Does Public Country-by-Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from the European Banking Industry

47 Pages Posted: 6 Oct 2019 Last revised: 18 Nov 2019

See all articles by Preetika Joshi

Preetika Joshi

York University - Schulich School of Business

Edmund Outslay

Michigan State University - Department of Accounting & Information Systems

Anh Persson

University of Illinois at Urbana-Champaign - Department of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2019

Abstract

In this study, we examine the effect of increased tax transparency on the tax planning behavior of European banks. In 2014, the European Union introduced public country-by-country reporting requirements to the banking industry. Treating this new requirement as an exogenous shock, we find limited evidence consistent with a decline in income-shifting by the banks’ financial affiliates in the post-adoption period (starting from 2015). We do not, however, find robust evidence of a significant change in the consolidated book effective tax rates among the affected banks. Our findings suggest that increased transparency from public country-by-country reporting can deter tax-motivated income shifting but that it did not appear to materially influence a bank’s overall tax avoidance. Our findings have policy implications for the ongoing debate between the European Parliament, the Organisation for Economic Co-operation and Development, and accounting standard-setting bodies on whether to require multinationals to publish country-by-country reports.

Keywords: public country-by-country reporting, tax transparency, income shifting, tax avoidance

JEL Classification: M4

Suggested Citation

Joshi, Preetika and Outslay, Edmund and Persson, Anh, Does Public Country-by-Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from the European Banking Industry (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=3460131 or http://dx.doi.org/10.2139/ssrn.3460131

Preetika Joshi (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
4165094858 (Phone)

Edmund Outslay

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
(517) 432-2912 (Phone)

Anh Persson

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

283 Wohlers Hall
1206 South Sixth Street
Champaign, IL 61820
United States
217.330.8543 (Phone)

HOME PAGE: http://https://giesbusiness.illinois.edu/profile/anh-vuong-persson

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
142
Abstract Views
653
rank
227,705
PlumX Metrics