Abstract of Select Papers


Does Private Country-by-Country Reporting Deter Tax Avoidance & Income Shifting?  Evidence from BEPS Action Item 13 

Job Market Paper

Presented at the 54th Journal of Accounting Research (2019) and currently in the second round of review at JAR 

To combat tax avoidance by multinational corporations, the Organisation for Economic Cooperation and Development introduced country-by-country reporting, requiring firms to provide tax authorities with a geographic breakdown of their profitability and activity. Treating the introduction of country-by-country reporting in the European Union as a shock to private disclosure requirements, this study examines the effect on corporate tax outcomes. Exploiting the €750M threshold and employing a regression discontinuity and difference-in-difference design, I document a 1%–2% increase in consolidated GAAP effective tax rates of the affected firms. I also find some evidence consistent with a decline in tax-motivated income shifting starting in 2018. These results suggest that while private geographic disclosures can have a deterrent impact on overall corporate tax avoidance, the regulations have so far had a limited effect on tax-motivated income shifting. The findings of this study have important policy implications for the global implementation of private country-by-country reporting and add to the ongoing debate on public versus private disclosure of tax information.


Does Public Country-by-Country Reporting Deter Tax Avoidance and Income-Shifting in European Multinational Banks? Evidence from Capital Requirements Directive IV

With Edmund Outslay & Anh Persson

Contemporary Accounting Research  (Conditionally Accepted) and presented at the 9th Contemporary Accounting Research Conference in Banff, Canada 

We examine the effect of increased tax transparency imposed on European banks by the introduction of public country-by-country reporting (CbCR) under the Capital Requirements Directive IV (CRD IV). Treating CRD IV as an exogenous shock to the banks’ disclosure requirements, we examine and find some evidence consistent with a decline in the income-shifting activities of the banks’ financial affiliates following the full introduction of CbCR (starting in 2015). Concurrently, there is also some evidence consistent with a decrease in income shifting by these banks’ non-financial affiliates, whose CbCR disclosure is not mandatory under CRD IV. We do not, however, find robust evidence of a significant change in the consolidated GAAP effective tax rates for the affected banks. Our findings suggest that increased transparency from public CbCR can act as a deterrent for tax-motivated income shifting, but it does not appear to materially influence a bank’s overall tax avoidance during the three-year post-adoption period. Our findings have important policy implications for the ongoing debates between the European Parliament, the OECD, and accounting standard-setting bodies on whether to require multinationals to publish their country-by-country reports.

Economic Consequences of Global Tax Transparency

Multinational corporations employ numerous strategies to artificially shift profits from high tax to low tax jurisdictions. Previous studies suggest that the allocation of taxable profits is not in line with economic value creation, thereby creating an inequitable distribution of the tax base. To combat the use of cross-border tax planning strategies by multinational corporations, various countries and regulatory bodies have introduced initiatives aimed at enhancing tax disclosures. In this study, I evaluate whether there is a reduction in the misalignment between reported profits and real activity following the introduction of private country-by-country reporting under OECD’s BEPS Action item 13. Using affiliate-level data of European multinational firms and employing a difference in difference design, I find a significant increase in employment and intangibles in low tax affiliates of European multinational firms subject to country-by-country reporting. I, however, fail to document a change in real investment (i.e., tangible assets) or the level of pre-tax income reported in low tax affiliates. This study informs politicians and researchers about the real consequences of global tax transparency.