Research
Research Interests
International Taxation, Profit shifting, Multinational Eterprises, Digitalization, International Trade, Globalization, CGE models, Wage inequality, Network analysis
Publications
Assessing the impact of digital technology diffusion policies. Evidence from Italy . Economics of Innovation and New Technology (2022): 1-24. (link)
- joint with Romano, Acciari and Mazzolari.
Abstract: This paper provides firm-level evidence on how subsidies to buyers of advanced digital production technologies work in sustaining private investments in innovation, and how such investments correlate with firms’ demand for labor. By exploiting the introduction in 2017 of a fiscal incentive granted to all Italian companies purchasing tangible goods instrumental to their digital transformation, we are able to quantify the volume of the subsidized investments within the national economy, to correlate the decision to invest with ex-ante structural and strategic characteristics of the beneficiary firms, and to evaluate the labor market effects (hirings and separations) of these investments at the firm level, for different classes of workers and firms. Overall, the analysis suggests that the policy has been so far an effective means to support the advanced digital technology transformation of the Italian production system and that such transformation has been positively correlated with employment growth at investing firms.
Previously published as working paper: The Impact of Digitalization Policies. Evidence from Italy’s Hyper-depreciation of Industry 4.0 Investments. Bratta, Romano, Acciari and Mazzolari (2020), DF Working Papers No.6. [link]
Analysing MNEs structure and activities using country-by-country reports. Evidence from the Italian dataset .Transnational Corporations Journal, 29 no.2 (2022) (link)
- joint with Santomartino and Acciari.
Abstract: This paper is based on microdata originating in the first collection of country by-country reporting (CbCR) – a new reporting tool to be filed by multinational enterprises (MNEs). It analyses the differences between CbCR and other widely used data sources of MNEs and presents the case of MNE activities in Italy. The CbCR dataset is used to understand the global distribution of MNE activities. Results show that foreign activities are mostly concentrated in high-income countries for all economic indicators. In low-income countries, MNEs activity appears to be concentrated in labour-intensive industries. Middle-income countries have a relatively higher importance in terms of tangible assets and employment opportunities than they do in terms of revenues and profits. Investment hubs have a relatively higher share in global MNEs profits than they do in global MNEs tangible assets and employment. The CbCR data can be useful for policymakers to obtain an indication on how a country is positioned in the global value chain (GVC) and its attractiveness for foreign companies.
Previously published as working paper: Country-by-Country Reports statistics – a new perspective to multinational enterprises. Descriptive analysis of national and foreign MNEs with a local presence in Italy. Santomartino, Bratta, Acciari (2020), DF Working Papers No.9 [link]
Working Papers
CORTAX 2019 Updated calibration and baseline results - JRC Working Papers on Taxation and Structural Reforms No 07/2023, European Commission, 2023 (link)
- joint with Pycroft, J. and Stoehlker, D.
Abstract: CORTAX is a macroeconomic model that focuses on corporate taxation and is used extensively for European Commission policy assessments. As a macroeconomic model, it simulates variables such as GDP, investment and employment, while being especially notable for its focus on corporate income taxation (CIT). It models the key aspects of CIT, such as multinational profit shifting, investment decisions, loss compensation, and debt-equity financing. CORTAX is versatile and can be used to examine different aspects of CIT, such as adjusting or harmonizing the CIT rate or base, addressing debt bias in CIT, and consolidation of the multinational CIT base. CORTAX is a multi-country model, covering all EU Member States, selected partner countries, and a tax haven. The general equilibrium framework of the model captures the interactions between different economic actors, including those between multinational headquarters and foreign subsidiaries.This calibration updates the model to 2019. This paper outlines the model structure, and explains the methodology used to arrive at the new baseline, including explaining the choices of data sources and parameters. The paper provides key summary results that serve as both a description and a validation of the model, and also serves as a reference for future work carried out using CORTAX 2019.
Assessing profit shifting using Country-by-Country Reports: a non-linear response to tax rate differentials - joint with Santomartino, Acciari
Media Coverage: VoxEU
Abstract: We assess the size of global MNEs’ profit shifting and associated tax revenue losses using administrative, firm-level data from Country-by-Country reporting (CbCR). This is a new dataset constituting one of the most comprehensive and detailed global datasets of multinationals (MNEs) and their affiliates. After assessing how CbCR outperforms existing datasets, we expand the analysis of the non-linear response of profits to tax rates and investigate non-linear responses by MNE nationality and size. Our results depart substantially from the existing literature, suggesting that the elasticity of profits with respect to corporate tax rates is eight times larger than conventional estimates in the lowest tax jurisdictions, and sixty percent lower than conventional estimates amongst jurisdiction-pairs where tax rate differences are smaller. Further, we find that profit shifting increases with MNE size but to a decreasing degree, suggesting that MNEs incur fixed costs when shifting profits that only become sustainable above a certain MNE size. We also observe different patterns of profit shifting among multinationals headquartered in Europe, the Americas, and Asia-Oceania. Finally, we account for the impact on profit shifting and global tax revenue arising from the 2017 US Tax Cuts and Jobs Act. We also assess the impact of an international corporate tax reform introducing a minimum level of taxation. Our results highlight the concentration of profit shifting in a few small, low tax jurisdictions, suggesting that international tax reforms aimed at guaranteeing a minimum level of taxation may be an efficient way to reduce profit shifting.
