Global Evidence on Profit Shifting Within Firms and Across Time
JRC Working Papers on Taxation and Structural Reforms No 12/2023
We provide estimates of profit shifting for over 2 million firm-year observations in 100 countries over the period 2009-2020. Employing nonparametric estimation techniques within a mainstay model of profit shifting, we examine how profits for both parent and subsidiary firms within a multinational group respond to marginal changes in the composite tax indicator. The key merit of this approach is that it yields firm-year estimates of profit shifting. We find that multinational firms engage in extensive profit shifting by maintaining affiliates in low-tax countries and zero-tax havens. Multinational groups with an ultimate owner in tax havens exhibit the largest responses of profits to the tax incentive. Our comprehensive estimates of global profit-shifting volumes exceed those obtained elsewhere in the literature using firm-level data and are in line with estimates obtained using macro-level data. Our new database opens important avenues to analyse the sources and effects of profit shifting.
DELIS Fotis;
DELIS Manthos;
LAEVEN Luc;
ONGENA Steven;
Delis, F., Delis, M., Laeven, L. and Ongena, S., Global Evidence on Profit Shifting Within Firms and Across Time, European Commission, 2023, JRC135964.
2023-12-01
European Commission
JRC135964
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