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Global evidence on profit shifting within firms and across time

Author

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  • 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
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    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

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