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Profit shifting of multinational enterprises: evidence from the Nordics

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  • Viertola, Marika

Abstract

This paper studies how Nordic multinational enterprises (MNEs) react to tax incentives generated by international corporate income tax rate differences and shift profit to low tax countries. A firm level panel data set containing ownership and accounting information is used to study profit shifting within the time period of 2012-2017. Applying a panel data adjusted Hines-Rice approach including firm and year fixed effects results in statistically significant tax semi-elasticity estimates between -0.7 to -1.3. The results are confirmed by several robustness checks as well as by applying the newest methods in two-way fixed effects literature. This suggests that MNEs with ultimate owners located in the Nordic countries seem to react to tax rate differences by shifting profit. Additionally, the MNEs within the euro area seem to engage more heavily in profit shifting.

Suggested Citation

  • Viertola, Marika, 2023. "Profit shifting of multinational enterprises: evidence from the Nordics," Working Papers 155, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:155
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    File URL: https://www.doria.fi/handle/10024/187070
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    More about this item

    Keywords

    multinational firms; profit shifting; international corporate taxation; tax avoidance; Business taxation and regulation; F23; H25; H26; fi=Verotus|sv=Beskattning|en=Taxation|;
    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

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