Latest version published in the Oxford University Centre for Business Taxation Working Paper Series - WP 20/11 (link)
previously published as Bratta, Santomartino, Acciari (2021), DF Working Papers No. 11.
Assessing the effects of VAT policies with an integrated CGE-microsimulation approach: evidence on Italy - joint with Bayar , Carta, Di Caro, Manzo, Orecchia
Abstract: Reforming the structure of the Value Added Tax (VAT) is an open issue in different countries, mostly for raising revenues and improving the efficiency of the tax system. However, most of the existing analyses do not combine micro- and macro-modelling tools for assessing the welfare and redistributive effects of VAT reforms. Aspects like tax evasion and erosion, moreover, are usually of secondary importance when studying VAT changes. The objective of this paper is twofold. First, we propose an integrated approach, based on the new dynamic multi-sector, multi-household tax computable general equilibrium (CGE) model (ITAXCGE) recently developed at the Italian Ministry of Economy and Finance, to study a uniform VAT rate reform in Italy. Our empirical approach has the merit of including new information when evaluating VAT reforms: tax evasion and erosion, irregular labour, different household groups, and a detailed structure of taxation. Second, we simulate the effects of a uniform VAT rate reform on welfare and redistribution, by taking into consideration the consequences of such reform on VAT gap changes. Our results suggest that the equity-efficiency trade-off deriving from the reform under investigation is reduced when including information on tax evasion in the analysis. The policy implications of our study are finally discussed
Bayar, Bratta, Carta, Di Caro, Manzo, Orecchia (2021) DF Working paper No. 14 (link )
Taxation and the future of work: How tax systems influence choice of employment form - joint with Anna Milanez
Abstract: Recent policy discussion has highlighted the variety of ways in which the world of work is changing. One development prevalent in some countries has been an increase certain forms of non-standard work. Is this beneficial, representing increased flexibility in the workforce, or detrimental, representing a deterioration in job quality driven by automation, globalisation and the market power of large employers? These changes also raise crucial issues for tax systems. Differences in tax treatment across employment forms may create tax arbitrage opportunities. This paper investigates the potential for such opportunities for eight countries. It models the labour income taxation, inclusive of social contributions, of standard employees and then of self-employed workers (with applicable tax rules detailed in the paper’s annex). The aim is to understand whether countries’ tax systems treat different employment forms differently, before approaching the broader question of whether differential treatment has merit when evaluated against tax design principles.
Milanez, A. and B. Bratta (2019), OECD Taxation Working Papers, No. 41, OECD Publishing, Paris, https://doi.org/10.1787/20f7164a-en.
Globalization and Wages: The role of Sector Complexity and Skill Ubiquity
Abstract: This paper consists in an empirical and theoretical analysis investigating the effects of international trade on the high skilled workers' wages introducing two new heterogeneities: skill ubiquity and sector complexity. Skill ubiquity describes the degree of specialization of the worker. It expresses the number of her potential employment sectors and their complexity. The complexity of a sector indicates how many skills are required in that sector and how much those skills are specialized. Thanks to the indexes'construction method I am able to identify which are the most ubiquitous skills, i.e. the skills that are the most common and least specialized at the same time, and which are the most complex sectors, i.e. those which require the greatest number of different and highly specialized skills. Using the data on US workers' wages and on US imports and exports volumes, I study the effects of international trade on workers' wages. Introducing those new heterogeneities I find the following results. Increases in exports in more complex sectors are associated with an increase of the wages of all workers and in particular of the wages of highly specialized workers. The overall effect of exports in the least complex sector is negative for the least specialized workers. Increases in imports have an opposite effect than increases in exports on workers' wages. Employment in a more complex sectors increases a worker's wage and owning a less specialized majors increases the worker's wage at a decreasing rate with respect to her employment sector complexity.
There and Back Again? Heterogeneous Firms, Product Quality and Reshoring Decision - joint with Marta Paczos
Abstract: We develop a novel theory to explain the recent phenomenon of reshoring, i.e. firms moving back their previously offshored business activities. Thanks to the access to a unique survey of American reshoring firms, we provide evidence for the importance of quality behind reshoring decision. We develop a dynamic heterogeneous firms model in which firms decide where to locate production and choose the quality of the produced variety. If a firm decides to offshore its production, it will face lower payroll costs yet higher quality production costs. In equilibrium reshoring decision arises as some firms initially offshore, exploit the rise in the profits due wages differentials and finally return to domestic country to further increase the quality. Moreover, the model delivers equilibrium sorting of firms: the most productive frms will never offshore, the least productive firms will always offshore and the firms with an intermediate productivity will decide to reshore.