Global Evidence on Profit Shifting Within Firms and Across Time
82 Pages Posted: 2 Dec 2022 Last revised: 11 Oct 2024
Date Written: January 27, 2024
Abstract
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 the profits of both parent and subsidiary firms within a multinational group respond to marginal changes in the composite tax indicator. The key advantage of this approach is that it yields firm-year estimates of profit shifting. Multinational firms engage in extensive profit shifting by maintaining affiliates in low-tax countries and zero-tax havens. Multinational groups with an ultimate tax-haven owner exhibit the largest profit response to tax incentives. Our new database opens important avenues for analyzing the sources and effects of profit shifting.
Keywords: Profit shifting, multinational enterprises, nonparametric estimation, tax arbitrage, global sample, F23, H25, H26, H32, M41
Suggested Citation: Suggested Citation
, Available at SSRN: https://ssrn.com/abstract=4291888 or http://dx.doi.org/10.2139/ssrn.4291888