Browsing by Author "Nakyambadde, Dorothy"

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    Firm Networks and Tax Compliance: Experimental Evidence from Uganda
    (2024-02-08) Almunia, Miguel; Justine, Knebelmann; Nakyambadde, Dorothy; Tian, Lin
    How do tax enforcement interventions diffuse through firm-to-firm networks? We explore this question with a randomized trial in Uganda. Using transaction-level VAT data, we map seller-buyer networks and identify discrepancies in the amounts reported by trading partners. Enforcement letters highlighting these discrepancies are sent to either the seller, the buyer, or both. The correction rate in the treatment group is 23.8%, fourteen times higher than in the control group. This response is asymmetric: corrections are primarily made by sellers, even when only buyers receive letters, providing novel evidence that firms can induce changes in their partners’ tax reporting. Spillover effects extend to transactions not listed in the letters, including those involving other trading partners. The intervention also results in sustained improvements in reporting behavior over subsequent months. Our study sheds light on firm-to-firm communication within networks and offers policy-relevant insights for fighting tax evasion.
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    The case of taxing multinational corporations in Uganda: Do multinational corporations face lower effective tax rates and is there evidence for profit shifting?
    (WIDER Working Paper, 2021-03-15) Koivisto, Aliisa; Musoke, Nicholas; Nakyambadde, Dorothy; Schimanski, Caroline
    We study how large domestic firms and multinational corporations compare in their effective tax rates and whether there is evidence of profit shifting out of Uganda. Using administrative data from the Uganda Revenue Authority and regression analysis, we find that multinational corporations lower their corporate tax burden through two channels: lower effective tax rates and profit shifting. Multinational corporations pay lower effective tax rates, by approximately 20 percentage points, on their reported profits than large domestic corporations because of tax treaties and other benefits. However, they are also more likely to report losses than domestic firms. This is likely due to profit shifting, as we observe that the lower the tax rate in the country of the global owner, the lower the reported profit of the multinational corporation in Uganda. Developing countries are particularly vulnerable to profit shifting, given their limited fiscal capacity. Thus, the profit-shifting behaviour of multinational corporations creates substantial challenges for achieving sustainable development through strengthening domestic revenue mobilization. This study is among the first to provide evidence of profit shifting by multinational corporations in a low-income country setting.