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Shift or Share? Anatomy of Profit Shifting and Distributional Effects on Workers

Author

Listed:
  • Giulia Aliprandi
  • Alice Chiocchetti
  • Manon Francois
  • Laure Heidmann

Abstract

Using exhaustive microdata on the worldwide activity of multinational firms from Country-by-Country Reports linked to employer-employee data, we study how profit shifting affects workers' earnings. We estimate that large French multinationals shift 19% of their foreign profits annually to low-tax jurisdictions, resulting in €10.3 billion shifted out of France and €3.7 billion in lost tax revenues. Exploiting France's mandatory profit-sharing policy, which mechanically links subsidiary-level reported profits to workers' compensation, we show that profit shifting reduces annual employees' earnings by 2.6%. Low-income workers are disproportionately affected, the bottom 10% losing 3.2% of wages compared to 2.3% for top 10% earners. Changing the profit-sharing formula to account for global, rather than subsidiary-level, profitability would increase wages by 1.9% overall and 4.1% for workers in profit-shifting subsidiaries.

Suggested Citation

  • Giulia Aliprandi & Alice Chiocchetti & Manon Francois & Laure Heidmann, 2025. "Shift or Share? Anatomy of Profit Shifting and Distributional Effects on Workers," CESifo Working Paper Series 12202, CESifo.
    • Handle: RePEc:ces:ceswps:_12202
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    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

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