On the Dynamics between Local and International Tax Planning in Multinational Corporations

Review of Accounting Studies, accepted.

59 Pages Posted: 5 Feb 2018 Last revised: 21 Jun 2022

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Jochen Pierk

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: June 21, 2022

Abstract

The international dimension of multinational corporations (MNCs) creates opportunities for pursuing both global as well as local (i.e., unilateral subsidiary country) tax planning strategies. To date, however, we have limited insights into both the dynamics and relative importance of one versus another strategy for MNCs. We propose and test a group-level ETR-based measure of profit shifting and validate it by showing it correctly identifies profit shifting reductions when shifting costs increase. We confirm that MNCs can keep group ETRs stable after the introduction of tighter tax compliance and documentation rules and suggest they can do so by relying relatively more on local tax planning activities. In line with the substitution argument, we document that especially groups identified as ex-ante income shifters as well as groups with greater target ETR pressure are responsible for the results.

Keywords: Tax planning, tax avoidance, profit shifting, local tax strategies, multinational corporations

Suggested Citation

Beuselinck, Christof and Pierk, Jochen, On the Dynamics between Local and International Tax Planning in Multinational Corporations (June 21, 2022). Review of Accounting Studies, accepted. , Available at SSRN: https://ssrn.com/abstract=3108489 or http://dx.doi.org/10.2139/ssrn.3108489

Christof Beuselinck

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

3 Rue de la Digue
Office: A321
Puteaux, 92800
France
+33320545892 (Phone)

Jochen Pierk (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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