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| Author: | Huizinga, H. Laeven, L. |
| Title: | International profit shifting within multinationals: A multi-country perspective |
| Journal: | Journal of Public Economics
2008 : JUN, VOL. 92:5-6, p. 1164-1182 |
| Index terms: | multinational companies international profit company taxation Europe models |
| Language: | eng |
| Abstract: | This paper models the opportunities and incentives generated by international (herein as: int-al.) tax differences for int-al. profit shifting (as: pr-sg.) by multinationals (MNEs). The model deals with both pr-sg. arising from int-al. tax differences btw. affiliates and parent companies and also from tax differences btw. affiliates in different host countries. This paper's model produces the prediction that a MNE's pr-sg. in a country depends on a weighted average of int-al. tax rate differences btw. all countries with the MNE being active. Using a unique dataset with detailed firm-level information on the parent companies and subsidiaries of European MNEs and information about the int-al. tax system, the model is tested and empirically examined the extent of intra-European pr-sg. by European MNEs. On average, there is found a semi-elasticity of reported profits as to the top statutory tax rate of 1.3, while shifting costs are estimated to be 0.6 percent of the tax base. Int-al. pr-sg. leads to a substantial redistribution of national corporate tax revenues. Many European nations seem to gain revenues from pr-sg. by MNEs mostly at the expense of Germany. |
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