Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/190101
Authors: 
Schimanski, Caroline
Year of Publication: 
2018
Series/Report no.: 
WIDER Working Paper 2018/52
Abstract: 
This study aims at providing causal evidence for tax-motivated profit-shifting out of developing countries, which, while often claimed to be the most affected, have been largely neglected in the literature. It uses global firm-level panel data from 2006-2015 and identifies profit-shifting through earnings shocks relative to comparable firms' profitability that are passed on to affiliates within multinational corporations located in lower taxed countries. Unlike previous studies on profit-shifting, the present study is thereby able to control for country-pair-year fixed effects. Moreover, it contributes to the literature in terms of its geographic scope, multi-dimensional shifting patterns, the use of effective tax rates, and additional profit-shifting incentivizing factors not previously considered. However, despite rising anecdotal concerns and limited initial mostly non-causal evidence, this study cannot provide robust significant causal evidence for systematic tax-motivated profit-shifting out of developing countries. Nor do affiliates in better credit-rated, less corrupt, more developed countries or tax havens seem to be profit-shifting destinations. This inconsistency highlights the need for better data and the potential complexity of profit-shifting schemes.
Subjects: 
tax avoidance
profit-shifting
developing countries
government tax revenue
effective tax rate
multinational firms
JEL: 
H26
H71
F63
H87
O10
ISBN: 
978-92-9256-494-0
Document Type: 
Working Paper
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