Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104255
Authors: 
Dischinger, Matthias
Year of Publication: 
2008
Series/Report no.: 
Munich Discussion Paper 2008-17
Abstract: 
We provide indirect empirical evidence of profit shifting behavior by multinational enterprises (MNEs) employing a panel study for the years 1995 to 2005, while controlling for unobservable fixed firm effects. We use a large micro database of European MNEs which includes detailed accounting and ownership information. Our results show a strongly negative relationship between an affiliated company's statutory corporate tax rate difference to its foreign parent firm and the affiliate's gross profits. Quantitatively, a 10 percentage points decrease in the tax rate of the affiliate (relative to the parent) increases its pre-tax profitability by 7%, other things being equal. Various robustness checks support this profit shifting inference. Furthermore, we provide evidence that a higher parent's ownership share of its subsidiary leads to intensified shifting activities between these two affiliates.
Subjects: 
corporate taxation
multinational enterprise
profit shifting
share ownership ratio
micro level data
JEL: 
H25
H26
F23
C33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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