The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile / Sebastián Bustos, Dina Pomeranz, Juan Carlos Suárez Serrato, José Vila-Belda, Gabriel Zucman.

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Bustos, Sebastián

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30114.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Profit shifting by multinational corporations is thought to reduce tax revenue around the world. We analyze the introduction of standard regulations aimed at limiting profit shifting. Using administrative tax and customs data from Chile in difference-in-differences event-study designs, we find that the reform was ineffective in reducing multinationals' transfers to lower-tax countries and did not significantly raise tax payments. At the same time, interviews with tax advisors reveal a drastic increase in tax advisory services. The qualitative interviews also allow us to identify and then quantitatively confirm a common tax planning strategy in response to the reform. These results illustrate that when enforcement can be circumvented by sophisticated tax planning, it can benefit tax consultants at the expense of tax authorities and taxpayers.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30114 (Browse shelf(Opens below))	Not for loan

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June 2022.

Profit shifting by multinational corporations is thought to reduce tax revenue around the world. We analyze the introduction of standard regulations aimed at limiting profit shifting. Using administrative tax and customs data from Chile in difference-in-differences event-study designs, we find that the reform was ineffective in reducing multinationals' transfers to lower-tax countries and did not significantly raise tax payments. At the same time, interviews with tax advisors reveal a drastic increase in tax advisory services. The qualitative interviews also allow us to identify and then quantitatively confirm a common tax planning strategy in response to the reform. These results illustrate that when enforcement can be circumvented by sophisticated tax planning, it can benefit tax consultants at the expense of tax authorities and taxpayers.