Negotiated Tax Havens
42 Pages Posted: 30 Nov 2018
Date Written: November 8, 2018
Recently, the intersection of state aid and international tax has acquired a high profile in the European Union. In response, important tax and accounting policy changes are being proposed or implemented. However, these changes are predicated on rhetoric that unfair tax ruling practices by host country governments are pervasive, and significantly benefit foreign-owned companies. Yet, there is no empirical evidence as to whether this is the case. Using several novel data sources on tax concessions granted in the EU, we find that both domestic- and foreign-owned companies receive economically significant tax benefits from state aid. Our finding that tax concessions create significant disparities across firms’ profitability and effective tax rates suggest that any country can operate as a tax haven for any company, without greater supervision and transparency.
Keywords: tax policy, FDI, state aid, competition, foreign-owned
JEL Classification: H25, F23
Suggested Citation: Suggested Citation