Abstract: We study the effect of mandatory disclosure rules on aggressive tax planning arrangements. We focus on the one introduced in 2018 under the Council Directive 2018/288/EU (or DAC6) and study its effect on tax evasion. We show a reduction of cross-border deposits in EU countries with a strong enforcement but also a relocation of funds to countries with limited intermediary reporting obligation. Finally, we detect an increase of USD 14 billion in cross-border deposits held by residents of countries offering citizenship/residence by investment programs, suggesting the use of these schemes as regulatory arbitrage to circumvent the disclosure mandated under DAC6.

Abstract: Firms in the digital economy often pay little tax in the countries where their customers are based. In response, market countries have introduced digital service taxes on the revenue of these firms to indirectly tax their profits. We study the incidence of these taxes using data on Amazon, the largest online retailer. We find that, on average, Amazon increased its fees by roughly half the amount of the digital service tax. Firms using Amazon as a platform have largely passed these increased fees on to consumers. Large digital firms thus bear only a small part of the tax burden, but the tax may nevertheless succeed in making them less competitive relative to brick-and-mortar competitors.

Media mention: Trump threatens 50% tariffs. How might Europe strike back? in the Economist.

Abstract: Zombie firms are firms that defy economic rationale and continue to survive despite financial distress for a long period of time. When part of a large group of companies, zombie firms can function as tax planning instruments by facilitating profit shifting or loss offsets. Tax planning using zombie firms is tough without consultation from intermediaries(tax consultants, accountants, lawyers etc.,.). In the light of DAC6, where the EU mandates intermediaries to disclose the tax planning activities of their clients, usage of zombie firms as tax planning instruments would come under the scanner. Using firm financial data from ORBIS and a differences-in-differences methodology, I find that group zombie firms in the EU become more prone to closure compared to their non-EU counterparts post DAC6. In case of firms that survive, I observe a lesser probability of a group firm being a zombie in the EU. Robustness and heterogeneity results show that apart from the location of the firm, the location of the group headquarter also significantly affects the results.