Externalities in International Tax Enforcement: Theory and Evidence
American Economic Journal: Economic Policy
vol. 15,
no. 2, May 2023
(pp. 497-525)
Abstract
We show that the fiscal authorities of high-tax countries can lack the incentives to combat profit shifting to tax havens. Instead, they have incentives to focus their enforcement efforts on relocating profits booked by multinationals in other high-tax countries, crowding out the enforcement on transactions that shift profits to tax havens, and reducing the global tax payments of multinational companies. The predictions of our model are motivated and supported by the analysis of two new datasets: the universe of transfer price corrections conducted by the Danish tax authority, and new cross-country data on international tax enforcement.Citation
Tørsløv, Thomas, Ludvig Wier, and Gabriel Zucman. 2023. "Externalities in International Tax Enforcement: Theory and Evidence." American Economic Journal: Economic Policy, 15 (2): 497-525. DOI: 10.1257/pol.20200200Additional Materials
JEL Classification
- E62 Fiscal Policy
- F23 Multinational Firms; International Business
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- H87 International Fiscal Issues; International Public Goods
- K34 Tax Law
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