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Assessing Profit Shifting Using Country-by-Country Reports: A Nonlinear Response to Tax Rate Differentials

Author

Listed:
  • Barbara Bratta
  • Vera Santomartino
  • Paolo Acciari

Abstract

We analyze profit shifting carried out by multinational enterprises (MNEs) worldwide and estimate associated tax-revenue losses using firm-level data from mandatory country-by-country reporting. We show how the data set outperforms existing data sets, expand the analysis of the nonlinear response of profits to tax rates, and investigate nonlinear responses by MNE nationality and size. Our results suggest that the elasticity of profits with respect to corporate tax rates is eight times larger than the literature in lowest-tax jurisdictions and 60 percent lower among jurisdiction pairs with smaller tax rate differences. Results suggest fixed costs in profit shifting exist and differ by MNE headquarters.

Suggested Citation

  • 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.
    • Handle: RePEc:ucp:nattax:doi:10.1086/729293
    DOI: 10.1086/729293
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    Cited by:

    1. Sarah Godar & Giulia Aliprandi & Tommaso Faccio & Petr Janský & Katia Toledo Ruiz, 2024. "The long way to tax transparency: lessons from the early publishers of country-by-country reports," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 593-634, April.
    2. 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).
    3. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    4. 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.
    5. Vera Santomartino & Barbara Bratta & Paolo Acciari, . "Analysing MNEs structure and activities using country-by-country reports. Evidence from the Italian dataset," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    6. Felix Hugger, 2025. "Regulatory avoidance responses to private Country-by-Country Reporting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(1), pages 271-309, February.
    7. Sarah Clifford & Jakob Miethe & Camille Semelet, 2025. "The Distribution of Profit Shifting," EconPol Policy Brief 78, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    8. Petr Janský, 2023. "Corporate Effective Tax Rates for Research and Policy," Public Finance Review, , vol. 51(2), pages 171-205, March.

    More about this item

    JEL classification:

    • 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
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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