Pennies from Haven: Wages and Profit Shifting

Alstadsæter, Annette; Bjørkheim, Julie Brun; Davies, Ronald B.; Scheuerer, Johannes

doi:10.2139/ssrn.4042434

Cited by 5 publications

(9 citation statements)

References 48 publications

(70 reference statements)

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“…This result might come from the joint effect of belonging to the Ibex-35 index and being a Pro t-Shifting rm, which is consistent with Fig. 2 and also with the higher possibility that rms within this industry will engage in Pro t-Shifting due to the relevance of intangible assets in their activities (Alstadsaeter et al, 2022). However, because of a multicollinearity problem it is not possible to estimate at the same time the coe cient for the interaction term and that of the variable Ibex to test this hypothesis.…”

Section: Ibex Jt * T Axh Aven Jtsupporting

confidence: 79%

“…However, using rm-level data for non-executive workers, Souillard (2022) shows that higher after-tax pro ts derived from Pro t-Shifting are not shared with workers other than executives. These results would support the bargaining approach theory (Alstadsaeter et al, 2022), since the referred workers could have lower bargaining power than executive workers, who are all in high-skilled occupations. Additionally, using French rm-level data, López-Forero (2022) nds that there is no signi cant change in the average wage of employees following the rm entry in Tax Havens.…”

Section: Literature Reviewsupporting

confidence: 72%

“…Using worker-level data for Norway, Alstadsaeter et al (2022) nds that Pro t-Shifting multinationals pay higher wages than non-Shifters, with the highest premium going to high-paid employees, especially CEOs working in the services industry. In the same vein, but using executive-level data for US-listed companies, Souillard (2022) nds that the Pro t-Shifting activity positively affects the wage of this type of employee, especially when remunerated on an after-tax basis.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Following the collective bargaining theory, rent-sharing between workers within rms depends on their bargaining power (Alstadsaeter et al, 2022). Thus, members of the board of directors could get higher compensation derived from greater after-tax pro ts originating in Pro t-Shifting if they had high bargaining power.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Do (some of) the tax savings derived from Profit-Shifting go to increase the compensation of the board of directors?

Castillo-Murciego,

López-Laborda

2023

Preprint

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Taking a sample of listed non-financial Spanish companies between 2013 and 2018, this paper examines whether the artificial Profit-Shifting activity by multinationals to reduce taxes may increase the remuneration of the members of the board of directors. In addition to this main variable of interest related to Profit-Shifting, the analyses incorporate a variable that controls for companies being on the Ibex-35 stock market index, as an apparently chief determinant of the level of remuneration of directors. The results suggest that a remuneration premium exists derived from the joint effect of Profit-Shifting and being on the Ibex-35 stock market index, at least for executive directors. By economic sectors, extra remuneration coming from Profit-Shifting is found only for executive directors in energy and construction firms. Also, being on the Ibex-35 index has a positive effect on remuneration for both executive and non-executive directors in trade and services firms. The results by economic sector are seemingly correlated with the share of intangible assets by industry. JEL: F23; H25; H26; H87; M12

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Section: Ibex Jt * T Axh Aven Jtsupporting

confidence: 79%

Section: Literature Reviewsupporting

confidence: 72%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Do (some of) the tax savings derived from Profit-Shifting go to increase the compensation of the board of directors?

Castillo-Murciego,

López-Laborda

2023

Preprint

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“…Suárez Serrato (2022) and Bilicka (2022) document labor-market consequences of anti-avoidance rules. Alstadsaeter et al (2022) show that firms engaging in profit shifting pay higher wages for managers, a finding echoed in Souillard (2022).…”

Section: Related Literaturementioning

confidence: 89%

Effective Tax Rates and Firm Size

Bachas¹,

Brockmeyer²,

Dom³

et al. 2023

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Tax rate motivated profit shifting and base erosion by multinational corporations: Indian evidence

Gill

Arora²,

Gandhi³

2022

IJOEM

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PurposeProfit shifting is a matter of great concern for governments internationally. It leads to the loss of tax revenues and puts multinational corporations (MNCs) in a disparate position. Lately, due to the aggressive stance of the Indian taxman, several Indian MNCs are planning to minimise their tax outflows. This paper aims to study profit-shifting drawing from the institutional theory for the Indian MNCs.Design/methodology/approachThe sample comprises 679 MNCs listed on the Bombay Stock Exchange or the National Stock Exchange with either Indian parents with foreign subsidiaries (553) or Indian subsidiaries of a foreign parent (126) for FY 2013–14 to FY 2018–19. A fixed-effect panel regression technique was invoked to examine tax rate differential motivated profit-shifting undertaken by MNCs with the moderating effect of international presence and patents.FindingsThe results suggest that MNCs shift their profits to take advantage of differences in global tax rates when they have an international presence in at least five tax countries. Further, profit shifting is likely towards no-tax compared to low-tax countries, with the presence of patents in an MNC group having no significant impact.Originality/valueLosses to the government revenue due to profit shifting by MNCs are rather severe in emerging economies. The study provides the first empirical evidence of the direction of profit shifting with the moderating effect of the extent of global presence and group patents, which would interest scholars in the field. The findings provide valuable insights to the policymakers, highlighting the urgent need to operationalise the general anti-avoidance taxation rules.

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Pennies from Haven: Wages and Profit Shifting

Cited by 5 publications

References 48 publications

Do (some of) the tax savings derived from Profit-Shifting go to increase the compensation of the board of directors?

Do (some of) the tax savings derived from Profit-Shifting go to increase the compensation of the board of directors?

Effective Tax Rates and Firm Size

Tax rate motivated profit shifting and base erosion by multinational corporations: Indian evidence

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