Research

Working Paper

Closing Pandora's IP Box: Real Effects of the Nexus Approach

Job-market paper | preparing for submission

To combat multinational firms' tax avoidance, policymakers have taken three approaches: direct anti-avoidance rules, transparency mandates, and tax system changes that align corporate activity with cash tax benefits. The latter approach is little understood but has potentially meaningful economic effects beyond limiting tax avoidance. This study examines such a tax system change: the recent Nexus Approach mandated in the European Union to align tax incentives for innovation with firms’ real activity. I show that innovation output, investment, and the demand for research and development (R&D) personnel increase in countries that offer preferential tax regimes for income from intellectual property (IP Box countries) after the nexus requirement is introduced. The effects are strongest among affiliates that, prior to the reform, engaged more extensively in IP-Box-related income shifting, had lower frictions to expanding domestic R&D, or operated in countries with strong tax benefits and subsidy environments. This growth, however, comes at the expense of non–IP Box countries, as multinationals reallocate innovative activities and investments within their group.

Working Paper

Do Transfer Pricing Arbitration Clauses foster Profit Shifting and Foreign Direct Investment?

with Andreas Oestreicher | preparing for submission

Using a stacked difference-in-differences design, we look into the profit shifting responses of multinational entities (MNEs) on double taxation treaties’ (DTT) arbitration clauses. Based on bilateral data on MNE financials, trade flow, and foreign direct investment (FDI), we find that the introduction of an arbitration clause in existing DTTs has, on average, a significant impact on profit shifting. In line with this, the introduction of arbitration leads to an increase in the trade value-added for affiliates in low-taxed countries. The effect is stronger for affiliates in countries having a larger exposure to tax avoidance and lower statutory tax rates. In contrast, the introduction of an arbitration clause weakens the inflow of FDI into lower-taxed affiliated companies and increases profit distributions. A series of additional tests suggests that our results are robust (available upon request).

Published Paper

The Fiscal Impact of Tax Rate Reductions and Depreciation Benefits in Times of Crisis – A Quantitative Analysis with regard to German Corporations

in: Steuer & Wirtschaft 2024, 101(3), 104-123

with Reinald Koch, Andreas Oestreicher, and Lena Schön

We show how the fiscal effects of a tax rate reduction, depreciation relief and investment premium differ over a period characterized by an earnings crisis. It becomes clear that a corporate tax cut of five percentage points exceeds the financial relief effects of the introduction of declining balance depreciation or the investment premium, which is equivalent in present value to depreciation relief, several times over. In comparison to the relief effect brought about by the introduction of a depreciation allowance, the relief effects of an investment premium occur more quickly and also have an effect on loss-making companies, while the effects of a tax rate reduction and depreciation allowance are dependent on the regulations of interperiodic loss offset. The intervals between the tax rate reduction, depreciation relief and investment premium are shortened if the investment effects associated with these relief measures are taken into account. The investment effect of an investment premium depends on how it is structured. If it is financed by a reduction in acquisition or production costs, the investment effects of an investment premium equivalent are largely consistent with those of declining balance depreciation in cash value, although the latter also has an effect on loss-making companies. If the investment premium is paid in the form of a net grant, the investment premium has a more sustainable effect over the subsidy period.

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PPaper

Policy Work

Analysis of the Effects of Tax Reform Measures on the Investment Response of Companies Using Micro Simulation Approaches – Framework Conditions for Investment Incentives

with Reinald Koch, Dominika Langenmayr, Andreas Oestreicher, and Lena Schön

funded by: Federal Ministry for Economic Affairs and Energy

Research Talks

2026

Midyear Meeting of the American Taxation Association (ATA) (2026, Discussant)

University of North Carolina Accounting and Taxation Seminar (2026, Presenter)

2025

Conference on International Taxation, Ghent (2025, Presenter & Discussant)

Annual Congress of the International Institute of Public Finance (IIPF) (2025, Presenter & Discussant)

Annual Meeting of the American Accounting Association (AAA) (2025, Presenter)

Annual Mannheim Taxation Conference / ZEW (2025, Presenter & Discussant)

2024

EUFIN Annual Conference (2024, Presenter)

Annual Mannheim Taxation Conference / ZEW (2024, Presenter & Discussant)

EAA Annual Congress (2024, Presenter)

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