2018
DOI: 10.2139/ssrn.3172293
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Profit Shifting and the Marginal Tax Rate: What Determines the Shift-to-Loss Effect?

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Cited by 6 publications
(4 citation statements)
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“…Our results capture the tax-optimized setting of e.g., transfer prices and financing structures among producing affiliates, not the purely artificial shifting of book profits to zero-tax havens. A second reason for this finding may be that statutory tax rates do not capture profit shifting incentives well, for example because our sample includes a large number of lossmaking affiliates (see Simone et al, 2017;Hopland et al, 2018;Gamm et al, 2018). Moreover, host country may offer specific tax incentives, including company-specific advance pricing agreements or country-specific double tax treaty networks, which are not reflected in the statutory tax rate.…”
Section: A2 Heterogeneity Analysismentioning
confidence: 99%
“…Our results capture the tax-optimized setting of e.g., transfer prices and financing structures among producing affiliates, not the purely artificial shifting of book profits to zero-tax havens. A second reason for this finding may be that statutory tax rates do not capture profit shifting incentives well, for example because our sample includes a large number of lossmaking affiliates (see Simone et al, 2017;Hopland et al, 2018;Gamm et al, 2018). Moreover, host country may offer specific tax incentives, including company-specific advance pricing agreements or country-specific double tax treaty networks, which are not reflected in the statutory tax rate.…”
Section: A2 Heterogeneity Analysismentioning
confidence: 99%
“…Surprising, there is no evidence that profit shifting increases with the tax rate differential. 16 As our sample includes a large number of loss-making affiliates, the statutory tax rate does not capture the underlying profit shifting incentives well (see Simone et al, 2017;Hopland et al, 2018;Gamm et al, 2018). Moreover, there may well exist tax incentives for profit shifting in a host country, including from company-specific advance pricing agreements and countryspecific double tax treaty networks that are not reflected in the statutory tax rate.…”
Section: Heterogeneity Analysismentioning
confidence: 99%
“…Yoo and Lee (2020) confirm the existence of inflexibility developed by Hopland et al (2018) using a dataset of worldwide MNCs. Gamm et al (2018) provide a first analysis to quantify the shift-to-loss incentives based on a simulated proxy for affiliates' marginal tax rate. Both Yoo and Lee (2020) and Gamm et al (2018) show that loss shifting is particularly pronounced when affiliates' loss carryforwards are near to expire.…”
Section: Introductionmentioning
confidence: 99%