Corporate Tax Avoidance and Industry Concentration

63 Pages Posted: 28 Jul 2020 Last revised: 22 Sep 2021

See all articles by Julien Martin

Julien Martin

University of Quebec at Montreal (UQAM)

Mathieu Parenti

Catholic University of Louvain (UCL)

Farid Toubal

Université Paris Dauphine; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII); Centre for Economic Policy Research (CEPR)

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Date Written: July 2021

Abstract

A simple model shows CTA increases concentration if (i) CTA gives a competitive advantage to avoiding firms, and (ii) CTA of large relative to small firms increases. We find a positive and causal impact of CTA on firm-level sales using three alternative identification strategies. We then show CTA increases more among the largest firms in most industries, which reinforces their dominant position. In key industries, the differences in tax aggressiveness between large and small firms explain 10% to 30% of the increase in concentration over the last 25 years. CTA-induced changes in the CR4 index influence industrial real output to an extent that is relevant at the macroeconomic scale.

Keywords: industry concentration, IRS Audit Probability, Tax avoidance

JEL Classification: D22, D4, F23, H26, L11

Suggested Citation

Martin, Julien and Parenti, Mathieu and Toubal, Farid, Corporate Tax Avoidance and Industry Concentration (July 2021). CEPR Discussion Paper No. DP15060, Available at SSRN: https://ssrn.com/abstract=3661403

Julien Martin (Contact Author)

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Mathieu Parenti

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

Farid Toubal

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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