Corporate tax systems and cross country profit shifting

Haufler, Andreas; Schjelderup, Guttorm

doi:10.1093/oep/52.2.306

Cited by 231 publications

(224 citation statements)

References 25 publications

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“…One reason is that a lower statutory tax rate makes a country less vulnerable to international profit-shifting through transfer-pricing and thin capitalization etc., as emphasized by Haufler and Schjelderup (2000).…”

Section: Reasons For the Viability Of Source Taxationmentioning

confidence: 92%

Can Capital Income Taxes Survive? And Should They?

Sørensen¹

2007

CESifo Economic Studies

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Section: Reasons For the Viability Of Source Taxationmentioning

confidence: 92%

Can Capital Income Taxes Survive? And Should They?

Sørensen¹

2007

CESifo Economic Studies

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“…Thus, in order to have international trade in our model, we need to assume that τ ∈ 0, 1 2 . Furthermore, we easily see from (11) and (12) that a decrease in trade costs reduces domestic sales and simultaneously increases exports by both MNEs, thereby inducing more competition on the two markets.…”

Section: Equilibrium Home Sales and Exportsmentioning

confidence: 97%

“…If we assume, e.g., a linear cost of enforcement, Ci(δi) = dδi, d > 0, a symmetric equilibrium in enforcement policies still exists but the government's first-order condition is satisfied for any level of enforcement of the "arm's length" principle. 11 The last assumption can be interpreted as a per-unit penalty which tax authorities impose on the MNE when they detect transfer price manipulation. 12 If transfer price manipulation costs were tax-deductible, fiscal authorities might not be able where t i and t j denote the corporate profit tax rate imposed by country i and country j respectively.…”

Section: The Modelmentioning

confidence: 99%

“…According to the expressions for equilibrium quantities, (11) and (12), home sales by the two MNEs are affected by the enforcement policy of the foreign country, while they are independent of the domestic enforcement policy. On the contrary, exports only depend upon the latter.…”

Section: Export Incentive and Enforcement Policymentioning

confidence: 99%

“…On the contrary, exports only depend upon the latter. Namely, differentiating (11) and (12) with respect to δ i , we have that, as long as…”

Section: Export Incentive and Enforcement Policymentioning

confidence: 99%

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Investment Liberalization and the Geography of Firm Location

Amerighi¹

2008

Foreign Direct Investment and the Multinational Enterprise

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We set up a symmetric two-country model with two multinationals competing on the quantities and possibly manipulating their transfer prices.Governments choose both the corporate profit tax rate and the level of enforcement of the "arm's length" principle. We show that stronger enforcement increases equilibrium tax rates. We also find that a larger international ownership of multinationals leads to a "race to the top" in both policies between the two countries, while trade liberalization initially implies a "race to the bottom". But as trade becomes free enough, a further decrease in trade costs raises equilibrium tax rates and enforcement policies.

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Tax‐avoidance strategies of American multinationals: an empirical analysis

Schwarz¹

2009

Manage Decis Econ

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This paper analyzes the opportunities of American multinationals to reallocate their profits into tax havens. In contrast to previous papers, a comprehensive look on the profit-shifting process is undertaken by proposing three different tests. Multinationals in high-tax countries have a lower equity ratio than affiliates in tax havens, indicating that income is shifted by extensively financing subsidiaries in high-tax countries with debt. Furthermore, the share of retained earnings is lower in high-tax countries owing to the unattractiveness of tax deferral. When testing for the outcomes of profit shifting, the results show that the pre-tax profitability of American multinationals is higher in tax havens. This relationship is consistent with the opportunities of multinationals to shift income outside high-tax jurisdictions. Finally, the paper shows that profit shifting largely takes place into tax havens, whereas other countries do not benefit from profit-shifting activities. Copyright © 2009 John Wiley & Sons, Ltd.

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Corporate tax systems and cross country profit shifting

Cited by 231 publications

References 25 publications

Can Capital Income Taxes Survive? And Should They?

Can Capital Income Taxes Survive? And Should They?

Investment Liberalization and the Geography of Firm Location

Tax‐avoidance strategies of American multinationals: an empirical analysis

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