Do Corporate Tax Cuts Reduce International Profit Shifting?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Applying a difference-in-differences framework with a one-onone matching strategy, which compares earnings of multinational and domestic corporations, I do not find empirical evidence that even a 10 percentage points cut in the business tax rate leads to a reduction of profit shifting activities. Terms of use: Documents in EconStor may

Income Shifting Strategy as a Reaction of Corporate Tax Rate Reduction and the Role of Auditors

“…These accounts include: fixed asset accounts related to depreciation expense, tax expense paid, differences in recognition of sales or income, and recognition of other income. The results of this study are in line with previous research in other countries such as: in China [2], in Korea [5], in France [6], and in Germany [7].…”

“…Warsini [4] found evidence that public companies in Indonesia implemented a tax avoidance strategy through income decreasing in financial reporting for 2 years prior to the enactment of the tax rate reduction in the 2010. Similar research results were also found in other countries when there was a reduction in tax rates such as in China [2], in Korea [5], in France [6], and in Germany [7]. These studies have found that companies undertake an income shifting strategy by arranging financial statements for one period before the enactment of lower tax rates by accelerating expense recognition and delaying revenue recognition.…”