The fact that multinationals exploit loopholes to avoid taxes is well-known. What is not known is how to stop this. As evasion method close, firms seek out new ones to stay one step ahead of tax authorities. This response to regulation then affects enforcement which leads to additional firm responses. To truly understand tax evasion, it is necessary to have a holistic view on the regulation-response-enforcement loop.
This project does exactly that by creating a partnership between academic researchers and government institutions that provides a heretofore unavailable view of the inner workings of tax policy. The heart of this fact-based approach to policy formation is data. The project combines existing gold-standard information on the behaviour of firms with brand-new information detailing the hands-on experience of government officials. These data not only give a much more detailed understanding of firm choices but also reveal for the first time the inner workings of how enforcement is carried out.
First, this will be used to understand the latest methods of tax avoidance including self-insurance and manipulations along the global supply chain. Second, this will then be matched by a detailed analysis of how tax authorities deploy their manpower, with a particular eye on how this is driven by firm choices and how that in turn alters what multinationals do. Third, we complete the circle by examining the tax advice industry to analyse how they act as intermediaries between tax payers and tax collectors and the ways in which they influence the ultimate outcome.
Given the data focus, the project continues by exploiting the latest types of country-by-country reporting required of multinationals. As these data are so new, one of our goals is to develop intuitive tools that will allow the tax administration to achieve more efficient and effective enforcement. This then creates practical tools for achieving tax fairness.
