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Profit Shifting of Large German Companies to Low-Tax Countries – How High Are the Tax Revenue Losses?

Author

Listed:
  • Clemens Fuest
  • Felix Hugger
  • Florian Neumeier

Abstract

Of the total global profits of the largest German multinationals, 9 percent are accounted for by subsidiaries based in tax havens. According to estimates by the ifo Institute, 62 percent of these profits can be attributed to real economic activity, while 38 percent are the result of profit shifting to avoid taxes. As a result, the German treasury is missing out on annual tax revenue of around EUR 1.6 billion. If the activities of smaller German multinationals and German subsidiaries of foreign multinationals are also included, this results in annual tax revenue losses of EUR 5.7 billion.

Suggested Citation

  • Clemens Fuest & Felix Hugger & Florian Neumeier, 2021. "Profit Shifting of Large German Companies to Low-Tax Countries – How High Are the Tax Revenue Losses?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 74(01), pages 38-42, January.
    • Handle: RePEc:ces:ifosdt:v:74:y:2021:i:01:p:38-42
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    References listed on IDEAS

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    1. Fuest, Clemens & Hugger, Felix & Neumeier, Florian, 2022. "Corporate profit shifting and the role of tax havens: Evidence from German country-by-country reporting data," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 454-477.
    2. Dhammika Dharmapala, 2014. "What Do We Know about Base Erosion and Profit Shifting? A Review of the Empirical Literature," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 421-448, December.
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