Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300270 
Year of Publication: 
2024
Series/Report no.: 
arqus Discussion Paper No. 285
Publisher: 
Arbeitskreis Quantitative Steuerlehre (arqus), Berlin
Abstract: 
This study analyzes the impact of tax complexity on the location of tax employees and tax risk. Using a hand-collected dataset of more than 7,500 tax employees from 348 European-listed multinationals, we identify two types of firm-level costs associated with tax complexity-tax employees, and tax risk. We find that firms locate more tax employees in countries with greater tax complexity. This association is particularly pronounced for complexity in tax procedures. We also find that multinationals operating in countries with high tax complexity are associated with higher tax risk. The incremental tax risk vanishes for firms that locate more tax employees in countries with highly complex tax procedures, while we find no risk reduction from additional tax employees in countries with complex tax rules. Our results reveal that multinationals eliminate 25 percent of overall tax complexity-related tax risk through targeted location of tax employees.
Subjects: 
tax complexity
tax complexity cost
tax department
tax employees
tax risk
JEL: 
H25
H26
M12
Document Type: 
Working Paper

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