post-pandemic. Results reflect a change in voters’ preferences, as they are driven by male politicians facing re-election incentives and municipalities with more telework during the pandemic.

This paper studies the impact of female leaders during a migration crisis. In particular, I examine female mayors in the German state of North Rhine-Westphalia during the intake of Ukrainian refugees in 2022/23. I use granular data on compliance with the municipal refugee allocation quota and data on the municipal election of 2020. The identification strategy is a local difference-in-differences approach based on close mixed-gender races for the mayorship. Female mayors comply less with the allocation quota than male mayors in response to the crisis. The effect is not driven by other mayor characteristics or the fiscal capacity of municipalities. Also, there is no difference in the frequency of refugee topics in council meetings. Instead, I argue that strong electoral competition is a plausible mechanism inducing lower compliance of female mayors.

This paper explores the connection between jurisdictional fragmentation and sprawl. We utilize Finnish municipal mergers as a quasi-experiment which induces exogenous variation in the number of local jurisdictions in a given area. We are able to draw on rich register data providing granular location information for the full population of Finnish residents. We compare the location of new buildings (and their residents) in the actual mergers to the location of new buildings in a control group of hypothetical mergers simulated from the pre-merger municipality map in a difference-in-differences framework. When using our full sample, we do not find statistically significant effects on the location of newly constructed residential buildings. However, in smaller municipalities new single-family and row houses were built about 10% or 2 km closer to the new center. These effects materialize after two full council terms or roughly ten years and are driven by spatially compact and populous mergers.

In times of hardship, politicians often leverage citizens’ discontent and scapegoat minorities to obtain political support. This paper tests whether blaming migrants for a health crisis affects social, political, and economic attitudes and behaviors. Through an online nationally-representative survey experiment in Italy, we analyze the effects of such narratives using information-provision treatments. Results show that narratives associating immigration with health threats do not generate sizeable add-on effects compared to those based on immigration only. If anything, they increase disappointment towards co-nationals, reduce institutional trust, and undermine partisanship among extreme-right supporters. Results are consistent with a theoretical framework where party credibility and institutional trust are influenced by political discourse. Our experiment underpins the prediction that political campaigns based on extreme narratives can be ineffective or socially and politically counterproductive, providing an example of how populism can backfire.

We examine the relationship between beliefs about and attitudes towards immigrants and intergroup contact between natives and migrants in eastern Germany, a region characterized by anti-immigrant sentiment. Using probability-based survey data, we randomly vary respondents’ access to a signal about the true size of the immigrant population in the region. Respondents who receive the signal show more supportive attitudes toward immigration, with effect sizes being more pronounced for attitudes toward high-skilled immigrants. Importantly, estimating conditional average treatment effects shows that respondents who have less contact with immigrants prior to our intervention respond more strongly to the treatment. Additional findings suggest that the level of intergroup contact and biased beliefs about immigrants are complementary targets for information campaigns on immigration.

This paper provides novel evidence on the impact of tax decentralization on citizens preferences for redistribution. In a large-scale survey experiment implemented in Spain, an information treatment explains respondents the normative power which regions exercise over personal income taxation. First stage results show that the treatment increases the salience of this feature by 40 percentage points. The treatment increases respondents aversion against inequality, but decreases their support for higher taxes on the rich. Both results are explained by respondents' identities. The effect on inequality is driven by individuals with a stronger regional than national identity, while the rejection of higher taxes on the rich is driven by participants which identify more with the nation than the region. Heterogeneous effects on the trust in the central or regional government confirm this pattern.

We conduct a survey experiment with four thousand German respondents and provide information on two measures of gender inequality, separately or jointly: the gender gap in earnings and the gender gap in pensions. We analyze the effect of providing information on views on the importance of reducing gender inequality and on agreement with the adoption of policies targeted at different stages of the life cycle and aimed at reducing inequality. We find that providing information on both gaps changes perceptions of the importance of reducing gender inequality and of adopting policy measures to this end. Information on only one gap tends to have insignificant effects on preferences for policy adoption. We provide insights into the importance of individual views on female disadvantages in the labor market, personal experiences of inequality, and social norms as correlates of preferences for reducing gender inequality and policy interventions.

