IDEAS home Printed from https://ideas.repec.org/p/dbp/wpaper/003.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://www.taxobservatory.eu//www-site/uploads/2022/06/GBJZ2022-1.pdf
    File Function: Full working paper
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Katarzyna Anna Bilicka, 2019. "Comparing UK Tax Returns of Foreign Multinationals to Matched Domestic Firms," American Economic Review, American Economic Association, vol. 109(8), pages 2921-2953, August.
    2. Mr. Nigel A Chalk & Mr. Michael Keen & Ms. Victoria J Perry, 2018. "The Tax Cuts and Jobs Act: An Appraisal," IMF Working Papers 2018/185, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Chen, Yilan & Lei, Shaohai, 2025. "Tax avoidance opportunity for multinational enterprises: effects of digitalized tax administration in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 102(C).
    3. Giulia Aliprandi & Gerrit von Zedlitz, 2023. "Benchmarking Country-by-Country Reports," Working Papers 017, EU Tax Observatory.
    4. Jonathan S. Hartley & Kevin A. Hassett & Joshua D. Rauh, 2025. "Firm Investment and the User Cost of Capital: New US Corporate Tax Reform Evidence," NBER Chapters, in: Tax Policy and the Economy, Volume 40, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Binglin He & Yukun Sun & Kezhong Zhang, 2025. "The Flaw in the Plan: Information Transparency and International Tax Avoidance Channels," Open Economies Review, Springer, vol. 36(4), pages 1193-1227, September.
    3. Yewei Wu & Bofu Zhang, 2023. "Inquiry Letters and Tax Aggressiveness," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(4), pages 37-65, July.
    4. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    5. Gresik, Thomas A. & Schindler, Dirk & Schjelderup, Guttorm, 2025. "Playing easy or playing hard to get: When and how to attract FDI," Journal of Economic Behavior & Organization, Elsevier, vol. 237(C).
    6. Javier Garcia-Bernardo & Petr Janský & Thomas Tørsløv, 2023. "Effective tax rates of multinational corporations: Country-level estimates," PLOS ONE, Public Library of Science, vol. 18(11), pages 1-19, November.
    7. Chen, Xuyang & Hindriks, Jean, 2023. "Multinational Taxation under Pressure: The Role of Tax Deductibility," LIDAM Discussion Papers CORE 2023013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Petr Janský, 2023. "Corporate Effective Tax Rates for Research and Policy," Public Finance Review, , vol. 51(2), pages 171-205, March.
    9. Clemens Fuest & Stefan Greil & Felix Hugger & Florian Neumeier, 2022. "Global Profit Shifting of Multinational Companies: Evidence from CbCR Micro Data," CESifo Working Paper Series 9757, CESifo.
    10. Bakke, Julia Tropina & Hopland, Arnt Ove & Møen, Jarle, 2019. "Profit shifting and the effect of stricter transfer pricing regulation on tax revenue," Discussion Papers 2019/11, Norwegian School of Economics, Department of Business and Management Science.
    11. Roland Beck & Antonio Coppola & Angus Lewis & Matteo Maggiori & Martin Schmitz & Jesse Schreger, 2024. "The geography of capital allocation in the euro area," IFC Bulletins chapters, in: Bank for International Settlements (ed.), External statistics in a fragmented and uncertain world, volume 62, Bank for International Settlements.
    12. Johannesen, Niels, 2022. "The global minimum tax," Journal of Public Economics, Elsevier, vol. 212(C).
    13. Sebastián Bustos & Dina Pomeranz & Juan Carlos Suárez Serrato & José Vila-Belda & Gabriel Zucman, 2022. "The Race Between Tax Enforcement and Tax Planning: Evidence From a Natural Experiment in Chile," NBER Working Papers 30114, National Bureau of Economic Research, Inc.
    14. Katarzyna Bilicka & Evgeniya Dubinina & Petr Janský, 2022. "Fiscal consequences of corporate tax avoidance," WIDER Working Paper Series wp-2022-97, World Institute for Development Economic Research (UNU-WIDER).
    15. Al-Karablieh, Yazan & Koumanakos, Evangelos & Stantcheva, Stefanie, 2021. "Clearing the bar: Improving tax compliance for small firms through target setting," Journal of International Economics, Elsevier, vol. 130(C).
    16. Chen, Xuyang, 2024. "The Global Minimum Tax, Investment Incentives and Asymmetric Tax Competition," MPRA Paper 121893, University Library of Munich, Germany.
    17. Vincent Vicard, 2023. "Profit Shifting, Returns on Foreign Direct Investments and Investment Income Imbalances," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 369-414, June.
    18. Katarzyna A. Bilicka & Michael P. Devereux & İrem Güçeri, 2024. "Tax Policy, Investment and Profit Shifting," NBER Working Papers 33132, National Bureau of Economic Research, Inc.
    19. Olbert, Marcel & Spengel, Christoph & Weck, Stefan, 2023. "Multinational firms in tax havens: Corporate motives, regulatory countermeasures, and recent statistics," ZEW Discussion Papers 23-036, ZEW - Leibniz Centre for European Economic Research.
    20. Sebastian Beer & Mr. Alexander D Klemm & Ms. Thornton Matheson, 2018. "Tax Spillovers from US Corporate Income Tax Reform," IMF Working Papers 2018/166, International Monetary Fund.

    More about this item

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dbp:wpaper:003. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Inga Chilashvili (email available below). General contact details of provider: https://edirc.repec.org/data/eutaxfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.