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Tax Avoidance through Advance Tax Rulings - Evidence from the LuxLeaks Firms

Author

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  • Birgit Huesecken
  • Michael Overesch
Abstract
Our empirical study tests the effect of special tax deals on tax avoidance by multinational corporations. In 2014, the International Consortium of Investigative Journalists published confidential documents identifying hundreds of firms worldwide that had benefited from advance tax rulings. We find that after engaging in an advance tax ruling in the tax haven Luxembourg, firms have lower worldwide effective tax rates than nonruling firms. The results are robust even if we mitigate a potential bias via propensity-score matching. Consequently, this study gives evidence for corporate tax avoidance through special tax deals in the form of advance tax rulings.

Suggested Citation

  • Birgit Huesecken & Michael Overesch, 2019. "Tax Avoidance through Advance Tax Rulings - Evidence from the LuxLeaks Firms," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 75(4), pages 380-412.
    • Handle: RePEc:mhr:finarc:urn:doi:10.1628/fa-2019-0011
    DOI: 10.1628/fa-2019-0011
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    Citations

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    Cited by:

    1. Petr Janský, 2023. "Corporate Effective Tax Rates for Research and Policy," Public Finance Review, , vol. 51(2), pages 171-205, March.
    2. Egger, Peter H. & Strecker, Nora M. & Zoller-Rydzek, Benedikt, 2020. "Estimating bargaining-related tax advantages of multinational firms," Journal of International Economics, Elsevier, vol. 122(C).

    More about this item

    Keywords

    advance tax ruling; corporate taxation; tax competition; tax avoidance;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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