IDEAS home Printed from https://ideas.repec.org/a/eee/jaecon/v79y2025i2s0165410124000740.html
   My bibliography  Save this article

Global evidence on profit shifting within firms and across time

Author

Listed:
  • Delis, Fotis
  • Delis, Manthos D.
  • Laeven, Luc
  • Ongena, Steven

Abstract

We provide estimates of profit shifting for over 2 million firm-year observations in 100 countries over the period 2009–2020. Employing nonparametric estimation techniques within a mainstay model of profit shifting, we examine how the profits of both parent and subsidiary firms within a multinational group respond to marginal changes in the composite tax indicator. The key advantage of this approach is that it yields firm-year estimates of profit shifting. Multinational firms engage in extensive profit shifting by maintaining affiliates in low-tax countries and zero-tax havens. Multinational groups with an ultimate tax-haven owner exhibit the largest profit response to tax incentives. Our new database opens important avenues for analyzing the sources and effects of profit shifting.

Suggested Citation

  • Delis, Fotis & Delis, Manthos D. & Laeven, Luc & Ongena, Steven, 2025. "Global evidence on profit shifting within firms and across time," Journal of Accounting and Economics, Elsevier, vol. 79(2).
    • Handle: RePEc:eee:jaecon:v:79:y:2025:i:2:s0165410124000740
    DOI: 10.1016/j.jacceco.2024.101744
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165410124000740
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jacceco.2024.101744?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Karkinsky, Tom & Riedel, Nadine, 2012. "Corporate taxation and the choice of patent location within multinational firms," Journal of International Economics, Elsevier, vol. 88(1), pages 176-185.
    2. Clemens Fuest & Stefan Greil & Felix Hugger & Florian Neumeier, 2022. "Global Profit Shifting of Multinational Companies: Evidence from CbCR Micro Data," CESifo Working Paper Series 9757, CESifo.
    3. Dyreng, Scott D. & Lindsey, Bradley P. & Markle, Kevin S. & Shackelford, Douglas A., 2015. "The effect of tax and nontax country characteristics on the global equity supply chains of U.S. multinationals," Journal of Accounting and Economics, Elsevier, vol. 59(2), pages 182-202.
    4. Sebastian Beer & Ruud de Mooij & Li Liu, 2020. "International Corporate Tax Avoidance: A Review Of The Channels, Magnitudes, And Blind Spots," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 660-688, July.
    5. Fatih Guvenen & Raymond J. Mataloni Jr. & Dylan G. Rassier & Kim J. Ruhl, 2022. "Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share," American Economic Review, American Economic Association, vol. 112(6), pages 1848-1884, June.
    6. Grubert, Harry, 2003. "Intangible Income, Intercompany Transactions, Income Shifting, and the Choice of Location," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 221-242, March.
    7. Joe Whittaker & Chris Whitehead & Mark Somers, 2005. "The neglog transformation and quantile regression for the analysis of a large credit scoring database," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 54(5), pages 863-878, November.
    8. Grubert, Harry, 2012. "Foreign Taxes and the Growing Share of U.S. Multinational Company Income Abroad: Profits, Not Sales, Are Being Globalized," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(2), pages 247-281, June.
    9. Thomas Tørsløv & Ludvig Wier & Gabriel Zucman, 2023. "The Missing Profits of Nations," Post-Print halshs-04928943, HAL.
    10. Lisa De Simone & Lillian F. Mills & Bridget Stomberg, 2019. "Using IRS data to identify income shifting to foreign affiliates," Review of Accounting Studies, Springer, vol. 24(2), pages 694-730, June.
    11. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2005. "Wages and International Rent Sharing in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 73-84, February.
    12. Clausing, Kimberly A., 2006. "International Tax Avoidance and U.S. International Trade," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 269-287, June.
