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on Public Finance |
| By: | Julien Martin; Mathieu Parenti; Farid Toubal |
| Abstract: | This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level. |
| Keywords: | tax avoidance, industry concentration, IRS audit probability |
| JEL: | D22 H26 L11 D40 F23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8469&r=all |
| By: | Colombino, Ugo (University of Turin); Islam, Nizamul (LISER (CEPS/INSTEAD)) |
| Abstract: | We present an extension of the numerical approach to empirical optimal taxation allowed by a peculiar structure of a microeconometric model of labour supply that includes a representation of the demand side. This makes it possible to identify optimal tax-transfer rules while accounting for equilibrium constraints and to evaluate the effects of exogenous labour demand shocks. We provide illustrative examples using the 2015 EU-SILC data set for Italy. |
| Keywords: | empirical optimal taxation, microsimulation, microeconometrics, evaluation of tax-transfer rules, equilibrium, labour demand shocks |
| JEL: | H21 C18 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13541&r=all |
| By: | Juranek, Steffen (Dept. of Business and Management Science, Norwegian School of Economics); Schindler, Dirk (Erasmus School of Economics, Erasmus University Rotterdam); Schneider, Andrea (Jönköping International Business School) |
| Abstract: | Multinational corporations increasingly use royalty payments for intellectual property rights to shift profits globally. This threatens not only the tax base of countries worldwide, it also affects the nature of competition for foreign direct investment (FDI). Against this background, our theoretical analysis suggests a surprising solution to the problem of curbing profit shifting without suffering major FDI losses: A strictly positive withholding tax on royalty payments is both the Pareto-efficient solution under international coordination and the optimal unilateral response. If internal debt is sufficiently responsive, governments can even implement Paretooptimal targeting. Then, the royalty tax closes the profit-shifting channel, while all competition for FDI is relegated to internal-debt regulation. Our results question the ban of royalty taxes in double tax treaties and the EU Interest and Royalty Directive. |
| Keywords: | Source tax on royalties; foreign direct investment; multinationals; profit shifting; internal debt; EU Interest and Royalty Directive |
| JEL: | F23 H25 O23 |
| Date: | 2020–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2020_011&r=all |
| By: | Matthew R. Denes; Sabrina T. Howell; Filippo Mezzanotti; Xinxin Wang; Ting Xu |
| Abstract: | Angel investor tax credits are used globally to spur high-growth entrepreneurship. Exploiting the staggered implementation of these tax credits in 31 U.S. states, we find that while they increase angel investment, they have no significant effect on entrepreneurial activity. Tax credits induce entry by inexperienced, local investors and are often used by insiders. A survey of 1,411 angel investors suggests that a “home run” investing approach alongside coordination and information frictions explain low take-up among experienced investors. The results contrast with evidence that direct subsidies to firms have large positive effects, raising concerns about using investor subsidies to promote entrepreneurship. |
| JEL: | G0 G14 G28 H0 H25 O3 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27751&r=all |