As tax competition and profit shifting have put pressure on corporate income tax rates across the world, the role of other capital taxes becomes more important. This paper studies the choice between income taxation at the corporate and shareholder level. I develop a tractable sufficient-statistics framework to determine optimal corporate and shareholder income taxes. The main result is that when the incidence of the corporate income tax on workers is higher than that of shareholder income taxes, lower tax rates on corporate relative to shareholder income are typically optimal. In a policy application, I derive optimal reform directions for corporate and shareholder income taxes for a large economy, the United States, and a small open economy, Norway.

This paper examines firms’ behavioural responses to Costa Rica’s 2019 corporate tax reform, which reduced distortions in the tax system but decreased its simplicity. Using 2016–2023 corporate tax return data and a difference-in-differences design, we analyse how firms adjusted to the reform’s rich variation in marginal and average tax rates. Our descriptive analysis suggests the reform reduced revenue and cost manipulation, previously evident in bunching around revenue thresholds and profit margin discontinuities. Our causal findings reveal two main patterns. First, firms responded asymmetrically, reacting more strongly to tax cuts than to tax increases. This likely reflects the removal of growth barriers for small firms, or the downward stickiness of reported profits driven by evasion costs. Second, firms responded to marginal but not average tax rates, contrasting with evidence that individuals simplify tax schedules. These findings suggest that well-communicated reforms can improve efficiency without increasing compliance errors.

Special Economic Zones (SEZs) have become an increasingly popular policy tool for promoting economic development and countries provide preferential tax incentives to attract firms into SEZs. Using unique South African administrative data—firm-level corporate tax returns merged with worker-level income tax returns—we propose an alternative method for identifying SEZ firms beyond self-reported data, based on tax payments and employee location. Additionally, we will examine how the establishment of SEZs changes the behaviour of firms within SEZs. We contribute to the literature by identifying firms that exploit preferential tax incentives of SEZs firms to avoid tax payments, despite not being entitled to such benefits, while also enhancing our understanding of the impact of SEZs in a developing country context.

The Distributed Profit Tax (DPT)—a system under which corporate taxes are deferred until profits are distributed to shareholders—has emerged as a prominent alternative to the traditional corporate income tax (CIT). This paper provides a comprehensive analysis of the DPT, evaluating its theoretical foundations and empirical effects in five countries. We delineate the theoretical distinctions between the DPT, the S-based cash-flow tax, and the CIT, noting that the DPT’s implications for investment and financial structure are theoretically ambiguous. Our empirical analysis indicates that the adoption of DPTs is associated with a significant decline in profit tax revenue—approximately 1 percent of GDP, on average—alongside increased profit retentions and modest reductions in debt-to-asset ratios. In contrast, the effects on investment are statistically insignificant.

We propose a methodology to estimate the impact of the 2024 global minimum tax on the effective tax rates of multinational enterprises. Using a dataset of 1,300 multinationals operating in Czechia from 2017 to 2022 (nearly 300,000 firm-country observations), we assess three main objectives of this reform: (i) increasing tax contributions, (ii) reducing profit shifting, and (iii) decreasing tax rate disparities. Our findings suggest that effective tax rates will rise significantly, increasing the average tax rate by approximately 4 percentage points and generating an additional €200 billion in revenue. This will also narrow intra-firm tax rate disparities, particularly affecting ‘internal profit centers’—affiliates with a high share of intra-firm revenue. Finally, by reducing tax rate differences across firms, the reform would result in a more equitable tax system, limiting profit-shifting opportunities for large multinationals and aligning their tax burdens more closely with smaller firms.

In 2021, the OECD announced that over 130 jurisdictions supported its “Pillar 2” proposal for a 15 percent global minimum effective tax rate for large multinational enterprises. This proposal has since been adopted unanimously by the European Union, and has come into force on 1 January 2024. We employ an event study methodology using daily 2021 stock market returns of 1.782 EU and US firms to determine how Pillar 2 announcements affected the value of firms subject to the global minimum tax, and that of their competitors. We find a significant negative impact on the stock market returns of directly affected US firms, while the impact on EU firms appears to be limited, suggesting investors in EU are less worried about the impact of future anti-tax avoidance regulations. In our current specifications, we find no conclusive evidence of a causal effect on the stock market returns of their competitors.

This paper examines the impact of the 2017 US Tax Cuts and Jobs Act (TCJA) on the investment behavior of US multinational corporations (MNCs) in Germany. The TCJA introduced substantial corporate tax changes, including a reduction in the US corporate tax rate, full expensing of certain capital expenditures (bonus depreciation), and the Global Intangible Low-Taxed Income (GILTI) provision, which altered incentives for foreign investment. Using a triple difference-in-differences framework and firm-level data on foreign-owned subsidiaries in Germany, this paper investigates whether US MNCs reallocated investment towards the US or increased tangible investment in Germany in response to the tax cut and GILTI. The findings shed light on the trade-offs between tax-motivated profit shifting and real economic activity in high-tax jurisdictions.