    13. De Simone, Lisa & Klassen, Kenneth J. & Seidman, Jeri K., 2022. "The effect of income-shifting aggressiveness on corporate investment," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    14. Åsa Johansson & Øystein Bieltvedt Skeie & Stéphane Sorbe & Carlo Menon, 2017. "Tax planning by multinational firms: Firm-level evidence from a cross-country database," OECD Economics Department Working Papers 1355, OECD Publishing.
    15. Matias D. Cattaneo & Michael Jansson, 2018. "Kernel†Based Semiparametric Estimators: Small Bandwidth Asymptotics and Bootstrap Consistency," Econometrica, Econometric Society, vol. 86(3), pages 955-995, May.
    16. Sebastian Beer & Jan Loeprick, 2015. "Profit shifting: drivers of transfer (mis)pricing and the potential of countermeasures," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 426-451, June.
    17. Kimberly A. Clausing, 2020. "Profit Shifting before and after the Tax Cuts and Jobs Act," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(4), pages 1233-1266, December.
    18. Thomas Tørsløv & Ludvig Wier & Gabriel Zucman, 2023. "The Missing Profits of Nations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(3), pages 1499-1534.
    19. Racine, Jeff, 1997. "Consistent Significance Testing for Nonparametric Regression," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 369-378, July.
    20. Dowd, Tim & Landefeld, Paul & Moore, Anne, 2017. "Profit shifting of U.S. multinationals," Journal of Public Economics, Elsevier, vol. 148(C), pages 1-13.
    21. Huizinga, Harry & Laeven, Luc, 2008. "International profit shifting within multinationals: A multi-country perspective," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1164-1182, June.
    22. repec:idq:ictduk:11176 is not listed on IDEAS
    23. Barbara Bratta & Vera Santomartino & Paolo Acciari, 2024. "Assessing Profit Shifting Using Country-by-Country Reports: A Nonlinear Response to Tax Rate Differentials," National Tax Journal, University of Chicago Press, vol. 77(2), pages 349-380.
    24. James R. Hines & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 149-182.
    25. De Simone, Lisa, 2016. "Does a common set of accounting standards affect tax-motivated income shifting for multinational firms?," Journal of Accounting and Economics, Elsevier, vol. 61(1), pages 145-165.
    26. Cohn, Jonathan B. & Liu, Zack & Wardlaw, Malcolm I., 2022. "Count (and count-like) data in finance," Journal of Financial Economics, Elsevier, vol. 146(2), pages 529-551.
    27. C. S. Agnes Cheng & Peng Guo & Chia‐Hsiang Weng & Qiang Wu, 2021. "Innovation and Corporate Tax Planning: The Distinct Effects of Patents and R&D," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 621-653, March.
    28. Jost H. Heckemeyer & Michael Overesch, 2017. "Multinationals’ profit response to tax differentials: Effect size and shifting channels," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(4), pages 965-994, November.
    29. Kenneth J. Klassen & Stacie K. Laplante, 2012. "Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?," Journal of Accounting Research, Wiley Blackwell, vol. 50(5), pages 1245-1285, December.
    30. Grosskurth, Philipp, 2019. "Dynamic structure - Dynamic results? Re-estimating profit shifting with historical ownership data," Ruhr Economic Papers 811, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    31. Jost H. Heckemeyer & Michael Overesch, 2017. "Multinationals profit response to tax differentials: Effect size and shifting channels," Canadian Journal of Economics, Canadian Economics Association, vol. 50(4), pages 965-994, November.
    32. Kevin Markle, 2016. "A Comparison of the Tax†Motivated Income Shifting of Multinationals in Territorial and Worldwide Countries," Contemporary Accounting Research, John Wiley & Sons, vol. 33(1), pages 7-43, March.
    33. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    34. Kimberly A. Clausing, 2016. "The Effect of Profit Shifting on the Corporate Tax Base in the United States and Beyond," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(4), pages 905-934, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. De Vito, Antonio & Hillmann, Lisa & Jacob, Martin & Vossebürger, Robert, 2025. "Do personal income taxes affect corporate tax-motivated profit shifting?," Journal of Accounting and Economics, Elsevier, vol. 79(2).
