Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228072
Authors: 
Garcia-Bernardo, Javier
Janský, Petr
Tørsløv, Thomas
Year of Publication: 
2019
Series/Report no.: 
IES Working Paper No. 31/2019
Abstract: 
A growing body of economics literature shows that multinational corporations (MNCs) shift their profits to tax havens. We contribute to this evidence by comparing a range of available data sets focusing on US MNCs, including country-by-country reporting data which has been released in December 2018 for the first time. With each of the datasets, we analyse the effective tax rates that US MNCs face in each country and the amount of profits they report. Using country-by-country reporting data, we have been able to establish that lower effective corporate tax rates are associated with higher levels of reported profits when compared with different indicators of real economic activity. This corresponds to the notion that MNCs often shift profits to countries with low effective tax rates - without also shifting substantive economic activity. Consequently, we identify the most important tax havens for US MNCs as countries with both low effective tax rates and high profits misaligned with economic activity.
Subjects: 
Effective tax rate
profit shifting
tax haven
country-by-country reporting
multinational enterprise
foreign direct investment
tax competition
JEL: 
C81
F21
F23
H25
H26
Document Type: 
Working Paper

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