This paper characterizes profit shifting behaviour across the size distribution of multinational firms to evaluate the appropriate targeting of the recently introduced Global Minimum Tax (GMT). We document that the propensity to use tax haven subsidiaries increases substantially with group size. Second, we introduce a new methodology to estimate shifted profits at the group level and find an exponential group size gradient in profits shifted to tax havens. Lastly, we relate the potential tax revenue gains from the GMT to the compliance costs of MNEs and conclude that revenue gains clearly dominate compliance costs for large groups currently covered by the GMT and that potential net revenue gains from lowering the threshold are modest.

Over the past two decades, governments have introduced measures to curb multinational tax avoidance, yet evidence from low- and middle-income countries remains scarce. This paper presents new findings from South Africa, linking administrative trade and corporate tax data to assess the effects of key anti-avoidance reforms. We examine two OECD BEPS initiatives, Country-by-Country Reporting and enhanced transfer pricing documentation, alongside the domestic implementation of an earnings-stripping rule that restricts interest deductibility.Using difference-in-differences estimators, we find that BEPS reforms significantly reduced transfer mispricing, lowering intra-firm prices and traded quantities with tax havens. Similarly, the debt-related reform resulted in a measurable reduction in the use of debt financing, while we do not observe any negative real effects for treated firms. Our findings offer novel evidence on the effectiveness of international tax reforms in reducing profit shifting in a developing country context.

Using a newly available exhaustive and granular dataset on the worldwide activity of multinational firms matched with oil, gas & mining production data at the country and firm level, we find evidence that windfall profits of multinational firms are excessively booked in low-tax countries. To identify the effect of price shocks on worldwide profit allocation, we exploit the heterogeneity in commodity price changes across mining and oil & gas products and use the fact that extractive firms specialize in different commodities. We find that a one percent increase in commodity prices leads to a 0.7pp excess increase in profits of subsidiaries located in tax havens.

How can tax authorities in low-income countries identify multinational enterprises (MNEs) engaged in profit shifting? In this project, we introduce a low-cost, data-driven methodology to identify profit-shifting MNEs using administrative data readily available to tax authorities in South Africa. By applying panel regression analysis and probabilistic detection methods, the method generates a variety of "red flags" for firms involved in suspicious activities, enabling tax authorities to prioritize high-risk cases for further auditing within their existing resource constraints. This approach empowers resource-limited tax authorities to target high-risk profit-shifting cases, supporting South Africa's broader revenue mobilization and fiscal sustainability goals. We contribute to the literature on profit shifting by presenting a novel method for identifying profit-shifting behaviours, which can be adapted by other low-income countries facing similar challenges.

Aggressive profit shifting by MNEs is a growing concern for domestic resource mobilization in developing economies. This paper evaluates the revenue and welfare consequences of a flagship anti-avoidance rule that has been implemented in morethan45countries to prevent profit shifting by MNEs through the debt channel. Our focus is Uganda, a representative developing country which implemented the rule in 2018. Exploiting admin data comprising the universe of corporate tax returns, we find that the rule does not significantly increase profits reported by MNEs in Uganda or tax remitted by them in Uganda. As an unintended consequence, however, the implementation of the rule leads to a contraction in real economic activity, reducing the turnover, employment, and trade of treated MNEs. We highlight the limited targeting efficiency of the rule, questioning its overall effects on welfare.

Digital nomad visas (DNVs) offer digital nomads a cost-effective way to strategically choose their tax residence country, in addition to providing other direct tax incentives. This paper examines the effective tax burden of digital nomads under these visas in the EU in a simulation analysis. Our preliminary findings indicate that digital nomads with a taxable nexus in the United States or the United Kingdom can achieve a lower effective personal income tax burden by working from EU countries that offer DNVs. Moreover, we employ travel data of digital nomads to gain insights into their movement patterns and the resulting tax revenue implications. Consistent with the tax advantages associated with these visas, we find that destinations offering DNVs attract digital nomads more frequently than those without such a visa.

This paper investigates whether and why pensioners move across borders in response to tax rate differentials. In 2013, retirees relocating to Portugal became eligible to a full tax exemption of foreign-source pensions. Contrary to the broadly held belief that seniors "age in place", we find substantial international mobility responses to the reform, concentrated among wealthy and educated pensioners in higher-tax origin countries. The implied migration elasticity of the stock of foreign pensioners to the net-of-tax rate is large (between 1.5 and 2) and increases at longer horizons. Tax-induced retirement migration clusters in space, and exhibits peer effects, amplification, and hysteresis patterns consistent with agglomeration through endogenous amenities. We show such forces theoretically and empirically have significant implications for optimal tax rates, and for the limited efficacy of unilateral policy responses to tax competition, like the source-based taxation of pensions.

