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Fiscal Consequences of Corporate Tax Avoidance

Author

Listed:
  • Katarzyna Bilicka

    (Utah State University, NBER, CEPR & Oxford Centre for Business Taxation)

  • Evgeniya Dubinina

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University)

  • Petr Jansky

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University)

Abstract

We study the consequences of multinational tax avoidance on the structure of government tax revenues. To motivate our analysis, we show that countries with high revenue losses due to profit shifting have lower corporate tax revenues and rates and higher indirect tax revenues and rates. To establish causality, we use German municipal data and analyse how changes in municipal trade tax rates levied on corporate profits affect local tax revenue structure. Following a trade tax rate increase, we find that municipalities with high exposure to aggressive multinationals experience a significant decline in trade tax revenue levels and shares.

Suggested Citation

  • Katarzyna Bilicka & Evgeniya Dubinina & Petr Jansky, 2023. "Fiscal Consequences of Corporate Tax Avoidance," Working Papers 018, EU Tax Observatory.
    • Handle: RePEc:dbp:wpaper:018
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    File URL: https://www.taxobservatory.eu//www-site/uploads/2023/06/EUTO_WP18_Fiscal-Consequences-of-Corporate-Tax-Avoirdance_June2023.pdf
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    More about this item

    Keywords

    Corporate Tax Avoidance; Profit Shifting; Multinational Corporations; Government Tax Revenue Structure;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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