Profit shifting of U.S. multinationals

Dowd, Tim; Landefeld, Paul; Moore, Anne

doi:10.1016/j.jpubeco.2017.02.005

Cited by 134 publications

(80 citation statements)

References 9 publications

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“…Recently, some studies have started to focus on specific sectors or extended the scope to developing countries. For example, using tax records of US MNCs, Dowd et al (2017) find significant non-linear effect of tax differential that points to more shifting into tax havens. Findings by Johannessen, Torslov, and Wier (2017), which uses data from multinational affiliates in 142 countries, including 25,000 corporations in 94 developing countries (from ORBIS), suggest that less developed countries are more exposed to crossborder profit shifting.…”

Section: Discussionmentioning

confidence: 99%

International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots

Beer

Mooij

Liu

2019

Journal of Economic Surveys

167

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This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, for the most recent year, a 1 percentage-point lower corporate tax rate compared to other countries will expand before-tax income by 1.5 percent-an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research. JEL-Codes: F230, H250. participants at the IMF "Evaluating Tax Reform" conference and Fiscal Affairs Department seminar for helpful comments. We are grateful to Jost Heckmeyer and Michael Overesch for sharing their dataset for replication purposes. Any remaining errors are our own. 5 Taxes in high-tax locations can also be avoided by changing the location of foreign direct investment (FDI). This paper, however, focuses only on tax avoidance through profit shifting, not through a change in the location of real capital (for a survey of taxation and FDI, see e.g. De Mooij and Ederveen 2008). 6 Transfer mispricing has also implications for national accounts statistics and the measurement of GDP growth, see e.g. Guvenen et al (2017).

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Section: Discussionmentioning

confidence: 99%

International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots

Beer

Mooij

Liu

2019

Journal of Economic Surveys

167

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“…The data set by the United States Bureau of Economic Analysis has been used recently by Zucman (), Clausing () and Cobham and Janský (), while Germany’s Microdatabase Direct investment (MiDi) data has been employed, for example, by Weichenrieder (), Hebous and Johannesen () and Gumpert, Hines, and Schnitzer (). Still more promising is the use of confidential corporate tax returns, as performed by Dowd, Landefeld, and Moore () for the US, or Habu () for the UK, which brings us to a discussion of profit‐shifting studies in these five countries.…”

Section: Literature Reviewmentioning

confidence: 99%

International tax planning within the structure of corporate entities owned by the shareholder‐individuals through Panama Papers destinations

Nerudová

Solilová

Litzman

et al. 2019

Development Policy Review

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Motivation The Panama Papers scandal highlighted the scale of financial secrecy, anonymous ownership and shell companies and their role in profit shifting and tax avoidance. We show the importance of international tax planning within the structure of corporate entities owned by shareholder‐individuals through Panama Papers destinations. Purpose To identify profit‐shifting channels and to estimate related government revenue losses to European Union Member States. Methods Using company data from the Amadeus/Orbis database (Bureau Van Dijk, n.d.a, n.d.b), we applied micro‐data analysis to the financial statements of multinational companies (MNEs) owned by shareholder‐individuals. Two groups—one with and the other without links to Panama Papers tax havens—alongside an analysis of profit‐shifting indicators. Findings Profit is generally shifted by moving operating revenues or costs, though the use of debt channels is also important. Also, groups linked to tax havens pay significantly less tax per unit of profit before tax, and require less operating revenue to achieve higher profits. Finally, related government revenue losses were assessed at EUR 8.67 billion. Policy implication Our results are relevant to the European Commission’s Comprehensive Common Consolidated Corporate Tax Base (CCCCTB) as it aims to counter profit shifting out of the European Union (EU) into tax havens. Further, our research highlights the importance of setting up registries of ultimate beneficiary owners in EU Member States.

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“…On the one hand, there are studies concerned with demonstrating or proving the existence of tax avoidance / profit shifting as well as the size of it (see Beer et al, 2018 for a survey of the empirical literature). On the other hand, there is research on the impact of tax avoidance, with a separate strand of literature focused on the impact on developing countries (see e.g., Crivelli, De Mooij & Keen, 2016;Reynolds & Wier, 2016;Cobham & Janský, 2017, 2018a& 2018bDowd, Landefeld & Moore, 2017;Johannesen, Tørsløv & Wier, 2017;Bolwijn, Casella & Rigo, 2018;Bradbury, Hanappi & Moore, 2018;Janský & Palanský, 2018;Tørsløv, Wier & Zucman, 2018).…”

Section: Measuring Tax Avoidancementioning

confidence: 99%

Tax Avoidance — Methodology for Quantification and the Case of the Netherlands

Kerste¹,

Baarsma²,

Weda³

2019

IJLPA

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The goal of this paper is to define and quantitatively measure tax avoidance. So far any rigorous assessment of financial flows related to tax avoidance that entails paying (almost) no taxes, is lacking. This prevents a proper assessment of the necessity for further regulation to fight such undesirable tax avoidance. Quantifying tax avoidance provides a sound starting point for assessing the severity of regulation – matching the expected benefits with costs – and sheds further light on the possible design of effective regulation. The paper defines tax avoidance as the legal use of tax constructions aimed at paying (almost) no taxes in the entire international financial chain. Our paper shows that in order to prevent international tax systems from being used for such double non-taxation, governments could introduce a withholding tax on outgoing interest and royalty flows to low tax jurisdictions (tax havens). If the low tax threshold is set at 15% or 10% respectively, then depending on the choice for one of the two provided definitions of ‘low tax jurisdiction’, we find that the combined outgoing royalty and interest flow related to tax avoidance via Dutch conduit companies was on average 9.7 or 11.9 billion euro per year in the period 2009-2013.

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Profit shifting of U.S. multinationals

Cited by 134 publications

References 9 publications

International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots

International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots

International tax planning within the structure of corporate entities owned by the shareholder‐individuals through Panama Papers destinations

Tax Avoidance — Methodology for Quantification and the Case of the Netherlands

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