Antitrust policies and corporate tax avoidance: International evidence

Abstract

We examine how a country's antitrust policies influence corporate tax strategies. Using comprehensive data on competition laws and the adoption of leniency programs across 51 non-U.S. countries, we find that firms tend to engage in greater tax avoidance when faced with more stringent antitrust policies. The effect of antitrust laws on tax avoidance is more pronounced in countries with stronger institutions, suggesting that less concern about rent extraction encourages managers to engage in greater tax planning. Finally, we find evidence that country-level corporate income tax revenue decreases as antitrust laws strengthen, suggesting potential unintended consequences. Overall, our study sheds light on the interplay between antitrust policies and firms' tax strategies, offering valuable insights for policymakers.