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Global Evidence on Profit Shifting Within Firms and Across Time

Author

Listed:
  • Ongena, Steven
  • Delis, Fotios
  • Delis, Manthos
  • Laeven, Luc

Abstract

We provide the first global estimates of profit shifting within firms at the subsidiary-year level. Employing nonparametric estimation techniques within a mainstay model of profit shifting, we examine the responses by subsidiary-year of earnings to the composite tax indicator faced by all subsidiaries of a multinational firm. Our panel includes 26,593 subsidiaries across 95 countries for the period 2009‒2017. Subsequently, we examine correlates of profit shifting, identifying that a key determinant is the subsidiaries’ ratio of intangible assets, and this channel is stronger in countries with weaker institutions. Both our new database and our novel findings open important avenues to analyze the sources and effects of profit shifting.

Suggested Citation

  • Ongena, Steven & Delis, Fotios & Delis, Manthos & Laeven, Luc, 2022. "Global Evidence on Profit Shifting Within Firms and Across Time," CEPR Discussion Papers 16615, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16615
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    Keywords

    Profit shifting; Multinational enterprises; Nonparametric estimation; Intangible assets; Institutional quality; Global sample;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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