Keywords

tax enforcement, investment, tax planning, tax authority, state aid

Abstract

Amid growing globalization, many countries have offered tax incentives to attract corporate investment. Prior research studies the role such incentives play in firms’ location and investment choices. However, we have limited evidence on the role that uncertainty about the intensity of future tax enforcement plays in those decisions. In 2013, the European Commission (“E.C.”) abruptly began investigating tax ruling practices of several countries in response to allegations that certain firms received preferential tax treatment (“state aid cases”). We use this setting to study the economic consequences of increased uncertainty about future tax enforcement. We find evidence consistent with significant reductions in U.S. multinational firms’ subsidiary investments within, firm input purchases from, and aggregate investment of U.S. firms flowing to targeted state aid countries. Our results highlight significant real effects of increased uncertainty and complexity surrounding shifts in supragovernmental tax enforcement.

Original Publication Citation

“Beyond Borders: Uncertainty in Supragovernmental Tax Enforcement and Corporate Investment” With Martin Jacob, Jaron Wilde, and Ryan Wilson, The Accounting Review, 2022 97(6): 233-261

Document Type

Peer-Reviewed Article

Publication Date

2021

Publisher

The Accounting Review

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Assistant Professor

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Accounting Commons

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