企业避税的财政后果

Multinational corporations (MNCs) shift a large share of their profits to tax havens and, due to this corporate tax avoidance, governments lose a portion of their tax revenue. In this paper, we study the consequences of multinational tax avoidance on the local governments’ tax revenues. We use financial firm-level data on the location and profits of firms operating in Germany combined with German municipal data to analyze how changes in municipal local business tax (LBT) rates affect MNC profits and LBT revenues in affected municipalities. Following an increase in the LBT rate, we find that firms that belong to more aggressive MNCs reduce profits and tax liability reported in affected municipalities. Consequently, municipalities with high exposure to aggressive multinationals experience a significant decline in LBT revenues relative to less exposed municipalities, which in some cases also affects their overall tax revenues. We then investigate potential explanations.