September 21: Baptiste Souillard (ULB)

Monday, September 21st

Baptiste Souillard (ECARES, SBS-EM, Université libre de Bruxelles, F.R.S.-FNRS) – “The unintended effect of import competition on corporate tax avoidance”


This paper examines the role played by import competition in corporate tax avoidance. I exploit balance sheets and income statements to measure tax avoidance of US-publicly listed firms and the US conferral of the Permanent Normal Trade Relations status on China to establish causality. The results, supported by a series of sensitiv- ity tests, reveal a positive effect of import competition on corporate tax avoidance. Furthermore, they are entirely driven by multinational enterprises. In response to the China shock, these firms invested in intangible assets to escape competition but these intangibles also allowed them to shift more profits towards low-tax countries. These findings shed light on the determinants of corporate tax avoidance. More generally, they help understand the decline in the average effective tax rate of US publicly listed firms and the recent backlash against large firms and globalization.

Souillard (2020) – IC CTA