PUBLICATIONS:

Tax Enforcement Using a Hybrid between Self- and Third-party Reporting

With P. Mavrokonstantis, Journal of Public Economics (Volume 203, 2021)

We study behavioural responses to a widely-used tax enforcement policy that combines elements of self- and third-party reporting. Taxpayers self-report to the tax authority but must file documentation issued by a third-party to corroborate their claims. Exploiting salary-dependent cutoffs governing documentation requirements when claiming deductions for charitable contributions in Cyprus, we estimate that deductions increase by £0.7 when taxpayers can claim £1 more without documentation. Second, using a retroactive reform, we estimate that at least 64% of the response is purely a reporting adjustment representing tax evasion. Finally, reporting rules drive the behaviour of a large group of taxpayers who display little responsiveness to financial incentives for giving

Taxing Multinationals Beyond Borders: Financial and Locational Responses to CFC Rules

Journal of Public Economics (Volume 173, 2019)

Using a large panel dataset on worldwide operations of multinational firms, this paper studies one of the most advocated anti-tax-avoidance measures: Controlled Foreign Corporation rules. By including income of foreign low-tax subsidiaries in the domestic tax base, these rules create incentives to move income away from low-tax environments. Exploiting variation around the tax threshold used to identify low-tax subsidiaries, we find that multinationals redirect profits into subsidiaries just above the threshold and change incorporation patterns to place fewer subsidiaries below and more above the threshold. Roughly half of the resulting increase in global tax revenue accrues to the rule-enforcing country.

 WORKING PAPERS:

The Distribution of Profit Shifting

(with J. Miethe, LMU Munich and Camille Semelet, LMU Munich and IFO institute)

This paper characterizes profit shifting behavior across the size distribution of multinational enterprises (MNEs) to evaluate the targeting of the recently introduced Global Minimum Tax (GMT). Using German microeconomic administrative data with no reporting gaps for tax havens, we first document reductions in tax payments after tax haven subsidiaries are added to a group and confirm their outsized productivity. As group size increases, so does the likelihood of including tax haven subsidiaries. Second, we introduce a new methodology to estimate shifted profits at the group level and find an exponential group size gradient in profits shifted to tax havens. A total of EUR 19 billion was shifted to tax havens by German MNEs in 2022. Large groups targeted by the GMT account for 95\% of this amount. While this is mainly a function of their size, we also document a positive gradient in profit shifting aggressiveness relative to employment. Third, we relate revenue potential from taxing excess profits in low-tax jurisdictions to compliance costs of the GMT, using a 15\% benchmark rate. For groups currently covered by the GMT, revenue gains significantly dominate costs, while extending coverage to additional groups yields only modest net gains. Our results support policy consistency of the GMT in the face of recent unilateral challenges.

 SELECTED WORK IN PROGRESS:

The Multinational Capital Advantage

(with J. Miethe, LMU Munich )  - Early results available upon request

Tax Enforcement with Multiple Evasion Technologies

(with N. Johannesen, University of Copenhagen)

Corporate Taxes and Economic Activity at Home and Abroad

(with J. Miethe, LMU Munich, Gerwin Kiessling, University of Oxford and Camille Semelet, LMU Munich and the IFO institute)

Taxes and Jobs within Multinational Enterprises

(with Irem Guceri, University of Oxford)

 POLICY WORK:

The OECD Global Anti-Base Erosion ("GloBE") proposal

(with Michael P. Devereux, François Bares, Judith Freedman, İrem Güçeri, Martin McCarthy, Martin Simmler and John Vella)

The OECD’s “Global Anti-Base Erosion” (GloBE) proposal was formally introduced in January 2019 as part of a consultation on “Addressing the Tax Challenges of the Digitalisation of the Economy” (OECD, 2019a). The main element of the proposal is an “income inclusion rule" that would tax the income of a foreign branch or a controlled entity if that income was subject to a low effective tax rate in the jurisdiction of establishment or residence” (OECD, 2019b, p.25). It gives the government of a parent company the right to tax that income – irrespective of whether that income might be considered to be generated in that country. The income inclusion rule is a form of minimum tax. Below, we consider the objectives of the GloBE proposal, and ask three questions: (i) whether the objectives are justified; (ii) whether the proposed reform achieves these objectives; and (iii) whether other possible reforms might achieve these objectives more successfully.

Oxford University, Centre for Business taxation - January 2020 Policy report.