This paper studies the impact of investor citizenship and residence schemes on local real estate markets. We do so by examining the Spanish golden visa programme that was introduced in 2013 and grants visas and full residence rights to foreign investors who invest at least 500,000 Euro in the Spanish real estate market. First, the number of real estate transactions above the threshold increased by 43% more for non-EU relative to EU and Spanish investors after the introduction of the programme. Second, non-EU investors appear to pay a premium of 11,421 Euro around the threshold relative to EU and Spaniards. Finally, we find that the programme had spillover effects on the real estate market. The average increase in golden visa exposure increases overall real estate transaction prices on average by 0.19% after the introduction of the scheme.

We match corporate tax return data with financial statement data to estimate tax-motivated cross-border income shifting in Austria. Our baseline estimate indicates a tax semi-elasticity of taxable income reported on corporate tax returns of -0.9. In contrast, we find little evidence of income shifting when using financial statement profits to proxy for taxable income -- a common approach in prior research. However, adjusting financial statement profits for tax-exempt dividend income yields estimates consistent with our main findings. Additional tests indicate that failing to account for dividend income can distort inferences about the relevance of specific income-shifting strategies. Our findings highlight that using financial statement data to approximate taxable income can affect the reliability of income-shifting estimates.

This paper analyzes the fiscal impact of corporate profit shifting to local business tax havens in Germany. Similar to international tax havens, municipalities in Germany have an incentive to reduce their local business tax (LBT) rate to attract corporate profits. I define local tax havens as low-tax municipalities close to large agglomeration areas. I use synthetic difference-in-differences methods together with administrative data sources to estimate the amount of profit shifting to local tax havens. Between 2013 and 2019, around 74 billion Euros were shifted to local tax havens. The results are driven by a small number of large firms that offer business and financial services. The fiscal cost to non-tax haven municipalities amounts to roughly 11 billion Euros.

Can a country reduce its exposure to tax havens, and what are the consequences? We analyze the effects of Ecuador’s corporate tax surcharge for firms with owners in tax havens. The reform was made possible by the prior establishment of an ownership registry. Comparing the behavior of firms with tax-haven owners at baseline (exposed firms), versus other foreign-owned firms, we find that the reform induced 12 percent of exposed firms to reduce tax haven ownership to zero. Exposed firms report owners in non-haven countries that tend to be individuals rather than firms, thus raising beneficial ownership transparency. Exposed firms also increase tax payments by 15%, without reducing employment and investment in Ecuador. Yet, transactions between exposed firms and tax haven parties did not fall. Overall, the policy which combined a “flashlight” (the ownership registry) and a “stick” (the tax surcharge) seemed effective at raising transparency and mitigating tax erosion.

It is well-known that some multinationals shift profits to tax havens. By manipulating the cost of intra-firm transactions, these firms artificially lower their tax base and the reduce the effectiveness of the tax authority. While this can be countered by monitoring and audits, such efforts are costly. Here, we present a data-driven approach to identifying potential profit shifters to better target limited audit resources. By comparing actual data from individual firms' tax returns in Ugandan administrative to broader industry trends, the method identifies when a given firm's behaviour seems unlikely in the absence of profit shifting. The method indicates that fewer of 3% of multinationals in Uganda exhibit such behaviour with four firms making up over 90% of potentially lost tax revenues. Thus, our methodology is a feasible and low cost method of targeting audits.

This paper studies whether multinational enterprises (MNEs) respond to international anti-tax

avoidance regulations by increasing local profit shifting activities. Within Germany, local variation of profit tax rates facilitate similar avoidance strategies on a sub-national level through the use of intellectual property or financing structures. We study whether these local schemes serve as complements orsubstitutes for international profit shifting. To explore the use of local profit shifting activities by MNEs, we construct a novel database documenting the network structures of MNEs that link international to sub-national tax havens. We hypothesize that MNEs intensify their domestic tax avoidance practices in response to stricter international regulations. Our findings highlight the adaptive strategies of MNEs in response to evolving international tax policies and underscore the complexity of recent anti-tax avoidance regulations and their consequences at both the international and local level.

We develop a methodology to decompose the tax revenue impact of the global minimum tax introduced in 2024 into several components and quantify its potential impact on profit shifting. We apply it to 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia. We find that the global minimum tax has the potential to decrease profit shifting by most multinationals, which are on average likely to pay higher effective tax rates in most countries worldwide post-reform. We find that Slovak corporate tax revenues will increase by 4%, with half of the increase due to its minimum top-up taxes. The other half of the increase is corporate income tax on profits that will no longer be shifted out of the country. We expect the global minimum tax to target 49% of previously shifted profits.

We study the potential impact of the OECD Global Anti-Base Erosion (GloBE) minimum tax on banks, combining a theoretical model with a new cross-country dataset of bank-level tax haven exposure and profitability. We show that the policy affects banks’ effective tax burden, their internal capital markets, and ultimately their financial stability metrics under Basel III. A dynamic stress-testing simulation and a difference-indifferences analysis reveal that banks with significant tax haven profit shares are more sensitive to post-GloBE regulatory shocks.