The Effects of the Tax Cuts and Jobs Act on the Tax-Competitiveness of Multinational Corporations

56 Pages Posted: 13 Mar 2023

See all articles by Michael Overesch

Michael Overesch

Universität zu Köln

Leon G. A. Reichert

University of Cologne

Georg Wamser

University of Tuebingen

Date Written: 2023

Abstract

We exploit the 2017 US tax reform to learn about the tax-competitiveness of US multinational corporations (MNCs) relative to their international peers. Matching on the propensity score, we compare pairs of similar US and European firms listed on the S&P500 or StoxxEurope600 in a difference-in-differences setting. Our results suggest significantly lower effective tax rates of US MNCs compared to their European competitors after the US tax reform. Additional tests show (i) that US MNCs have gained substantially in what we call tax-competitiveness, (ii) that the reform effect is more pronounced for MNCs with a high share of domestic activity, and (iii) that the tax reform did not change the international tax-planning behavior of US MNCs. We provide evidence that US MNCs already successfully engaged in international tax planning prior to the reform, and this behavior is unchanged after the tax reform.

Keywords: effective tax rate, tax reform, tax-competitiveness, tax avoidance, pair matching, difference-in-differences analysis, profit shifting

JEL Classification: H250, H260, K340

Suggested Citation

Overesch, Michael and A. Reichert, Leon G. and Wamser, Georg, The Effects of the Tax Cuts and Jobs Act on the Tax-Competitiveness of Multinational Corporations (2023). CESifo Working Paper No. 10310, Available at SSRN: https://ssrn.com/abstract=4383849 or http://dx.doi.org/10.2139/ssrn.4383849

Michael Overesch

Universität zu Köln ( email )

Albertus-Magnus-Platz
WiSo-Gebäude
Cologne, 50923
Germany
0221/470-5605 (Phone)

HOME PAGE: http://www.steuer.uni-koeln.de/

Leon G. A. Reichert

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Georg Wamser (Contact Author)

University of Tuebingen ( email )

Mohlstr. 36
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

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