Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273903 
Year of Publication: 
2022
Series/Report no.: 
WIDER Working Paper No. 2022/97
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
Multinational corporations shift a large share of their foreign profits to tax havens and, due to this corporate tax avoidance, governments worldwide lose a portion of their tax revenues. In this paper we study the consequences of multinational tax avoidance for the structure of government tax revenues. First, we show that, at the country level, countries with large revenue losses due to profit shifting have lower corporate tax revenues and rates. At the same time, they raise a larger share of tax revenues from personal and indirect taxes and have higher indirect tax rates. Second, to establish causality, we use German municipal data and analyse the effects of changes in municipal tax rates levied on corporate profits on local tax revenue structure. We show that following a tax rate increase, municipalities with a large presence of aggressive multinational corporations experience a significant decline in that tax revenue share.
Subjects: 
corporate tax avoidance
profit shifting
multinational corporations
tax revenue structure
JEL: 
E62
H26
H71
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-231-7
Document Type: 
Working Paper

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