In 2015, the countries of the Organization for Economic Cooperation and Development, supported by the G20, adopted an action plan against base erosion and profit shifting (BEPS). This international initiative was a response to corporate tax avoidance, which had surged over the past thirty years alongside the global expansion of value chains and the growth of multinational corporations.
Multinational corporations have exploited differences within the international tax system to establish organizational structures based, in particular, on choosing to locate in low-tax jurisdictions and transferring profits through various mechanisms, the most significant of which is the adjustment of intra-group transfer prices. A company will invoice another company within the same group, but in a different country, in order to shift funds.
Has the “Base Erosion and Profit Shifting” (BEPS) plan succeeded in curbing these practices over the past ten years? Studies on the subject currently paint a mixed picture. In our recent working paper “Tax avoidance by small multinationals as a side effect of anti-tax avoidance policy,” we help assess its effects, while highlighting the differences in tax avoidance behavior between large and small multinationals.
No Significant Decrease
First, from a macroeconomic perspective, recent empirical analyses show that international tax avoidance has not decreased significantly since 2015. Gabriel Zucman and his colleague at the University of Berkeley, Ludvig Wier, have demonstrated, in particular, that over the 2015–2019 period, multinational profits continued to grow faster than global profits, the share of profits reported in tax havens remained stable at around 37%, and the fraction of global tax revenue lost due to profit shifting rose from 9% to 10%.
These findings illustrate a paradox. While international regulations have been strengthened, no net decline in tax avoidance has been observable at the aggregate level, at least in the years immediately following the implementation of the reform.
How can this be explained? Research by economists Ruby Doeleman, Dominika Langenmayr, and Dirk Schindler shows that this overall stability masks subtle strategic adjustments. Large multinationals tend to redirect their profits away from the most visible tax havens.
They tend to redirect them to low-tax jurisdictions with greater economic substance, making the net effect on tax revenues in high-tax countries ambiguous.
Reallocation to tax-advantaged jurisdictions
Similarly, Olbert and De Simone, researchers at the universities of Rotterdam and Austin, respectively, emphasize that the implementation of “Country-by-Country Reporting ” (CbCR, which entails increased transparency regarding the allocation of taxable profit) as outlined in the BEPS plan has led to actual reallocations of investment and employment toward tax-advantaged jurisdictions, reflecting an adjustment of organizational structures rather than a mere accounting change. These studies converge on a key idea: while tax incentives remain, the BEPS framework and CbCR now lead firms to make trade-offs by aligning tax gains with greater economic substance.
In our work, we propose the hypothesis that tax planning practices have gradually shifted toward medium-sized multinational enterprises. The BEPS agenda, although aimed at combating tax avoidance, has in fact unintentionally lowered the barriers to entry for these practices among small multinationals.
Smaller Multinationals
From its inception, the text focused on large companies, establishing a consolidated revenue threshold of 750 million euros to determine reporting obligations. Only firms exceeding this threshold were subject to strict requirements and significant penalties for non-compliance; this tiered approach aimed to concentrate tax oversight on the entities most capable of engaging in aggressive tax strategies and to limit administrative costs for smaller companies. At the same time, small and medium-sized multinationals benefited from a positive information shock that allowed them to reassess their risk of tax audits downward, while gaining expertise on the complex transfer pricing manipulation schemes detailed in the regulations.
Thus, our ongoing work on French multinationals appears to reveal a complementary phenomenon. While large multinationals (with revenue exceeding €750 million) have partially exited tax havens as a result of the reform, smaller multinationals have increased their presence in low-tax jurisdictions after 2015, taking advantage of the clarifications and standardization introduced by BEPS to reduce uncertainty and fixed costs associated with international tax planning practices.
If these findings are confirmed, they would point to a channel through which smaller firms learn from and imitate the practices of large firms, a process that may have been facilitated by the legislation.
Improving the competitiveness of domestic firms
These results suggest that anti-tax avoidance policies targeting multinationals must pay attention not only to the intensive margin of these practices—that is, the propensity of firms engaged in these practices to intensify or mitigate them—but also to the extensive margin, that is, the incentives for new entrants to adopt these practices within the new legislative framework. In particular, these policies must ensure that they do not facilitate the adoption of tax optimization practices by firms that were initially less sophisticated.
However, studies on trends in tax avoidance over the past decade suggest another consequence of the BEPS plan and CbCR obligations for multinationals above the threshold of €750 million in consolidated revenue: in addition to an increase in their effective tax costs, their sales would decline.
Multinationals would thus lose market power as their tax avoidance strategies are curtailed, thereby enhancing the competitiveness of domestic firms. This is, however, a recent and evolving area of research. The long-term effects on market structure require further empirical data.
This article is published in partnership with Printemps de l’économie, a series of conferences and debates taking place from March 17 to 20 at the Economic, Social, and Environmental Council (CESE) in Paris.
Find the full program for the 2026 edition, “The Age of Power Struggles,” here.
Flora Bellone, University Professor of Economics, researcher at GREDEG (Université Côte d’Azur, CNRS, INRAE) and Charlie Joyez, Associate Professor of Economics, researcher at GREDEG (Université Côte d’Azur, CNRS, INRAE)
This article is republished from The Conversation under a Creative Commons license. Read the original article .
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