Conference Agenda

This paper presents the concept of effective tax rates (ETRs) for a firm that increases its output by one unit choosing a cost-minimizing combination of inputs. The standard approach of calculating effective tax rate measures is shown to be a special case in this framework: output expansion by using only one single (capital) input. We compare the ETRs for output expansion with those of the standard approach and highlight differences and possible sources of misinterpretation. Moreover, our approach is able to capture an important feature of multinational firm activity: interdependent decisions along the production chain in multiple locations. We link our approach to the literature on BEPS, discuss policy implications and derive a “neutral” tax system that gives multinational firms the same investment incentives as a group of stand-alone firms in the same locations.

The paper explores how a small low-tax economy is affected by foreign corporate-tax shocks. To address this question, I develop a dynamic general-equilibrium model, in which multinational firms engage in both tangible and intangible FDI. Intangible assets arise from multinationals' R&D activities. Each multinational decides whether to place its intangibles in the parent firm or in an overseas affiliate. The placement decision shapes the intra-firm trade in royalties and R&D services. The model reveals that corporate taxes can distort the price setting of multinational firms. I investigate territorial corporate taxation as well as worldwide taxation of intangible income.

We exploit the assignment mechanism of the APOIAR Program, a targeted initiative aimed at supporting the firms most affected during the COVID-19 pandemic, to provide causal evidence on the impact of grants on firm survival and performance in times of crisis. Using sharp and fuzzy regression discontinuity designs and drawing on a combination of administrative datasets, we find that eligible firms experienced a short-term increase in profitability in 2021, with €1 of support increasing net income by €0.658. However, these effects did not persist into 2022, and we found no significant changes in turnover or cost reduction, indicating that the increase in profitability was mechanically due to the subsidy. Firms allocated part of the grant to rental payments and purchases of office supplies, including modest investments in digitalization. Our findings suggest that these funds were particularly important for ex-ante less productive, with less cash on hand, and more indebted firms.

This paper evaluates the effectiveness of Special Economic Zones (SEZs) as instruments of economic development in South Africa. Drawing on rich administrative tax data and employing a difference-in-differences identification strategy, we examine how SEZ participation relates to firm-level outcomes, including sales, trade, employment, and wages. Contrary to the common expectation that SEZ participation boosts firm performance, the results suggest that SEZ firms generally underperform relative to their non-SEZ counterparts. This, however, appears to be due to an interim period between when South Africa passed the law creating SEZs and when their benefits were actually implemented. Thus, although we find no evidence that South African SEZs improve performance, there is an important interplay between firm decisions and the uncertainty that surrounds SEZ implementation.