Research

Abstract:

We study the short-term effect of the first global multilateral standard for the automatic exchange of information (AEOI), the so-called Common Reporting Standard (CRS), on cross-border tax evasion. Employing newly available bilateral data on cross-border deposits, we find that the CRS induced a reduction of 11.5% in cross-border deposits parked in tax havens. However, despite the 4000 bilateral information exchange relations created under the CRS, deposit relocation is still an option for secrecy-seeker. We find that the United States, which did not commit to the CRS, emerges as an attractive location for cross-border deposits.

In this project, we investigate the effects of a qualitative tax disclosure mandate aimed at improving the availability of tax information and tax compliance by imposing reputational costs for firms. We use, as an exogenous shock, the 2016 UK reform that required the disclosure of tax strategy details by large businesses. We find that treated firms—those that must publish a tax strategy report—significantly increase the volume of tax strategy disclosure in their annual reports but also provide more boilerplate statements. Disclosure volume and boilerplate increase the most for high public pressure and tax-aggressive firms. We show the important role that public pressure plays in facilitating this increase in disclosure volume, even in the absence of the mandate. We document no significant effect on tax avoidance. Our findings indicate that this requirement for qualitative tax disclosure has incentivized firms to portray themselves as “good tax citizens” without actually changing their tax practices. 

In this paper, we study the economic consequences of anti-loss trafficking rules, which disallow the use of loss carry-forwards as tax shield after a substantial ownership change. Using staggered changes to these rules, we find that limiting the transfer of tax losses reduces the number of M&As with loss-making targets by 22%. We further observe decreases in birth and survival rates of young companies in response to stricter regulations and vice versa. Tightening (loosening) anti-loss trafficking rules impairs (increases) return on assets, especially for R&D-intensive firms, and stricter rules lead to a decrease in successful patent applications. 

In this paper, we study how national implementation shapes individual responses to global agreements by looking at the introduction of the multilateral standard for automatic information exchange on financial assets, i.e., the Common Reporting Standard (CRS). We utilize rich micro-level data on all bank transfers to Norway. This provides us with unparalleled detail on hidden ownership structures. These data show a significant increase in cash repatriation from tax havens post-CRS implementation. Yet, we document substantial heterogeneity in responses down to a null result if CRS enforcement is weak. Relying on macroeconomic data on cross-border bank deposits, we employ model averaging techniques to establish the most important characteristics of the receiving countries that make the CRS more effective. Our results suggest that a highly digitized tax administration triggers twice the drop in tax haven deposits compared to a tax administration relying on paper tax returns. These results have implications for global policy initiatives more broadly. 

In recent decades, increased mobility of capital and labor improved individuals’ opportunities to avoid or evade tax. This chapter explores two programs commonly provided by tax havens that facilitate individuals in dodging taxation in their home country. We first focus on longer-existing initiatives targeting wealthy individuals by offering citizenship and residence-by-investment (CBI/RBI) programs and discuss how they allow individuals to evade taxes. We then delve into the recently launched digital nomad visa (DNV) programs, which grant individuals temporary residence in a country while working exclusively remotely. We provide a comprehensive overview of the key features of existing programs based on a novel, hand-collected dataset. Currently, more than 40 countries offer a DNV program, and half of them are tax havens. Although DNV programs mainly create concerns about tax avoidance, they can also provide tax evasion opportunities similar to those documented in the literature for CBI and RBI programs. 

In this article, we evaluate qualitatively and quantitatively the current R&D tax incentive regimes in place in ten important foreign direct investment (FDI) countries (Belgium, China, France, Germany, Ireland, the Netherlands, Spain, Switzerland, the United Kingdom, and the United States) considering effects on location attractiveness, innovative activity and profit shifting. The environment of offered R&D tax incentives has been highly dynamic in very recent years. Furthermore, the importance of innovative activities is accentuated during an economic crisis. First, we qualitatively analyse the different design features of the existing R&D tax incentives in their sample countries. Second, we use forward-looking effective average tax rates to measure their effect on location attractiveness quantitatively. Our main finding is that input and output-oriented R&D tax incentives continue to play an important role internationally and that the regimes in place have a considerable impact on forward-looking effective average tax rates, i.e., on countries’ tax attractiveness for R&D investments.