This study highlights the overarching role of risk shifting via alternative risk transfers (ART) in multinational companies' profit shifting practices. Risk shifting allows multinational companies to transition from ex-ante to ex-post shifting, that is, it reduces the risk of shifting profits away from a loss-making affiliate. Therefore, ART enable the multinationals to be more aggressive in their profit shifting. Our analyses also rationalizes the dominant use of sale-dependent royalty payments to invoice user fees on intangible assets. Such royalties are superior to fixed fees whenever the scope of ART is constrained and risk shifting is incomplete. The reason is that the amount of shifted profits is positively correlated with profitability when sales-dependent royalties are used.

We model capital investment in an oligopoly as an infinite-horizon dynamic game and analyze the short-run and long-run economic effects of a country’s corporate tax policy. In an industry with a low rate of capital depreciation (or product turnover), an increase in the tax deductibility of a firm’s capital investments, as reflected in a shift from income taxation to cash flow taxation, decreases market concentration and increases consumer surplus at the cost of large tax subsidies. However, in industries with a high rate of depreciation, the shift increases consumer surplus and tax revenues at the cost of higher market concentration.

An increasingly important component of corporate social responsibility is corporate tax responsibility, i.e., the extent to which a company pays its fair share of taxes. We develop a model of a company where the shareholders may care about corporate tax responsibility, but the CEO does not. We show that when shareholders care about corporate tax responsibility, they condition the CEO's compensation on both after-tax and before-tax profits. However, and surprisingly, we find that such a compensation contract may also be optimal for purely selfish shareholders. The reason is that, under quite natural conditions, a mix of before- and after-tax profit incentives gives stronger incentives to invest and exert effort than relying on after-tax profits only. Tax avoidance decline when before-tax profits play a more prominent role in the incentive contract, and more generally, the price for the additional managerial effort is a higher tax burden in the firm.

We examine whether tax-aggressive firms respond differently to interest limitation rules (ILRs) compared to the non-aggressive ones and whether, given the election right, the former prefer a certain type of ILRs (safe haven approach that restricts internal debt ratio versus earnings stripping rules) in order to maintain their tax-aggressive status. We exploit a quasi-natural experiment provided by the introduction of a hybrid system of ILRs in Poland. We use a unique data set consisting of micro-level information from tax authorities matched with Amadeus and complemented with more granular data from individual financial statements. We apply triple difference and logistic panel regressions. We do not find that the leverage responses of tax-aggressive and non-aggressive firms are statistically different among these two groups. However, the regressions based on tax return data show that tax-aggressive firms are more likely to escape earnings stripping rules and choose the traditional safe haven approach instead.

This paper studies the impacts of limiting interest deductions on firms’ investment and financing choices using U.S. tax data. The 2017 law known as TCJA implemented an interest limitation for big, high-interest firms. Using an event study design comparing big and small high-interest firms, we rule out economically significant impacts of the limitation on investment and leverage, and find evidence that the it led firms to increase equity issuance. A triple difference design that accommodates size-varying impacts of other policy changes yields similar results, as does a regression discontinuity design focusing on marginal firms just large enough to face the limitation. Our results indicate many firms do not use debt as their marginal source of financing and provide evidence consistent with capital structure models with fixed leverage adjustment costs. Furthermore, they suggest limiting interest is unlikely to have large impacts on investment or address concerns about rising corporate debt levels.

This paper examines the effects of real estate transfer taxes (RETT) on property prices using a micro dataset of roughly 17 million German properties for the period from 2005 to 2019. Our empirical analysis exploits variation in RETT rate hikes across German states and over time. Our monthly event study estimates indicate a price response that strongly exceeds the change in the tax burden for single transactions. Twelve months after a reform, a one percentage point increase in the tax rate reduces property prices by on average 3%. Negative price effects are predominantly found in counties where properties sell quickly and price discounts are small and in growing housing market regions. Moreover, effects are stronger for apartments and apartment buildings than for single-family houses. Our results can be rationalized by a theoretical model that predicts larger price responses in sellers' markets and for properties with a high transaction frequency.

Several types of taxation include the market value of housing in the tax base. Thus, it becomes important to obtain accurate, timely house values. However, to value residential property represents a major challenge for tax administrations due to informational constraints. In the present paper we present and discuss a simple procedure for assigning market value to each dwelling in Norway, based on deriving estimates from hedonic regressions. The valuations are updated yearly to reflect changes in market value. To our knowledge, this is a novel example of using predictions obtained from regression estimates to define full-scale housing values for tax purpose. We present and discuss two versions of our procedure -- the first prediction model that was implemented in 2010 and a simple, but significant, upgrade of the model that could be implemented with no additional gathering of data.

