Corporate Tax Compliance Costs and Investments

55 Pages Posted: 2 May 2019 Last revised: 28 Jun 2023

See all articles by Jesse van der Geest

Jesse van der Geest

Tilburg University

Martin Jacob

WHU - Otto Beisheim School of Management

Date Written: June 15, 2023


We examine the effects of tax compliance costs on firms’ investment. While reducing compliance
costs is an important tax policy objective, there is little empirical evidence regarding the investment
effects of such actions. Using two different settings, we show that lower compliance costs increase
firms’ investment. This effect is more pronounced among smaller firms and financially constrained
firms. We further find that lower compliance costs are associated with more foreign direct
investment and entrepreneurial activity. Our findings imply that reducing compliance costs can
have positive investment effects and that tax administration reforms can play an important role in
achieving compliance cost gains.

Keywords: Compliance costs, investment, tax administration

JEL Classification: D22, H25, H32

Suggested Citation

van der Geest, Jesse and Jacob, Martin, Corporate Tax Compliance Costs and Investments (June 15, 2023). Available at SSRN: or

Jesse Van der Geest

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE

Martin Jacob (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar, 56179


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