Profit Shifting by Multinationals: Indirect Evidence from European Micro Data
AbstractWe provide indirect empirical evidence of profit shifting behavior by multinational enterprises. This issue is analyzed in an econometric panel study for the years 1995 to 2005 and additionally in a cross-section for 2004 using a large micro database of European subsidiaries of multinationals (AMADEUS) which includes detailed balance sheet items. Our results show a decrease in the unconsolidated pre-tax profits of an affiliated company of approximately 7% if the difference in the statutory corporate tax rate of this affiliate to its parent increases by 10 percentage points. Various robustness checks support our profit shifting evidence. Furthermore, the results suggest an overall shift of profits out of the European Union. In addition, we provide evidence that a higher parent's ownership share of its subsidiary leads to intensified profit shifting behavior.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 2029.
Date of creation: Sep 2007
Date of revision:
corporate taxation; multinational enterprise; tax planning; profit shifting; micro level data; panel econometrics;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-09-24 (Accounting & Auditing)
- NEP-ALL-2007-09-24 (All new papers)
- NEP-EEC-2007-09-24 (European Economics)
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