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Why pay more? Corporate Tax Avoidance through Transfer Pricing in OECD Countries

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  • Eric J. Bartelsman

    ()
    (VU University Amsterdam)

  • Roel Beetsma

    ()
    (University of Amsterdam, and CEPR)

Abstract

This paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of OECD countries. We use a new method to disentangle the income shifting effects from the effects of tax rates on real activity. Our baseline estimates suggest that a substantial share of the revenues from a unilateral increase in the corporate tax rate is lost because of a decline in reported income. This discussion paper has resulted in a publication in the Journal of Public Economics , 2003, 87(9-10), 2225-52.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-054/2.

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Date of creation: 05 Jul 2000
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Handle: RePEc:dgr:uvatin:20000054

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Web page: http://www.tinbergen.nl

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Keywords: Profit shifting; Transfer pricing; Corporate tax rates; STAN database;

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  1. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-93, May.
  2. Kemfert, Claudia, 1998. "Estimated substitution elasticities of a nested CES production function approach for Germany," Energy Economics, Elsevier, vol. 20(3), pages 249-264, June.
  3. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
  4. James R. Hines, Jr. & Eric M. Rice, 1990. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers 3477, National Bureau of Economic Research, Inc.
  5. James R. Hines Jr., 1993. "Altered States: Taxes and the Location of Foreign Direct Investment in America," NBER Working Papers 4397, National Bureau of Economic Research, Inc.
  6. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
  7. Joe Stone & Hyun-Hoon Lee, 1995. "Determinants of intra-industry trade: A longitudinal, cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(1), pages 67-85, March.
  8. Jeffrey K. MacKie-Mason & Roger H. Gordon, 1994. "How Much Do Taxes Discourage Incorporation?," Public Economics 9401002, EconWPA.
  9. Alfons Weichenrieder, 1996. "Fighting international tax avoidance," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 37-58, February.
  10. Harrigan, James, 1999. "Estimation of cross-country differences in industry production functions," Journal of International Economics, Elsevier, vol. 47(2), pages 267-293, April.
  11. Hines, J.R.J. & Hubbard, R.G., 1989. "Coming Home To America - Devidend Repatriations By U.S. Multinationals," Papers 146, Princeton, Woodrow Wilson School - Public and International Affairs.
  12. Kenneth A. Froot & James R. Hines, Jr., 1994. "Interest Allocation Rules, Financing Patterns, and the Operations of U.S. Multinationals," NBER Working Papers 4924, National Bureau of Economic Research, Inc.
  13. Grubert, Harry, 1998. "Taxes and the division of foreign operating income among royalties, interest, dividends and retained earnings," Journal of Public Economics, Elsevier, vol. 68(2), pages 269-290, May.
  14. Jane G. Gravelle & Laurence J. Kotlikoff, 1987. "The Incidence and Efficiency Costs of Corporate Taxation when Corporate and Noncorporate Firms Produce the Same Good," NBER Working Papers 2462, National Bureau of Economic Research, Inc.
  15. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  16. James R. Hines, Jr., 1996. "Tax Policy and the Activities of Multinational Corporations," NBER Working Papers 5589, National Bureau of Economic Research, Inc.
  17. Kashif S. Mansori & Alfons J. Weichenrieder, 2001. "Tax Competition and Transfer Pricing Disputes," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(1), pages 1-, December.
  18. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April.
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