No. 12: Technological change and countries’ tax policy design

Abstract

We investigate whether technological change predicts tax policy changes in 34 OECD countries from 1996 to 2016. To examine tax policy reactions, we construct two new country-level indexes, one capturing tax-related investment incentives and one capturing anti-tax avoidance rules in a country. We document a decreasing trend in statutory tax rates, stable capital investment incentives, and a trend toward stricter anti-tax avoidance rules across countries over the last two decades. Our main finding is that country-specific exposure to technological change predicts variation in these trends. We find that, following technological changes, countries tighten their anti-tax avoidance rules. Cross-sectional tests show that smaller countries deviate from this general trend and use less stringent anti-tax avoidance rules. In the competition for firms’ mobile capital, smaller countries thus appear to create indirect investment incentives by opting for less salient tax policy tools (i.e., anti-tax avoidance rules).

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin und der Goethe-Universität Frankfurt, die die gleiche Forschungsagenda verfolgen.