Abstract
We exploit the new country-by-country reporting data of multinational corporations, with unparallelled country coverage, to reveal the distributional consequences of profit shifting. We estimate that multinational corporations worldwide shifted over $850 billion in profits in 2017, primarily to countries with effective tax rates below 10%. Countries with lower incomes lose a larger share of their total tax revenue due to profit shifting. We further show that a logarithmic function is better suited for capturing the non-linear relationship between profits and tax rates than linear or quadratic functions. Our findings highlight effective tax rates’ importance for profit shifting and tax reforms.
Original language | English |
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Article number | 106527 |
Number of pages | 47 |
Journal | World Development |
Volume | 177 |
Early online date | 13 Jan 2024 |
DOIs | |
Publication status | Published - May 2024 |
Bibliographical note
Publisher Copyright:© 2024 Elsevier Ltd
Keywords
- Corporate taxation
- Country-by-country reporting
- Effective tax rate
- Global development
- Multinational corporation
- Profit shifting