Corporate Tax Planning and Real Investment in Canada:Evidence from Minimum Tax Rules and International Profit Shifting Constraints
DOI:
https://doi.org/10.5281/zenodo.18644943Keywords:
Corporate taxation, Tax planning, Real investment, Minimum tax, Profit shifting, CanadaAbstract
This paper examines how constraints on corporate tax planning affect real investment decisions by firms operating in Canada. In recent years, policymakers have increasingly relied on minimum-tax provisions and international anti–profit shifting rules to protect the corporate tax base and limit aggressive tax avoidance. While these measures are designed to enhance fairness and revenue integrity, their implications for real economic activity remain an open empirical question.Using firm-level panel data and complementary quasi-experimental approaches, this study analyzes how tighter tax planning constraints influence capital investment, investment timing, and financing behavior. The empirical framework combines evidence from threshold-based responses around minimum-tax kinks with difference-in-differences event-study analyses surrounding major policy implementations. The results indicate that firms facing binding tax planning constraints reduce investment relative to less exposed firms, with effects concentrated among multinational enterprises and firms with high reliance on internal funds. These findings suggest that tax planning capacity plays a non-trivial role in shaping real investment outcomes and highlight the importance of policy design in balancing base protection with economic efficiency.
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