A Fistful of Dollars? Foreign Sales Platforms and Profit Shifting in Tax Havens

Using public macro-level data on activities of multinationals, we document that U.S. firms geographically disconnect sales and production to avoid paying corporate taxes. We revisit both theoretically and empirically the location determinants of foreign platforms and show that market access motives are far less relevant when considering tax havens. We characterize these countries and shed light on the attractiveness of different tax havens for specific sectors of activity. Our quantification shows that profit shifting by foreign sales platforms in tax havens amounts to about $80bn in 2013. Our findings contribute to the recent policy debate on the reform of international taxation.