The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile

Sebastián Bustos; Dina Pomeranz; Juan Carlos Suárez Serrato; José Vila-Belda; Gabriel Zucman

doi:10.3386/w30114

The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile

Sebastián Bustos, Dina Pomeranz, Juan Carlos Suárez Serrato, José Vila-Belda & Gabriel Zucman

Working Paper 30114

DOI 10.3386/w30114

Issue Date June 2022

Revision Date November 2025

Profit shifting by multinational corporations is thought to reduce tax revenue around the world. This paper provides a comprehensive analysis of the introduction of standard regulations to limit profit shifting. Using administrative tax and customs data from Chile, we find that the reform was ineffective in reducing multinationals’ transfers to lower-tax countries and did not significantly raise tax payments. Interviews with tax advisors and employment history data reveal a drastic increase in consulting services. Our results illustrate that when enforcement can be circumvented by sophisticated tax planning, it can benefit tax consultants at the expense of tax authorities and taxpayers.

We thank Alberto Abadie, Claudio Agostini, Christopher Aitken, Marcelo Bergolo, Devika Bhatia, Katarzyna Bilicka, Anne Brockmeyer, Shawn Chen, Lorenzo Casaburi, Dhammika Dharmapala, Michael Devereux, David Dorn, Alice Evans, Claudio Ferraz, Manon François, John Friedman, François Gerard, Irem Güçeri, Jeffrey Hoopes, Jim Hines, Juliana Londoño-Vélez, Michael Lovenheim, Ben Olken, Florian Scheuer, Joel Slemrod, Tavneet Suri, Eleanor Wilking, and Danny Yagan as well as participants at the Oxford Centre for Business Taxation and a number of other seminars and conferences for helpful comments and discussion, and the Weiss Foundation, the International Growth Center, the Swiss National Science Foundation, the European Research Council and the University Research Priority Program “Equality of Opportunity” of the University of Zurich for generous financial support. Zucman also acknowledges support from the Stone foundation and the European Research Council. We are grateful to the Chilean Tax Authority for excellent research collaboration. We thank our team of outstanding, dedicated research assistants. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Copy Citation

Sebastián Bustos, Dina Pomeranz, Juan Carlos Suárez Serrato, José Vila-Belda, and Gabriel Zucman, "The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile," NBER Working Paper 30114 (2022), https://doi.org/10.3386/w30114.

Download Citation

MARC RIS BibTeΧ

The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile

Related

Topics

Programs

More from the NBER