Technological Changes and Countries’ Tax Policy Design: Evidence from Anti–Tax Avoidance Rules

Abstract

We investigate the association between technological changes and corporate tax policies in 34 OECD countries. We use a shift-share design to capture the differential exposure of countries to U.S. technological advancements. Our study shows that countries’ anti-tax avoidance rules are tightened as their exposure to U.S. technological advancements increases. The tightening is particularly concentrated in countries that are larger, more exposed to intangibles, and have higher profit shifting incentives. Our findings have important implications for corporate executives as a country’s anti–tax avoidance rules are associated with foreign technological advancements.

Keywords: tax policy, technological changes, tax avoidance

JEL Classification: M48, H25, H26