Multinational Corporations and Tax Havens: Evidence from Country-by-Country Reporting

Garcia-Bernardo J., Jansky P. and Tørsløv T. (2019): "Multinational Corporations and Tax Havens: Evidence from Country-by-Country Reporting" IES Working Papers 31/2019. IES FSV. Charles University.

40 Pages Posted: 29 Sep 2020 Last revised: 22 Dec 2020

See all articles by Javier Garcia-Bernardo

Javier Garcia-Bernardo

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR)

Petr Jansky

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies

Thomas Tørsløv

University of Copenhagen

Date Written: October 30, 2019

Abstract

A growing body of economics literature shows that multinational corporations (MNCs) shift their profits to tax havens. We contribute to this evidence by comparing a range of available data sets focusing on US MNCs, including country-by-country reporting data which has been released in December 2018 for the first time. With each of the datasets, we analyse the effective tax rates that US MNCs face in each country and the amount of profits they report. Using country-by-country reporting data, we have been able to establish that lower effective corporate tax rates are associated with higher levels of reported profits when compared with different indicators of real economic activity. This corresponds to the notion that MNCs often shift profits to countries with low effective tax rates – without also shifting substantive economic activity. Consequently, we identify the most important tax havens for US MNCs as countries with both low effective tax rates and high profits misaligned with economic activity.

Keywords: Effective Tax Rate, Profit Shifting, Tax Haven, Country-by-Country Reporting, Multinational Enterprise, Foreign Direct Investment, Tax Competition

JEL Classification: C81, F21, F23, H25, H26

Suggested Citation

Garcia-Bernardo, Javier and Jansky, Petr and Tørsløv, Thomas, Multinational Corporations and Tax Havens: Evidence from Country-by-Country Reporting (October 30, 2019). Garcia-Bernardo J., Jansky P. and Tørsløv T. (2019): "Multinational Corporations and Tax Havens: Evidence from Country-by-Country Reporting" IES Working Papers 31/2019. IES FSV. Charles University., Available at SSRN: https://ssrn.com/abstract=3672981 or http://dx.doi.org/10.2139/ssrn.3672981

Javier Garcia-Bernardo

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR) ( email )

Amsterdam Roeterseilandcampus
Nieuwe Achtergracht 166
Amsterdam, 1018 WV
Netherlands

Petr Jansky (Contact Author)

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://ies.fsv.cuni.cz/en/staff/jansky

Thomas Tørsløv

University of Copenhagen ( email )

Nørregade 10
Copenhagen, DK-1165
Denmark

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