Farid Toubal, Ph.D. (University of Paris-Dauphine -- PSL)
This paper investigates the influence of corporate tax avoidance (CTA) on firm-level sales, and its aggregate implications. A simple model shows CTA gives a competitive advantage to avoiding firms, which leads to an increase in concentration if large firms adopt more aggressive tax planning strategies that small ones. We find support in US firm-level data for a positive and causal impact of CTA on firm-level sales using three alternative identification strategies. We then show CTA increased more among the largest firms in most industries, which reinforced their dominant position. In key industries, the differences in tax aggressiveness between large and small firms explain 10% to 30% of the increase in concentration over the last 25 years. CTA-induced concentration influences industrial real output to an extent that is relevant at the macroeconomic scale.
Julien Martin (Université du Québec à Montréal and CEPR) – Mathieu Parenti (Université Libre de Bruxelles and CEPR) – Farid Toubal (Université Paris-Dauphine- PSL, CEPII, CESifo and CEPR)