Income Shifting in U.S. Multinational Corporations
AbstractIt is often claimed that multinational firms avoid taxes by shifting income from high-tax to low-tax countries. Using a five year panel of data for two hundred large U.S. manufacturing firms, we find that U.S. tax liability, as a fraction either of U.S. sales or U.S. assets, is related to the location of foreign subsidiaries in a way that is consistent with tax-motivated income shifting. Having a subsidiary in a tax haven, Ireland, or one of the "four dragon" Asian countries - all characterized by low tax rates - is associated with lower U.S. tax ratios. Having a subsidiary in a high-tax region is associated with higher U.S. tax ratios. These results suggest that U.S. manufacturing companies shift income out of high-tax countries into the U.S., and from the U.S. to low-tax countries. Such behavior certainly lowers worldwide tax liabilities for larger U.S. manufacturing companies and appears to significantly lower their U.S. tax liabilities as well.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3924.
Date of creation: Dec 1991
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Publication status: published as David Harris, Randall Morck, Joel B. Slemrod. "Income Shifting in U.S. Multinational Corporations," in Alberto Giovannini, R. Glenn Hubbard, and Joel Slemrod, eds., "Studies in International Taxation" University of Chicago Press (1993)
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Other versions of this item:
- David Harris & Randall Morck & Joel B. Slemrod, 1993. "Income Shifting in U.S. Multinational Corporations," NBER Chapters, in: Studies in International Taxation, pages 277-308 National Bureau of Economic Research, Inc.
- Harris, D. & Morck, R. & Slemrod, J., 1991. "Income Shifting in U.S. Multinational Corporations," Working Papers 287, Research Seminar in International Economics, University of Michigan.
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- James R. Hines, Jr. & Eric M. Rice, 1994.
"Fiscal Paradise: Foreign Tax Havens and American Business,"
NBER Working Papers
3477, National Bureau of Economic Research, Inc.
- Hines, James R, Jr & Rice, Eric M, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 149-82, February.
- Hines, J.R. & Rice, E.M., 1990. "Fiscal Paradise: Foreign Tax Havens And American Business," Papers 56, Princeton, Woodrow Wilson School - Discussion Paper.
- Morck, R. & Yeung, B., 1991.
"Why Investors Value Multinationality,"
282, Research Seminar in International Economics, University of Michigan.
- Morck, Randall & Yeung, Bernard, 1992. "Internalization : An event study test," Journal of International Economics, Elsevier, vol. 33(1-2), pages 41-56, August.
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