Corporate Taxes, Profit Shifting and the Location of Intangibles within Multinational Firms
AbstractIntangible assets are one major source of profit shifting opportunities due to a highly intransparent transfer pricing process. Our paper argues that multinational enterprises (MNEs) optimize their profit shifting strategy by locating shifting–relevant intangible property at affiliates with a low statutory corporate tax rate. Using panel data for European MNEs and controlling for unobserved time–constant heterogeneity between affiliates, we find that the lower a subsidiary’s tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment. This effect is statistically and economically significant, even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 4450.
Date of creation: Jun 2008
Date of revision:
corporate taxation; multinational enterprise; profit shifting; intangible assets; micro level data;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ACC-2008-06-27 (Accounting & Auditing)
- NEP-ALL-2008-06-27 (All new papers)
- NEP-PBE-2008-06-27 (Public Economics)
- NEP-PUB-2008-06-27 (Public Finance)
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