Consumption taxes and corporate tax planning - evidence from European service firms

Olbert, Marcel ; Werner, Ann-Catherin

Services tax planning_OW_20190207_SSRN.pdf - Published

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URN: urn:nbn:de:bsz:180-madoc-486054
Document Type: Working paper
Year of publication: 2019
Place of publication: Mannheim
Edition: Version 07 February 2019
Publication language: English
Institution: Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel)
Subject: 330 Economics
Keywords (English): Consumption Taxes , Tax Planning , Profit Shifting
Abstract: Consumption taxes are a primary source of tax revenue in many jurisdictions. Exploiting a unique setting in Europe with 28 staggered and plausibly exogenous value-added tax rate changes, this study examines the effect of consumption taxes on corporate tax planning. We find that service firms report 0.5 percent less in sales if consumption taxes increase by one percentage point. Consistent with incentives for tax planning and economic theory, the effect is stronger for firms with greater discretion over where to pay value-added taxes and firms bearing a greater part of the tax burden. We then show that the extent and the channels of profit shifting depend on firms’ responsiveness to consumption taxes, suggesting that consumption taxes place a constraint on corporate income tax planning.

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BASE: Olbert, Marcel ; Werner, Ann-Catherin

Google Scholar: Olbert, Marcel ; Werner, Ann-Catherin

ORCID: Olbert, Marcel ORCID: 0000-0001-8689-9843 ; Werner, Ann-Catherin

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