International Profit Shifting within European Multinationals
AbstractThe conduct of business activities in two or more countries creates opportunities for international profit shifting, while international tax rate differences create incentives. Using detailed information on both multinational firm structure and the international tax system, this paper examines the extent of intra-European profit shifting by European multinationals. Firm-level estimates of profit shifting can be aggregated to arrive at macro measures of international profit shifting. On average, we find a macro semi-elasticity of reported profits with respect to the top statutory tax rate of 1.43 in Europe, while shifting costs are estimated to be 1.6 percent of the tax base. International profit shifting leads to a substantial redistribution of national corporate tax revenues. Many European nations appear to gain revenues from intra-European profit shifting by multinationals largely at the expense of Germany.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6048.
Date of creation: Jan 2007
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Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-28 (All new papers)
- NEP-EEC-2007-01-28 (European Economics)
- NEP-PBE-2007-01-28 (Public Economics)
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