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Does Intangible Asset Intensity Increase Profit-Shifting Opportunities of Multinationals?

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Abstract

This paper studies how intangible asset intensity affects multinationals' profitshifting behavior. Intangible assets reduce the cost of booking profits in low-tax jurisdictions, independently from where profits are generated. Consequently they can be instrumental to implementing tax-avoidance schemes. Using a large firm-level, parent-subsidiaries matched panel data set I test if multinationals characterized by high intangible asset intensity report higher profits in low-tax jurisdictions, respect to corporations with low intangible asset intensity. I find that, intangible asset intensity exacerbates multinationals' profit-shifting behavior. Splitting the sample between tech and non-tech companies, I find that, although tech companies leverage intangible asset intensity for profit-shifting more than the rest of the sample, there is no statistical difference between profit-shifting of tech companies with high intangibles intensity and non-tech companies with high intangibles intensity.

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  • Roberto Crotti, 2021. "Does Intangible Asset Intensity Increase Profit-Shifting Opportunities of Multinationals?," IHEID Working Papers 02-2021, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp02-2021
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    Cited by:

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    2. Das, Khanindra Ch & Mahalik, Mantu Kumar & Sadorsky, Perry, 2023. "Tax provision by international subsidiaries of Indian extractive industry multinationals: Do environmental pollution and corruption matter?," Resources Policy, Elsevier, vol. 80(C).

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    Keywords

    intangible assets; international profit-shifting; corporate 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

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