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The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile

Author

Listed:
  • Bustos, Sebastian
  • Pomeranz, Dina
  • Suárez Serrato, Juan Carlos
  • Vila-Belda, José
  • Zucman, Gabriel

Abstract

Profit shifting by multinational corporations is thought to reduce tax revenue around the world. This paper provides a comprehensive analysis of the introduction of standard regulations to limit profit shifting. Using administrative tax and customs data from Chile, we find that the reform was ineffective in reducing multinationals’ transfers to lower-tax countries and did not significantly raise tax payments. Interviews with tax advisors and employment history data reveal a drastic increase in consulting services. Our results illustrate that when enforcement can be circumvented by sophisticated tax planning, it can benefit tax consultants at the expense of tax authorities and taxpayers.

Suggested Citation

  • Bustos, Sebastian & Pomeranz, Dina & Suárez Serrato, Juan Carlos & Vila-Belda, José & Zucman, Gabriel, 2025. "The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile," CEPR Discussion Papers 20207, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20207
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    File URL: https://cepr.org/publications/DP20207
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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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