Technological Changes and Countries' Tax Policy Design: Evidence from Anti–Tax Avoidance Rules.

This article investigates the association between technological changes and corporate tax policies, focusing on anti–tax avoidance rules, across 34 OECD countries from 1996 to 2016. Using a shift-share design based on exposure to U.S. technological advancements—measured via industry-level changes in total factor productivity, labor productivity, and capital intensity—the study finds that greater exposure to U.S. technological change is associated with tighter anti–tax avoidance rules, particularly in larger countries with higher exposure to intangible assets and stronger profit shifting incentives. The analysis distinguishes proactive policymaking, where countries anticipate tax avoidance risks from technological change, from reactive responses to observed tax avoidance, and shows stronger associations in countries with more long-term oriented cultures. The findings also reveal that smaller countries, facing higher risks of capital flight, do not exhibit this association, suggesting they may maintain looser anti–tax avoidance rules to attract investment, while larger countries use stricter rules to preserve tax revenues. The study does not find significant associations between technological change and statutory tax rates but observes a negative relation with investment incentives. Limitations include measurement constraints on technological exposure and anti–tax avoidance indices, and the inability to establish causal relationships.