The findings show that tax policy isn’t just about revenue. It also shapes competition & fairness in the marketplace.

Curbing profit-shifting can level the playing field between large multinationals & smaller firms.

📄 For more insights read the full WP: www.taxobservatory.eu/publication/...

In numbers:

➡ Industries with top 8 firms under reporting obligations, became 2.6 percentage points less concentrated.

➡ Using the Herfindahl-Hirschman Index yields similar results.

These are the first empirical estimates linking tax compliance directly to market structure.

And this had wider effects 🌐

As large firms’ dominance decreased, industry concentration fell in sectors where the biggest players were subject to the new rules.

Less tax avoidance → fairer competition → less market concentration.

Specifically, they found that:

📉 One percentage point rise in effective tax rates led to a 1.8% drop in global sales.

📉 The subsidiaries of these firms also saw their sales decline.

This was not led by divestment of subsidiaries, firms simply became smaller.

In 2016, the EU introduced CbCR, requiring large multinationals to disclose where they earn profits & pay taxes.

🔍 Using this reform as a natural experiment, the researchers compared affected & unaffected firms, and found that stronger tax compliance made big firms smaller.

"Le secteur extractif mobilise des entreprises et des chaînes de valeur qui traversent les frontières. Pour le réguler, les États coopèrent ou exercent leur influence au-delà de leur juridiction." 💬 @nmoreaukastler.bsky.social

📺 Regardez la session complète ici : www.youtube.com/watch?v=w2gq...

6/6 Key lessons for Europe 🇪🇺:

✅ Mandatory due diligence can influence firm behavior.
⚠️ Legal havens pose enforcement challenges.
💡 Costs are manageable, and the transparency benefits are long-term.

5/6 🔍Transparency gains?

From firms' reports, more than 1,000 smelters across the world are mapped, while we knew only a few hundred of them before.

4/6 💰Costs?

Initial compliance expenses were significant, but manageable and risk-dependent, averaging €30,000–€70,000 per year once traceability systems were in place.

3/6 ⚠️ But avoidance exists: about 24% of this decrease is caused by diversion of trade to legal havens.

These jurisdictions make it harder to track origins, creating loopholes that can weaken enforcement.

2/6 In 2010, the Dodd-Frank Act Conflict Mineral Rule required US 🇺🇸 downstream companies to ensure tin, tantalum & tungsten weren’t financing armed groups in the DRC 🇨🇩

Exports from the region fell 76%, all trade partners adapted to the US rule & local mineral prices dropped 16.5% 📉