Law

Austrian data show how to curb profit shifting effectively

28/05/2026

WU study shows that targeted anti‑tax avoidance rules curb profit shifting – while exemptions can backfire.

The European Commission plans to simplify corporate taxation and reform key anti–tax avoidance rules through a proposed Tax Omnibus directive. A new study by WU Vienna uses Austrian tax data to assess which measures are effective in curbing profit shifting to low‑tax jurisdictions. The results show that well-targeted rules significantly reduce profit shifting, while certain exemptions can even facilitate profit shifting to other countries and lead to a loss of economic activity in Austria.

A close look at Austrian tax data

Foto von WU-Professor Harald Amberger

As part of a research project funded by the Austrian Academy of Sciences, the researchers analyzed administrative corporate tax return data from more than 800 multinational companies operating in Austria. “The study compares the effects of three anti–tax avoidance measures that were introduced step by step in Austria between 2014 and 2019,” explains WU Professor Harald Amberger, one of the study’s authors. The analysis focuses on restrictions on the deductibility of intra‑group interest and royalty payments, new transparency requirements for large multinational companies, and stricter rules regarding the profits earned by low‑taxed foreign subsidiaries. The results reveal substantial differences in the effectiveness of these measures.

Rules against specific tax avoidance practices are effective

Portraitfoto von Stefanie Pendl

Rules targeting specific tax avoidance practices are effective

Targeted rules that address specific tax avoidance practices prove to be particularly effective. For example, following the introduction of restrictions on the deductibility of intra‑group interest and royalty payments, the taxable income reported in Austria by affected companies increased significantly. “Our results show that targeted measures to curb profit shifting to other countries can be highly effective,” says WU researcher Stefanie Pendl. The researchers found no evidence that companies resorted to alternative tax avoidance practices instead.

Rules with exemptions can backfire

A different picture emerges for broader transparency‑based measures and rules that include so‑called substance‑ or activity‑based exemptions. These exemptions allow companies to avoid the application of anti–tax avoidance rules if they can demonstrate real economic activity in low‑tax jurisdictions. The findings show that, following the introduction of such exemption‑based rules,affected multinational groups increased their economic activity in low‑tax countries. At the same time, the taxable income reported in Austria declined among these companies. “Certain exemptions can facilitate profit shifting to other countries,” says Amberger. “As a result, high‑tax countries such as Austria risk losing not only tax revenues but also economic activity.” The study thus provides important empirical evidence for the European Commission’s proposal to reform corporate taxation in the European Union.

Reference

Amberger, Harald J., Pendl, Stefanie (2026): Multinationals' Responses to Anti-Base Erosion Rules: Evidence from Administrative Tax Returns. Working Paper. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6873238

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