We study whether stronger tax compliance among multinationals can reduce industry concentration. Exploiting the 2016 introduction of country-by-country reporting in the European Union as a natural experiment, we implement a difference-in-differences design comparing large multinational groups subject to the reform with unaffected firms. We find that increased tax compliance led to a significant decline in multinationals’ consolidated global sales, with a one-percentage-point rise in effective tax rates associated with a 1.8% reduction in sales. Sales of the affected multinationals’ subsidiaries also declined, and industry concentration fell in sectors where top firms were subject to the reform. The results suggest that curbing profit-shifting can reduce the competitive advantage of large multinationals and, consequently, industry concentration.