What Do We Know About Base Erosion and Profit Shifting? A Review of the Empirical Literature

35 Pages Posted: 2 Jan 2014 Last revised: 30 Sep 2014

See all articles by Dhammika Dharmapala

Dhammika Dharmapala

UC Berkeley School of Law; CESifo (Center for Economic Studies and Ifo Institute); European Corporate Governance Institute (ECGI)

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Date Written: September 3, 2014


The issue of tax-motivated income shifting within multinational firms – or “base erosion and profit shifting” (BEPS) – has attracted increasing global attention in recent years. This paper provides a survey of the empirical literature on this topic. Its emphasis is on reviewing and elucidating what is known about the magnitude of BEPS. The paper discusses different empirical approaches to identifying income shifting, describes existing data sources, and summarizes the findings of the empirical literature. A major theme that emerges from this survey is that in the more recent empirical literature, which uses new and richer sources of data, the estimated magnitude of BEPS is typically much smaller than that found in earlier studies. The paper seeks to provide a framework within which to conceptualize this magnitude and its implications for policy. It concludes by highlighting the importance of existing legal and economic frictions as constraints on BEPS, and by discussing possible ways in which future research might model these frictions more precisely.

Keywords: Base erosion; profit shifting; multinational firms

JEL Classification: H25, F23

Suggested Citation

Dharmapala, Dhammika, What Do We Know About Base Erosion and Profit Shifting? A Review of the Empirical Literature (September 3, 2014). Illinois Public Law Research Paper No. 14-23, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 702, Available at SSRN: https://ssrn.com/abstract=2373549 or http://dx.doi.org/10.2139/ssrn.2373549

Dhammika Dharmapala (Contact Author)

UC Berkeley School of Law ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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