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Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?

Author

Listed:
  • Javier Garcia-Bernardo

    (Utrecht University)

  • Gabriel Zucman

    (UC Berkeley and EU Tax Observatory)

  • Petr Janský

    (Charles University)

Abstract

The 2017 Tax Cut and Jobs Act reduced the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.

Suggested Citation

  • Javier Garcia-Bernardo & Gabriel Zucman & Petr Janský, 2022. "Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?," Working Papers 003, EU Tax Observatory.
    • Handle: RePEc:dbp:wpaper:003
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    File URL: https://www.taxobservatory.eu//www-site/uploads/2022/06/GBJZ2022-1.pdf
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    More about this item

    Keywords

    multinational corporation; corporate taxation; profit shifting; effective tax rate; country-by-country reporting; Tax Cuts and Jobs Act;
    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

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