Instituto de Economía

Abstract: Accounting firms can bridge the information gap and can identify the most suitable tax planning opportunities for multinational corporations. They act as intermediaries between tax havens who offer specific tax planning arrangements and international corporations who are the final customers for these arrangements. We use a framework with horizontal differentiation to study three types of fee-setting rules of accounting firms: full price discrimination, fees that are haven-specific, and uniform, product-independent fees. Compared to haven-specific fees, uniform fees have higher accounting payoffs and lead to higher tax revenues and less tax avoidance in the equilibrium.