Externalities in international tax enforcement theory and evidence by Thomas Torslov, Ludvig Wier and Gabriel Zucman
By: Torslov, Thomas
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Contributor(s): Wier, Ludvig | Zucman, Gabriel.
Material type: 
ArticleSubject(s): POLITICA FISCAL | EMPRESAS MULTINACIONALES | FISCALIDAD INTERNACIONAL | EVASION FISCAL | ELUSION FISCAL | PREVENCIÓN | EXTERNALIDADES | ESFUERZO FISCAL
In:
American Economic Journal : Economic Policy v. 51, n. 2, May 2023, p. 497-525Summary: We show that the fiscal authorities of high-tax countries can lack the incentives to combat profit shifting to tax havens. Instead, they have incentives to focus their enforcement efforts on relocating profits booked by multinationals in other high-tax countries, crowding out the enforcement on transactions that shift profits to tax havens, and reducing the global tax payments of multinational companies. The predictions of our model are motivated and supported by the analysis of two new datasets: the universe of transfer price corrections conducted by the Danish tax authority, and new cross-country data on international tax enforcement.
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| OP 2135/2023/2-1 Optimal income taxation with spillovers from employer learning | OP 2135/2023/2-2 Pensions and fertility | OP 2135/2023/2-3 Taxing billionaires | OP 2135/2023/2-4 Externalities in international tax enforcement | OP 2135/2023/3 American Economic Journal : Economic Policy | OP 2135/2023/3-1 Sin taxes and self-control | OP 2135/2023/3-2 Common practice |
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We show that the fiscal authorities of high-tax countries can lack the incentives to combat profit shifting to tax havens. Instead, they have incentives to focus their enforcement efforts on relocating profits booked by multinationals in other high-tax countries, crowding out the enforcement on transactions that shift profits to tax havens, and reducing the global tax payments of multinational companies. The predictions of our model are motivated and supported by the analysis of two new datasets: the universe of transfer price corrections conducted by the Danish tax authority, and new cross-country data on international tax enforcement.
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