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Corporate tax cuts and firm employment: A match made in haven?

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  • Souillard, Baptiste

Abstract

Evidence on employment responses to corporate income taxes is mixed. This paper revisits the issue in the context of corporate tax avoidance. It is now well known that multinational companies artificially register some of their profits in tax havens to reduce their tax liability. The study reveals that all other things being equal, the establishment of tax haven subsidiaries is followed by a 4 percent rise in firm employment in the subsequent years. This finding offers greater insight into how corporate income taxes affect employment levels. It also has particular resonance at a time when international tax regulation is tightening to limit the aggressive tax planning activities of large multinational companies.

Suggested Citation

  • Souillard, Baptiste, 2022. "Corporate tax cuts and firm employment: A match made in haven?," Economics Letters, Elsevier, vol. 219(C).
    • Handle: RePEc:eee:ecolet:v:219:y:2022:i:c:s0165176522003135
    DOI: 10.1016/j.econlet.2022.110835
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    1. Tosun, Onur Kemal & Lucey, Brian, 2023. "Growth … What growth?," Finance Research Letters, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Multinational enterprises; Tax avoidance; Profit shifting; Employment; Tax havens;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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