The Role of Headquarters in Multinational Profit Shifting Strategies
AbstractThis paper stresses the special role of multinational headquarters in corporate profit shifting strategies. Using a large panel of European firms, we show that multinational enterprises (MNEs) are reluctant to shift profits away from their headquarters even if these are located in high-tax countries. Thus, shifting activities in response to corporate tax rate differentials between parents and subsidiaries are found to be significantly larger if the parent observes a lower corporate tax rate than its subsidiary and profit is thus shifted towards the headquarters firm. This result is in line with recent empirical evidence suggesting that MNEs bias the location of profits and highly profitable assets in favor of the headquarters location (for agency cost reasons among others).
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Bibliographic InfoPaper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 1003.
Date of creation: 2010
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Multinational Firm; Profit Shifting; Headquarters Location;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-03-13 (Accounting & Auditing)
- NEP-ALL-2010-03-13 (All new papers)
- NEP-BEC-2010-03-13 (Business Economics)
- NEP-IFN-2010-03-13 (International Finance)
- NEP-PBE-2010-03-13 (Public Economics)
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