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The Dominant Role of Large Firms in Profit Shifting

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  • Ludvig Wier

    (University of California)

  • Hayley Erasmus

    (National Treasury of South Africa)

Abstract

Globally, the largest 0.001 per cent of firms earn one-third of all corporate profits. Nonetheless, there is little understanding of how profit shifting differs across firm size. Using the universe of South African corporate tax returns and global financial accounts, we find that profit shifting is concentrated among a few very large firms and that previous micro studies underestimate profit shifting by failing to account for firm size. This aids to explain the notable gap between micro and macro estimates of profit shifting. We revisit OECD’s micro estimate and find that this may underestimate profit shifting by 40 per cent.

Suggested Citation

  • Ludvig Wier & Hayley Erasmus, 2023. "The Dominant Role of Large Firms in Profit Shifting," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(3), pages 791-816, September.
    • Handle: RePEc:pal:imfecr:v:71:y:2023:i:3:d:10.1057_s41308-022-00180-w
    DOI: 10.1057/s41308-022-00180-w
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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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