Income Shifting in U.S. Multinational Corporations

46 Pages Posted: 11 Jun 2007 Last revised: 30 Jan 2013

See all articles by David Harris

David Harris

affiliation not provided to SSRN

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Bernard Yin Yeung

National University of Singapore - Business School

Date Written: December 1991

Abstract

It is often claimed that multinational firms avoid taxes by shifting income from high-tax to low-tax countries. Using a five year panel of data for two hundred large U.S. manufacturing firms, we find that U.S. tax liability, as a fraction either of U.S. sales or U.S. assets, is related to the location of foreign subsidiaries in a way that is consistent with tax-motivated income shifting. Having a subsidiary in a tax haven, Ireland, or one of the "four dragon" Asian countries - all characterized by low tax rates - is associated with lower U.S. tax ratios. Having a subsidiary in a high-tax region is associated with higher U.S. tax ratios. These results suggest that U.S. manufacturing companies shift income out of high-tax countries into the U.S., and from the U.S. to low-tax countries. Such behavior certainly lowers worldwide tax liabilities for larger U.S. manufacturing companies and appears to significantly lower their U.S. tax liabilities as well.

Suggested Citation

Harris, David and Morck, Randall K. and Slemrod, Joel B. and Yeung, Bernard Yin, Income Shifting in U.S. Multinational Corporations (December 1991). NBER Working Paper No. w3924. Available at SSRN: https://ssrn.com/abstract=476113

David Harris (Contact Author)

affiliation not provided to SSRN

No Address Available

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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