This paper presents novel estimates on the incidence of corporate taxes by measuring the effect of local business tax increases on the welfare of commercial landowners. We use unique data on commercial real estate prices in Germany covering 1 million properties offered for sale and 2.4 million properties offered for rent between 2008 and 2018. Empirically, we exploit the German institutional setting with over 4,000 municipal tax changes using an event study design. The estimates suggest that a 1 percentage point business tax increase reduces commercial real estate prices (rents) by 3 percent (2 percent) after 5 years on average. This result is robust to the inclusion of a large set of controls and to heterogeneous treatment effect estimators. We find that commercial landowners bear between 15-24% of the tax burden, while workers (7-20%) and residential landowners (4-25%) bear less burden than prior research suggests with firm owners around 44-57%.

Liability-side equivalence suggests that economic incidence is independent of statutory incidence. We empirically test this conjecture by studying a policy intervention in the German market for real estate agents, which partially shifted the statutory incidence of agent fees from buyers to sellers. Specifically, we study listings posted on online real estate marketplaces two months before and after the implementation date. We employ a difference-in-differences estimation that exploits region- and listing-type-specific susceptibility to the intervention. Our results suggest that liability-side equivalence generally holds, but with two qualifications. First, sellers did not adjust listing prices, but effected higher transaction prices in bilateral negotiations. Second, sellers were only able to do so when they had bargaining power over buyers. We further find that demand for brokerage decreased following the intervention. Our findings have important implications for the distribution of statutory incidence of intermediary fees in matching markets and tax liability considerations.

The Global Minimum Tax (GMT) introduces significant changes to the taxation of large multinational enterprises. This paper assesses the impact of the GMT using new and unique data on MNE activity and has four main findings. First, the GMT reduces the incentives to shift profits, resulting in an estimated fall in global shifted profits by around half. Second, the GMT will reduce low-taxed profit worldwide through reduced profit shifting and top-up taxation. The global amount of MNE profit taxed below the 15% minimum effective rate is estimated to fall by more than two thirds. Third, the GMT is estimated to increase CIT revenues by USD 155-192 billion per year. The distribution of these gains across jurisdictions strongly depends on implementation choices of governments. Finally, the GMT is estimated to reduce tax rate differentials across jurisdictions which could potentially impact the efficiency of the allocation of investment and economic activity.

We study which multinationals are likely to reduce their profit shifting in response to the global minimum top-up taxes introduced in 2024, using 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia in 2020. We estimate that its corporate tax revenues will increase by 3% or EUR 73 million, with 57% of the increase due to its top-up taxes on undertaxed profits in Slovakia (52% of the increase) and in other countries (5%). The other 43% of the increase is corporate income tax on profits that are no longer shifted out of Slovakia due to other countries, both non-headquarter (87%) and headquarter (13%), applying top-up taxes. Multinationals will reduce profit shifting by 57%; by 59% to low-tax countries but only 42% to high-tax ones. In particular, German and Austrian multinationals will mostly continue shifting profits to their parent countries.

Announcements made in 2021 by the Organization for Economic Cooperation and Development about a global minimum tax (Pillar Two) not only were legally non-binding but also lacked domestic political support in many countries. It is thus unclear how many nations will adopt Pillar Two. The initial OECD process also avoided important questions of international law: legal controversies may importantly determine the course of Pillar Two implementation. This paper analyzes strategic incentives for adopting Pillar Two on the part of national-income-maximizing governments. Countries from which multinationals originate will likely suffer deep losses and be better off defecting. Pillar Two’s enforcement mechanism, the UTPR, lack effectiveness; accounts of its purported clever design lack logical inconsistency. Any purported novelty in Pillar Two design must confront first-order questions about international law. Assuming Pillar Two as new institutional reality in international taxation is thus over-hasty and may lead to bad social science.

We analyze the role of the threshold in the Global Minimum Tax (GMT) on the tax competition between a country with an multinational firm affiliate that sells in the local market and a tax haven country that is setting the tax rate to induce profit shifting from the sales affiliate to a tax haven affiliate. We assume that firms are heterogeneous in their productivities and faced fixed costs of setting up a tax haven affiliate, so that only the most productive firms will choose to have a tax haven affiliate. We examine how the existence of an intensive and extensive margins of profit shifting affect the tax competition between the tax haven and non-haven countries.