Tax Avoidance by Small Multinationals as a Side Effect of Anti Tax Avoidance Policy

The OECD's Base Erosion and Profit Shifting (BEPS) initiative, adopted in 2015, introduced country-by-country reporting (CbCR) obligations for multinational groups with consolidated turnover above €750 million. This paper examines whether the reform generated unintended behavioral responses among smaller firms below the reporting threshold. Using firm-level data on French multinationals from OFATS, FARE, and DIANE (2007, 2009, 2014–2022), we estimate difference-in-differences models in a linear probability framework with firm and year fixed effects. We focus on restructuring at the extensive margin, distinguishing entry into and exit from tax-haven jurisdictions. Firms below the threshold significantly increase their probability of opening tax-haven affiliates after 2016, the year CbCR started to be enforced in Europe, while larger firms become more likely to exit. The results are robust to alternative tax-haven definitions and to excluding firms near the cutoff. Heterogeneity analyses show that the post-reform entry in tax havens is concentrated among financially structured small MNEs. Overall, the findings suggest that targeted transparency reforms can reallocate tax-haven activity across the firm size distribution rather than uniformly reduce it.