Prof. Juan Carlos Suárez Serrato, Ph.D.

“The Race between Tax Enforcement and Tax Planning”

Profit shifting by multinational corporations is thought to reduce tax revenue around the world. While transfer pricing regulations are meant to curtail profit shifting, there have been rising concerns that a sophisticated tax advisory industry can limit their effectiveness. In this study (CESifo Working Paper 10462), Juan Carlos Suárez Serrato and his collaborators provide a comprehensive analysis of how firms and tax advisors respond to the introduction of standard regulations aimed at limiting profit shifting. Using administrative tax and customs data from Chile in difference-in-differences event-study designs, they find that the reform was ineffective in reducing multinationals’ transfers to lower-tax countries and did not significantly raise tax payments. At the same time, interviews with tax advisors reveal a drastic increase in tax advisory services.

Mr. Suárez Serrato’s research informs how government intervention can help alleviate market failures and how different ways to finance the government impact firms and workers. Beyond characterizing the effects of policy changes, his research improves our understanding of economic phenomena that range from measuring how much people value public goods to how much firms respond to R&D subsidies by misreporting their expenses. These insights inform recent economic trends, such as why workers locate in certain areas, or why the contribution of R&D investment to economic growth may be declining. Overall, his research is guided by two principles: 1) a desire to inform debates over important policy questions at the regional, national, and international levels, and 2) the use of economic models to gain insight into economic behavior and market outcomes.

Juan Carlos Suárez Serrato is the Edward P. Rust Professor of Economics at Stanford Graduate School of Business and a faculty associate at the National Bureau of Economic Research. He is also a CESifo Research Network Fellow. He was previously a Professor of Economics at Duke University and a Post-doctoral Fellow at the Stanford Institute for Economic Policy Research. He received a PhD in Economics from UC Berkeley, a BA in Economics and Mathematics from Trinity University, and he is a graduate of the AEA Summer Training Program in Economics.