Martina Magli

The literature commonly confines the impact of corporate taxes on cross-border trade to a shift of tax revenues to tax havens. Using corporate tax changes, event studies, and a structural gravity framework that allows for the estimation of country-specific policies, we provide novel insights into the trade elasticity. We first provide evidence that trade in goods and services react in different ways to changes in corporate taxation, reflecting the intangible nature of services. Leveraging a comprehensive panel dataset and tax reforms, we present evidence of a positive elasticity to tax changes that depends on the initial tax differential between countries. We show that the effect of tax reforms on trade in services is not confined to tax havens and highly heterogeneous across types of services. Our results emphasize the relevance of corporate tax reforms beyond countries classified as tax havens and the necessity of addressing tax gaps across countries.