How import competition contributes to corporate tax avoidance

FinReg Blog - Duke University School of Law

Summary: Tax scandals have inevitably had a special resonance in public opinion at a time when societies are struggling with budget deficits, rising inequalities, and a pandemic underlining the importance of public goods. Despite being opaque by nature, tax avoidance strategies are now quite well-known, both by researchers and policymakers. The factors pushing firms to engage in tax avoidance are, however, relatively less understood. This column consists of a non-technical summary of my paper “The unintended effect of import competition on corporate tax avoidance”. In this paper, I show that the China shock prompted multinational companies to invest in intangible assets, thereby facilitating profit shifting activities. The findings carry important policy implications. For example, as they reveal a close relationship between competition, trade, and corporate income taxes, they emphasize the need to connect international trade and tax policies at the international level.

International corporate taxation after covid-19: Minimum taxation as the new normal (with S. Laffitte, J. Martin, M. Parenti, and F. Toubal)

CEPII Policy Brief, 2020, 30

Dissemination: VoxEU, Ökonomenstimme, Libération

Summary: There are lessons to be learned from the current Covid-19 pandemic. This exceptional situation requires rethinking the provision of sound infrastructures and a functioning health system. National healthcare and other public services, which are currently under increasing pressure, have been underfunded in many countries, an issue that corporate tax avoidance has likely exacerbated. Some multinationals that have been avoiding corporate taxes for years are about to be bailed out by national governments, thus arousing a public sentiment of unfairness. In this Policy Brief, we argue that setting a minimum effective tax rate on the global profit of multinational firms would tackle these concerns.

Profit shifting in France: Evidence from firm‐level administrative databases (with S. Laffitte, M. Parenti, and F. Toubal)

Focus du Conseil d'Analyse Économique, 2019, 36

Dissemination: Financial Times, Agence France Presse, Le Monde, Les Échos, L'Express, La Tribune, Le Parisien, Le Figaro, Ouest France, Europe 1, Challenges, La Croix, L'Humanité, Alternatives Économiques, and more. All articles can be found here.

Summary: Using French administrative databases (FARE and LIFI), we estimate that at least €4.6 billion of corporate income taxes are avoided by firms located in France on an annual basis.

Quel reporting pays par pays pour les futures réformes ? (with S. Delpeuch, S. Laffitte, M. Parenti, H. Paris, and F. Toubal)

Focus du Conseil d'Analyse Économique, 2019, 38

The note is not available in English.

Summary: In this report, we present the French Country‐by‐Country Reporting (CbCR) database and compare it with the information contained in the administrative database Fare. We observe some discrepancies between these two sources and show that the informational content of the CbCR data is actually limited. We argue that it is due to the design of the CbCR requirements and we propose to harmonize and improve these requirements to make these data more informative and exploitable for both researchers and tax authorities.