Profit Shifting, Employee Pay, and Inequalities: Evidence from US-Listed Companies

Souillard, Baptiste

doi:10.2139/ssrn.4097846

Cited by 4 publications

(5 citation statements)

References 62 publications

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“…(2022) documented a transformation in investment destinations and a reshaping of the global tax competition landscape post-CRS adoption. Changes in cross-border tax avoidance and profit shifting may concurrently reverberate with changes in investment strategies and domestic labor markets, thus influencing individual income tax in emerging economies (Serrato, 2018;Souillard, 2022). If the CRS intensifies the financial burdens associated with tax compliance and profit shifting, investment returns in low-tax or CRS-participating jurisdictions may decline, but increase in their high-tax or nonparticipating counterparts.…”

Section: Discussionmentioning

confidence: 99%

Does Information Exchange Affect Cross‐border Tax Avoidance? Evidence from the Common Reporting Standard

Wang,

Zhang,

Gao

2024

China and World Economy

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Using panel data from 2012 to 2020 for publicly traded Chinese companies, we explored the efficacy in mitigation of tax information asymmetry to combat profit shifting and transnational tax avoidance. Our empirical analysis revealed that, after the implementation of the inaugural multilateral automatic information exchange system known as the Common Reporting Standard, there was a statistically significantly increase in the effective tax rate by 1.4 percentage points, accompanied by an increase in instances of tax compliance. These trends were discernibly associated with a reduction in profit shifting and notable changes in reported profit margins, particularly influenced by actions related to debt shifting and strategic management of intellectual property assets. These findings underscore the strong connection between these effects and various factors such as investment destinations, asset portfolios, and industry classifications. The results imply a prospective decline in the incidence of cross‐border tax avoidance by Chinese multinational entities and demonstrate the potential of emerging international tax cooperation frameworks for curbing the global tax avoidance practices of multinational corporations.

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Section: Discussionmentioning

confidence: 99%

Does Information Exchange Affect Cross‐border Tax Avoidance? Evidence from the Common Reporting Standard

Wang,

Zhang,

Gao

2024

China and World Economy

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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: 91%

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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“…Following the collective bargaining model, directors are expected to have signi cant bargaining power based on their quali cations and skills. Also, they may be responsible for the company's nancial operations and tax policy, and have a good idea of its pro tability, reinforcing their bargaining power vis-à-vis the rm (Souillard, 2022). Nevertheless, as argued above, the effect of Pro t-Shifting on remuneration might vary between executive and non-executive directors because of their different powers and their responsibility to protect the interests of the shareholders.…”

Section: Econometric Analysismentioning

confidence: 99%

“…The rst eliminates the included EU countries, i.e., Cyprus, Ireland, Luxembourg, Malta, Belgium and the Netherlands, from the classi cation of Tax Havens taken as reference. As, like Spain, these countries are EU members, they might be central for Spain and investments there might be based on economic reasons rather than tax avoidance reasons (Souillard, 2022).…”

Section: Alternative Tax Haven Listsmentioning

confidence: 99%

“…This could be assumed as long as they are highly-skilled individuals di cult to nd in the labour market. Moreover, as long as they are in charge of guiding and controlling the business policy, they are aware of this tax planning activity of the rm, which can remain hidden from the eyes of the rest of the company's workers (Souillard, 2022).…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

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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Profit Shifting, Employee Pay, and Inequalities: Evidence from US-Listed Companies

Cited by 4 publications

References 62 publications

Does Information Exchange Affect Cross‐border Tax Avoidance? Evidence from the Common Reporting Standard

Does Information Exchange Affect Cross‐border Tax Avoidance? Evidence from the Common Reporting Standard

Effective Tax Rates and Firm Size

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

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