EU Tax Observatory Seminar

Du 19/04/2024 de 12:00 à 13:00

Salle R1-14

JAKOB BROUNSTEIN (IFS)

Retaining your corporate income tax base: Effects of a tax haven shareholdership reform in Ecuador

Can a country reduce its exposure to tax havens, and what are the consequences? We analyze the effects of the 2015 corporate tax surcharge applied by Ecuador to all domestic firms with shareholders from tax havens. This reform was made possible by the implementation of a mandatory ownership registry in 2012. We implement a difference-in-differences estimation that compares firms demonstrating pre-reform tax haven shareholdership versus other internationally owned firms (without tax haven presence). Exposed firms reduce their reported shareholder linkages to tax havens by 17pp on average, with approximately one-third of exposed firms ceasing observable ties to tax havens entirely. We document a nearly complete substitution (14pp) towards foreign non-haven ownership, hinting at a layering response. Yet, we also find a small increase in domestic shareholdership, and a modest rise in taxable profits and tax liability, which suggests that substituting to alternate avoidance strategies is not frictionless.