Why are U.S.-Owned Foreign Subsidiaries Not Tax Aggressive?

Kohlhase, Saskia; Pierk, Jochen

doi:10.2139/ssrn.2815112

Cited by 4 publications

(3 citation statements)

References 19 publications

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“…Following the insights of Scholes et al (2015), Kohlhase and Pierk (2016), and Markle (2016), we expect that parent firms located in countries under the territorial tax scheme, to be more tax aggressive-to shift more profit. The reason is that by doing so, they would be able to repatriate their profits without the obligation to pay any taxes to their government.…”

Section: Inference From Multivariate Analysismentioning

confidence: 86%

“…In our second hypothesis, we want to investigate whether the effect CSR has on profit shifting differs according to the corporate tax system. Prior literature finds that multinationals under the territorial tax system shift more income compared to those under the worldwide tax scheme (e.g., Scholes et al, 2015;Kohlhase and Pierk, 2016;Markle, 2016). In our framework, we expect CSR to have a larger impact for parent firms that are more incentivized to participate in profit shifting activities (i.e., those under the territorial tax system).…”

Section: Introductionmentioning

confidence: 89%

“…Specifically, countries under the worldwide tax system impose taxes to any income earned by its nationals either within the country or overseas, while countries under the territorial regime exempt income earned overseas. 7 Prior literature finds that multinationals under the territorial tax system shift more income compared to those under the worldwide tax scheme (e.g., Scholes et al, 2015;Kohlhase and Pierk, 2016;Markle, 2016). Hence, if the incentives for profit shifting are higher in multinationals under the territorial tax scheme, we should expect the effect of CSR on profit shifting for these firms to be larger.…”

Section: Hypothesis Developmentmentioning

confidence: 98%

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Corporate Social Responsibility and Profit Shifting

et al. 2019

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In this work we investigate the relationship between corporate social responsibility (CSR) and profit shifting. First, we employ worldwide data for parent firms and their foreign subsidiaries to derive a profit shifting measure. Then, drawing on legitimacy theory and risk-management strategy, we find corporate social responsibility to be positively correlated with profit shifting. In addition, we find this relationship to be stronger in parent firms in countries under the territorial tax system. We perform a battery of sensitivity tests and robustness checks to corroborate our findings. By and large, our results suggest that multinational firms with higher CSR scores shift larger amounts of profits to their low-tax foreign subsidiaries, potentially indicating strategic planning in the choice of CSR investments by multinational enterprises.

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Section: Inference From Multivariate Analysismentioning

confidence: 86%

Section: Introductionmentioning

confidence: 89%

Section: Hypothesis Developmentmentioning

confidence: 98%

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Corporate Social Responsibility and Profit Shifting

et al. 2019

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Financial Transparency to the Rescue: Effects of Public Country‐by‐Country Reporting in the European Union Banking Sector on Tax Avoidance*

Overesch

Wolff

2021

Contemporary Accting Res

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We analyze the effect of mandatory financial transparency on corporate tax avoidance. The effectiveness of comprehensive tax transparency, in the form of a public country‐by‐country reporting, to mitigate corporate tax planning is largely unknown. Capital Requirements Directive IV by the European Commission required multinational banks to publish key financial and tax data in the form of public country‐by‐country reporting. We examine tax avoidance of banks around the reform. Our focus is on multinational banks newly required to report activities in tax havens that had not been publicly disclosed before the country‐by‐country reporting mandate. We predict and find that these exposed banks increased their tax expense relative to multinational banks with no activities in tax havens to disclose, as well as relative to domestic banks unaffected by the new mandate. In additional tests, we compare our sample of exposed multinational banks to several control groups from the financial sector and other industries. Our results suggest that country‐by‐country reporting can serve as an additional policy instrument to curb corporate tax avoidance, but only when the reporting exposes the firms' tax sheltering activities to public scrutiny.

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The Effective Income Tax Experience of U.S. and Non-U.S. Multinationals

Allen

Morse

2016

SSRN Journal

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Why are U.S.-Owned Foreign Subsidiaries Not Tax Aggressive?

Cited by 4 publications

References 19 publications

Corporate Social Responsibility and Profit Shifting

Corporate Social Responsibility and Profit Shifting

Financial Transparency to the Rescue: Effects of Public Country‐by‐Country Reporting in the European Union Banking Sector on Tax Avoidance*

The Effective Income Tax Experience of U.S. and Non-U.S. Multinationals

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