<p>Taxing companies’ goods or services where they are consumed, rather than where companies operate, limits tax avoidance and improves efficiency. However, such destination-based systems are hard to enforce. Therefore, in the European Union, value-added taxes on digital business-to-consumer (B2C) sales were historically based on the seller’s location or origin, allowing multinational companies to route sales through low-VAT countries. We study the impact of a 2015 reform that required multinationals to pay VAT where their consumers are. Difference-in-differences results suggest that they reported disproportionately high digital B2C services sales in low-VAT countries under the previous origin-based system. The introduction of the destination-based system curbed this tax planning behavior. While this baseline finding is consistent with expectations, we also provide novel evidence on potentially unintended or unexpected effects of system changes toward destination-based taxation. Specifically, we find that multinationals also decreased employment in low-VAT countries and increased income tax-motivated profit shifting post reform. In sum, our findings indicate that destination-based taxes curb corporate tax planning for mobile tax bases but that tax system changes have real effects and incentivize tax avoidance for other tax bases taxed at origin.</p>