EFAG Seminar with Dr Travis Chow (University of Hong Kong)

Cross-Border Income Shifting, Information Exchange, and the Physical Flow of Tangible Goods

Abstract

We examine whether cross-border income shifting influences firms’ trade in tangible goods. We posit that structuring a firm’s supply chain so that tangible goods imports flow from low-tax jurisdictions can help firms better justify income shifted to low-tax jurisdictions. We shed light on the connection between income shifting and the flow of tangible goods by utilizing firm-level shipping container data and shocks to income shifting enforcement stemming from the staggered adoption of bilateral Tax Information Exchange Agreements (TIEA) between the U.S. and other jurisdictions. The results show that the adoption of a TIEA between the U.S. and a jurisdiction is associated with a significant decrease in the volume of imports by U.S. firms from that jurisdiction, relative to imports by U.S. firms from control jurisdictions. Our results suggest that changes to cross-border income shifting enforcement lead firms to alter their physical flow of tangible goods.

About the speaker

Dr. Travis Chow’s research focuses on how taxes affect corporate and individual decision-making and has appeared in The Accounting Review, Journal of Accounting Research, Contemporary Accounting Research, Management Science, and the Journal of Risk and Insurance. He is a member of the Editorial Board of the Journal of the American Taxation Association. Currently, he teaches Management Control at HKU, and in the past, he has taught taxation and financial accounting at the undergraduate level, as well as an empirical tax research seminar for PhD students at Singapore Management University. Dr. Chow completed his undergraduate and graduate education in Canada after finishing high school in Hong Kong. Before pursuing his doctoral studies, he worked as an economic analyst in Toronto.