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The general anti-avoidance rule

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Title:The general anti-avoidance rule
Authors:Jon Kerr
Mary Cowx
Keywords:Tax Planning
Tax Avoidance
General Anti-Avoidance Rule
Tax Risk
Date Issued:30 Aug 2019
Abstract:Although a general anti-avoidance rule (GAAR) being enacted within a country is becoming increasingly more common, the presence of a GAAR is generally overlooked and thus its effect left unstudied. In this paper we provide an initial investigation by studying the effect that the presence of a GAAR within a country has on corporate tax avoidance behaviors. Using an indicator for the enactment of a GAAR within a specific country, we find a statistically and economically significant increase in aggregate tax collections and a statistically and economically significant decrease in firm-level tax avoidance. Additional analyses show that the firm-level results are strongest for firms with higher levels of tax avoidance, for countries with lower levels of tax enforcement prior to the implementation of a GAAR, and for countries where the burden of proof lies, at least partially, with the taxpayer. In final analyses, we find that the GAAR is associated with a decrease in the volatility of reported ETRs.
Appears in Collections: 19 Taxation

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