According to Art. 7 and Art. 8 Anti-Tax Avoidance Directive (ATAD) EU-Member States must implement a CFC-rule. CFC-rules should reduce the tax incentive for firms to shift profits into low-tax countries such as tax havens. This paper uses the introduction of a CFC-rule in Austria in 2019 to empirically examine whether a CFC-rule, which is in line with the ATAD, changes the engagement of firms in tax havens. The results derived show that after the introduction of the Austrian CFCrule tax haven investment of Austrian firms is significantly lower than that of German firms, which were not affected by a change in CFC-rules during the observation period. The introduction of a CFC-rule which is in line with the ATAD, decreases the tax advantage of tax haven investments. With such a rule in place firms are thus less likely to shift profits into tax havens.

Petutschnig, Matthias, Rechbauer, Martina, Winkelbauer, Bernhard. 2021. Does the ATAD’s CFC-rule lead to a decrease in tax haven investment?
Empirical evidence from Austria. BFuP - Betriebswirtschaftliche Forschung und Praxis. 73 (4), 385-411. Available here: https://www.wiso-net.de/toc_list/BFUP#BFUP__bfup2021385864172nwb (in German)