    2. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    3. Sebastian Beer & Ruud de Mooij & Li Liu, 2020. "International Corporate Tax Avoidance: A Review Of The Channels, Magnitudes, And Blind Spots," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 660-688, July.
    4. Michael Overesch & Sina Willkomm, 2025. "The relation between corporate social responsibility and profit shifting of multinational enterprises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(2), pages 466-500, April.
    5. Cooper, Maggie & Nguyen, Quyen T.K., 2020. "Multinational enterprises and corporate tax planning: A review of literature and suggestions for a future research agenda," International Business Review, Elsevier, vol. 29(3).
    6. 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.
    7. Müller, Raphael & Spengel, Christoph & Vay, Heiko, 2020. "On the determinants and effects of corporate tax transparency: Review of an emerging literature," ZEW Discussion Papers 20-063, ZEW - Leibniz Centre for European Economic Research.
    8. Dyrda, Sebastian & Hong, Guangbin & Steinberg, Joseph B., 2024. "A macroeconomic perspective on taxing multinational enterprises," Journal of International Economics, Elsevier, vol. 152(C).
    9. Makoto Hasegawa, 2023. "Territorial Tax Reform and Profit Shifting by US and Japanese Multinationals," National Tax Journal, University of Chicago Press, vol. 76(4), pages 771-804.
    10. Petr Janský & Miroslav Palanský, 2019. "Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1048-1103, October.
    11. Barbara Bratta & Vera Santomartino & Paolo Acciari, 2024. "Assessing Profit Shifting Using Country-by-Country Reports: A Nonlinear Response to Tax Rate Differentials," National Tax Journal, University of Chicago Press, vol. 77(2), pages 349-380.
    12. Langenmayr, Dominika & Liu, Li, 2020. "Where Does Multinational Profit Go with Territorial Taxation? Evidence from the UK," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224516, Verein für Socialpolitik / German Economic Association.
    13. Dobranschi, Marian & Nerudová, Danuše & Solilová, Veronika & Litzman, Marek, 2023. "An alternative measure of profit shifting and corporate income tax losses," Journal of Multinational Financial Management, Elsevier, vol. 70.
    14. Langenmayr, Dominika & Liu, Li, 2023. "Home or away? Profit shifting with territorial taxation," Journal of Public Economics, Elsevier, vol. 217(C).
    15. Nerudova, Danuse & Dobranschi, Marian & Solilová, Veronika & Litzman, Marek, 2023. "Onshore and offshore profit shifting and tax revenue losses in the European Union," Economic Modelling, Elsevier, vol. 119(C).
    16. Nadia Accoto & Stefano Federico & Giacomo Oddo, 2024. "Trade in services related to intangibles and the profit shifting hypothesis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 70(4), pages 1037-1059, December.
    17. Ludvig Wier & Hayley Erasmus, 2023. "The Dominant Role of Large Firms in Profit Shifting," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(3), pages 791-816, September.
    18. Marika Viertola, 2023. "Profit Shifting of Multinational Enterprises: Evidence from the Nordics," Working Papers 18, Finnish Centre of Excellence in Tax Systems Research.
    19. Bakke, Julia Tropina & Hopland, Arnt Ove & Møen, Jarle, 2019. "Profit shifting and the effect of stricter transfer pricing regulation on tax revenue," Discussion Papers 2019/11, Norwegian School of Economics, Department of Business and Management Science.
    20. Ropponen, Olli, 2021. "Interest Limitation Rules and Business Cycles: Empirical Evidence," ETLA Working Papers 90, The Research Institute of the Finnish Economy.

    More about this item

    Keywords

    Profit shifting; Multinational enterprises; Nonparametric estimation; Tax arbitrage; Global sample;
    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
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaecon:v:79:y:2025:i:2:s0165410124000740. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jae .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.