What do we know about the effects of country-by-country reporting?

Sophisticated multinational corporations are becoming ever more adept at tax planning, prompting fears that skillful manipulation of tax laws is eroding the tax base in many countries. The Organisation for Economic Co-operation and Development (OECD) is particularly concerned about this development, and has undertaken a number of initiatives to address this perceived threat to the tax base. Its Base Erosion and Profit Shifting (BEPS) project, for example, requires multinational firms above a certain size threshold to disclose their country-by-country numbers on several metrics to members’ tax authorities (e.g., the number of their employees in each country).

This country-by-country reporting currently is required on a private level in many OECD member countries, including the IRS in the United States. In the European Union, some multinational banks are also required to file public reports – and many support an extension to public reporting for large multinationals as well.

In this page, we summarize what the research has found thus far on the effectiveness of both public and private country-by-country reporting. Be sure to check back often, as more and more research is added to this growing area of exploration.

Summary of CbCR Papers


The Impact of Country-by-Country Reporting on Corporate Tax Avoidance

May 25, 2020

Hugger, Felix

Within the framework of the OECD BEPS initiative many countries introduced nonpublic country-by-country reporting for MNEs above a revenue threshold. The reports provide tax authorities with information on the global activities of multinationals at a country level. This paper investigates the responses of companies to country-by-country reporting and tests whether the goal of a reduction in tax avoidance is achieved. Difference-in-difference estimations show an increase in consolidated effective tax rates of about one percentage point in the treatment group and provide evidence for a reduction in profit shifting at the subsidiary level. Responses are more pronounced for companies experiencing a stronger increase in detection probability. At the same time, total tax payments do not rise, which may be explained by a decrease in economic activity of companies in scope. The second part of the paper investigates avoidance of the disclosure obligation and documents substantial excess mass just below the revenue threshold in the post-reform years. This effect is stronger for company types with higher costs of CbCR and lower costs of adjusting revenues. More

Do investors care about tax disclosure?

April 05, 2020

Flagmeier, Vanessa and Gawehn, Vanessa

We assess the investor reaction to a potential introduction of public country-by-country reporting (CbCR) into the European Capital Requirements Directive IV. Estimating cumulative abnormal returns with the help of a multivariate regression model, we find weak significant evidence around our event date (February 20th, 2013) that investors perceive the introduction of CbCR as beneficial. In additional tests, we assess investor perceptions relative to different control groups (domestic institutions and non-EU institutions) and in the cross-section (splitting across size, systemically relevant, pre-event level of GAAP ETR and pre-event level of geographic disclosure). The only significant outcome is a negative reaction for large international EU institutions. More

Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

October 01, 2019

Eberhartinger, Eva and Speitmann, Raffael and Sureth-Sloane, Caren (October 2019)

European regulation mandates public country-by-country reporting for banks and is expected to increase reputational costs in case of tax haven activities. We test whether the availability of additional public information on the locations of banks' subsidiaries reduces their tax haven presence. In a preliminary difference-in-difference analysis we find that indeed, tax haven presence in “Dot-Havens” has declined significantly after the introduction of mandatory public country-by-country reporting for European banks, as compared to the insurance industry which is not subject to this regulation. More

Real Effects of Private Country-by-Country Disclosure

September 01, 2019

De Simone, Lisa and Olbert, Marcel

We investigate the effects of mandatory private Country-by-Country (CbC) disclosure to tax authorities on economic activity. Using rich data on the operations of multinational firms, we exploit the threshold-based application of this 2016 disclosure rule in a regression discontinuity design. We find evidence that firms affected by the disclosure mandate reduce ownership in tax haven subsidiaries relative to unaffected firms and thereby increase transparency in their previously opaque organizational structure. We also document that affected firms invest less in aggregate employment on average relative to unaffected firms but do not appear to alter consolidated tax payments. However, affected firms increasingly allocate revenue, employment, total assets, and, correspondingly, tax payments to subsidiaries in European low-tax countries. Collectively, our findings suggest that mandatory CbC disclosure curbs the most aggressive tax planning achieved through tax haven operations but has likely unintended adverse effects on other real economic activities. More

Does Private Country-by-Country Reporting Deter Tax Avoidance and Income Shifting?

May 01, 2019

Preetika Joshi

This paper evaluates the economic consequences of a recent global tax transparency initiative. To combat tax avoidance by multinational corporations, many jurisdictions have introduced regulations aimed at enhancing tax disclosure requirements. In particular, the Organization for Economic Cooperation and Development introduced country-by-country reporting that requires firms to provide a detailed geographic breakdown of their activity and results to tax authorities in all jurisdictions in which the firm operates. More

Increasing Tax Transparency: Investor Reactions to the Country-by-Country Reporting Requirement for EU Financial Institutions

April 20, 2019

Dutt, Verena Katharina and Ludwig, Christopher and Nicolay, Katharina and Vay, Heiko and Voget, Johannes

We employ an event study methodology to investigate the stock price reaction around the day of the political decision to include a country-by-country reporting obligation for EU financial institutions. More

The Interplay between Mandatory Country-by-country Reporting, Geographic Segment Reporting, and Tax Havens: Evidence from the European Union

March 01, 2019

Rodney J. Brown, Bjorn N. Jorgensen, Peter F. Pope

We investigate whether mandatory public country-by-country reporting (CBCR) by European Union (EU) banks affects geographic segment reporting. We find no significant change in the reported number of geographic segments, country segments, or line items per geographic segment disclosed in segment reporting notes after the introduction of CBCR. Consistent with the notion that EU banks may aggregate geographic segments to obfuscate tax haven activities, we find a positive association between tax haven intensity and geographic segment aggregation. More

Financial Transparency to the Rescue: Effects of Country-by-Country Reporting in the EU Banking Sector on Tax Avoidance

November 27, 2017

Overesch, Michael and Wolff, Hubertus

We analyze the effect of mandatory financial transparency on corporate tax avoidance. Capital Requirements Directive IV by the European Commission forced multinational banks to publish key financial and tax data in the form of Country-by-Country Reporting for the first time in history. More