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Income Shifting as an Aspect of Tax Avoidance: Evidence from U.S. Multinational Corporations


  • Adriana Cordis

    () (College of Business Administration, Winthrop University, 701 Oakland Avenue, Rock Hill, SC 29733, USA)

  • Chris Kirby

    (Belk College of Business, UNC Charlotte, 9201 University City Boulevard, Charlotte, NC 28223, USA)


We use jurisdiction-specific effective tax rates (ETRs) to investigate income shifting as an aspect of tax avoidance by U.S. firms. Our central prediction is that tax-based incentives for shifting income, as measured by the spread between domestic and foreign ETRs, should be reflected in the share of pre-tax income earned by U.S. firms in foreign jurisdictions. The data lend substantial support to this prediction. We find robust evidence of a positive correlation between the foreign share of pre-tax income and the ETR spread that is consistent with firms shifting income both into and out of the United States. The evidence also indicates that firms respond asymmetrically to positive and negative ETR spreads. Specifically, the response to a negative spread is stronger than to a positive spread of the same magnitude.

Suggested Citation

  • Adriana Cordis & Chris Kirby, 2018. "Income Shifting as an Aspect of Tax Avoidance: Evidence from U.S. Multinational Corporations," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 1-53, March.
  • Handle: RePEc:wsi:rpbfmp:v:21:y:2018:i:01:n:s0219091518500017
    DOI: 10.1142/S0219091518500017

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