Cross-Jurisdictional Income Shifting and Tax Enforcement: Evidence from Public versus Private Multinationals

Posted: 13 Dec 2014

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Marc Deloof

University of Antwerp; University of Antwerp - Antwerp Management School

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC); Maastricht University

Date Written: October 2, 2014

Abstract

This paper examines the impact of tax enforcement and public listing status on income shifting by multinational corporations (MNCs). For a sample of over 8,000 subsidiaries that are majority-owned by 959 European MNCs over the period 1998-2009, we find strong evidence of income shifting from high to low tax countries and that income is shifted more out of high-tax countries when local tax enforcement is weak. In addition, we show that private MNCs exploit weak tax enforcement more to shift income out of the parent country compared to public MNCs. Combined, our results suggest that tax enforcement plays a crucial role in MNC income shifting decisions and that shifting is more aggressive when MNCs are less affected by nontax shifting costs as is the case in private MNCs.

Keywords: tax planning, income shifting, tax enforcement, composite tax score

JEL Classification: H25, H26, M40

Suggested Citation

Beuselinck, Christof and Deloof, Marc and Vanstraelen, Ann, Cross-Jurisdictional Income Shifting and Tax Enforcement: Evidence from Public versus Private Multinationals (October 2, 2014). Review of Accounting Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2509911

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

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Office: A321
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Marc Deloof

University of Antwerp ( email )

Prinsstraat 13
Faculteit TEW
Antwerpen, 2000
Belgium
+32 3 265 41 69 (Phone)
+32 3 265 47 99 (Fax)

HOME PAGE: http://https://www.uantwerpen.be/en/staff/marc-deloof/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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