Technological Changes and Countries’ Tax Policy Design: Evidence from Anti–Tax Avoidance Rules

Abstract

We investigate the association between technological changes and corporate tax policies in 34 OECD countries between 1996 and 2016. We use a shift-share design to capture the differential exposure of countries to U.S. technological advancements. Our study shows that countries’ antitax avoidance rules are tightened as their exposure to U.S. technological advancements increases. The tightening is particularly concentrated in countries that are larger, more exposed to intangibles, and have higher profit shifting incentives. Our findings have important implications for corporate executives as a country’s anti–tax avoidance rules are associated with foreign technological advancements. This paper was accepted by Eric So, accounting. Funding: A. I. Brühne and M. Jacob acknowledge funding by the Deutsche Forschungsgemeinschaft [Project-ID 403041268–TRR 266 Accounting for Transparency]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2021.03955 .