Profit Shifting of U.S. Multinationals

Dowd, Tim; Landefeld, Paul; Moore, Anne

doi:10.2139/ssrn.2711968

Cited by 36 publications

(64 citation statements)

References 15 publications

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“…Most of the evidence of MNE profit shifting comes from cross-country regressions of MNE profits (or income) on tax rates (Clausing, 2016;Dowd, Landefeld, and Moore, 2016;Hines and Rice, 1994). Dharmapala (2014) provides a comprehensive survey.…”

Section: Related Literaturementioning

confidence: 99%

Offshore Profit Shifting and Domestic Productivity Measurement

Guvenen

Mataloni²,

Rassier³

et al. 2018

Preprint

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Beginning in 2004, official statistics display a slowdown in U.S. productivity growth. We show how offshore profit shifting by U.S. multinational enterprises affects GDP and, thus, productivity measurement. Profit shifting increased in the mid-1990s, resulting in lower measured productivity growth. We construct value added adjusted for profit shifting. The adjustments raise aggregate productivity growth rates by 0.09 percent annually for 1994-2004, 0.24 percent annually for 2004-2008, and lower annual aggregate productivity growth rates by 0.09 percent after 2008. The adjustments are large in R&D-intensive industries, where value added increases by as much as 8 percent in the mid-2000s.

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Section: Related Literaturementioning

confidence: 99%

Offshore Profit Shifting and Domestic Productivity Measurement

Guvenen

Mataloni²,

Rassier³

et al. 2018

Preprint

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“…;Dharmapala and Riedel (2013);Dyreng and Markle (2016); andDowd et al (2017).32 Similar empirical specifications providing evidence consistent with income tax-motivated profit shifting are also used by De Simone (2016) andBlouin et al (2018). Since the sample in this paper only includes MNE affiliates…”

mentioning

confidence: 72%

Consumption Taxes and Corporate Tax Planning - Evidence from European Service Firms

Werner

Olbert

2019

SSRN Journal

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Consumption taxes are a primary source of tax revenue and, against the common intuition, firms might bear the respective tax burden. However, it is largely unknown how firms respond to consumption taxes. We examine whether service firms in Europe respond to consumption taxes and whether managing sales as the respective tax base is interrelated with subsequent income tax-motivated profit shifting. We exploit corporate affiliate-level panel data and a unique setting in Europe over the period 2007-2015 with 72 staggered and plausibly exogenous consumption and corporate income tax rate changes. We find that firms, on average, exhibit a negative valueadded tax-rate semi-elasticity of reported sales of around 0.5. Consistent with theory and incentives from the European value-added tax system, the effect is stronger for firms with greater discretion over the jurisdiction of value-added tax liability (firms in the digital service sector) and firms facing greater demand elasticity. We then show that the extent and the channels of profit shifting depend on firms' responsiveness to consumption taxes consistent with managing sales in response to consumption taxes placing a constraint on manipulating transfer prices for intra-group trade. Our study thereby provides novel insights for the design of multidimensional tax systems.

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“…Prior research has found significant effects of tax rates in affiliate and parent countries on the profit shifting behavior of multinational entities; however, the magnitude of the effects varies. The results measured in semi-elasticities range from close to zero to well above one [39].…”

Section: Taxes and Taxation Trendsmentioning

confidence: 86%

International Aspects of Corporate Income Taxes and Associated Distortions

Birškytė¹,

Giriūnienė²

2018

Taxes and Taxation Trends

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The purpose of this chapter is to review the latest developments in corporate income tax (CIT) focusing on its international aspects and associated distortions. In this endeavor, the chapter draws on evidence provided by the leading tax experts as well as on the profound and rigorous research produced by academia. This chapter examines and synthesizes research on tax competition, relationship between tax rates and foreign direct investment (FDI), and tax avoidance as a result of differential tax regimes. Trends in the development of CIT are discerned using statistical data provided by OECD and European Commission. Numerous studies done on global, regional, and country-specific datasets support the premise that indeed tax competition for capital exists though the magnitude of effects varies. There is also enough evidence that tax avoidance and evasion through base erosion and profit shifting persist for some time and may be on the rise.

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Profit Shifting of U.S. Multinationals

Cited by 36 publications

References 15 publications

Offshore Profit Shifting and Domestic Productivity Measurement

Offshore Profit Shifting and Domestic Productivity Measurement

Consumption Taxes and Corporate Tax Planning - Evidence from European Service Firms

International Aspects of Corporate Income Taxes and Associated Distortions

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