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

Author

Listed:
  • Javier Garcia-Bernardo

    (Charles University, Utrecht University)

  • Petr Janský

    (Charles University)

  • Gabriel Zucman

    (Paris School of Economics, Berkeley)

Abstract

The 2017 Tax Cut and Jobs Act lowered 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. Between 2017 and 2020, the share of profits booked abroad declined by 1–5 percentage points, in part related to repatriations of intellectual property to the US. However, the share of foreign profits booked in tax havens remained stable at around 50%. While aggregated changes in profit allocation are small, a number of firms responded strongly.

Suggested Citation

  • Javier Garcia-Bernardo & Petr Janský & Gabriel Zucman, 2025. "Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?," Working Papers 042, EU Tax Observatory.
    • Handle: RePEc:dbp:wpaper:042
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    References listed on IDEAS

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    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. Blouin, Jennifer & Robinson, Leslie, 2025. "Accounting for the profits of multinational enterprises: Double counting and misattribution of foreign affiliate income," Journal of Public Economics, Elsevier, vol. 252(C).
    3. 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).
    4. Albertus, James F. & Glover, Brent & Levine, Oliver, 2025. "The real and financial effects of internal liquidity: Evidence from the Tax Cuts and Jobs Act," Journal of Financial Economics, Elsevier, vol. 166(C).
    5. Dhammika Dharmapala, 2024. "The consequences of the 2017 US international tax reform: a survey of the evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 1158-1178, August.
    6. Joana Andrade Vicente, . "Arguments for implementing formulary apportionment in the European Union," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    7. Nabavi Pardis & Nordström Martin, 2023. "The Impact Assessment of Implementing a Global Minimum Tax for MNEs in Sweden," Nordic Tax Journal, Paradigm, vol. 2023(1), pages 111-123, December.
    8. De Vito, Antonio & Hillmann, Lisa & Jacob, Martin & Vossebürger, Robert, 2025. "Do personal income taxes affect corporate tax-motivated profit shifting?," Journal of Accounting and Economics, Elsevier, vol. 79(2).
    9. Dyrda, Sebastian & Hong, Guangbin & Steinberg, Joseph B., 2024. "A macroeconomic perspective on taxing multinational enterprises," Journal of International Economics, Elsevier, vol. 152(C).
    10. Alice Chiocchetti & Manon François & Laure Heidmann & Giulia Aliprandi, 2025. "Shift or Share? Profit Shifting and Workers’ Profit-Sharing," Working Papers 039, EU Tax Observatory.
    11. Michael Overesch & Dirk Schindler & Georg Wamser, 2024. "Design and Consequences of CFC and GILTI Rules: A Review and Potential Lessons for the Global Minimum Tax," CESifo Working Paper Series 11018, CESifo.
    12. Lompo, Miaba Louise & Ouoba, Marie Madeleine, 2022. "How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers," MPRA Paper 114235, University Library of Munich, Germany.
    13. Eulaiwi, Baban & Alghamdi, Fatmah Saeed & Al-Hadi, Ahmed & Duong, Lien & Taylor, Grantley, 2024. "U.S. multinational corporations' income shifting incentives and share repurchases: Evidence across differential taxation systems," Global Finance Journal, Elsevier, vol. 60(C).
    14. Brun Lidia & Stoehlker Daniel & Pycroft Jonathan & Van't Riet Maarten, 2026. "A – Potentially Positive – Welfare Assessment of the Global Minimum Tax," JRC Working Papers on Taxation & Structural Reforms 2025-04-02, Joint Research Centre.
    15. 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.
    16. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    17. Christine L. Dobridge & Patrick Kennedy & Paul Landefeld & Jacob Mortenson, 2023. "The TCJA and Domestic Corporate Tax Rates," Finance and Economics Discussion Series 2023-078, Board of Governors of the Federal Reserve System (U.S.).
    18. 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, pages 171-206, National Bureau of Economic Research, Inc.
    19. Katarzyna Bilicka & Michael Devereux & Irem Güçeri, 2023. "Tax-Avoidance Networks and the Push for a “Historic” Global Tax Reform," Tax Policy and the Economy, University of Chicago Press, vol. 37(1), pages 57-108.
    20. Lompo, Miaba Louise & Ouoba, Marie Madeleine, 2022. "How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers," MPRA Paper 113410, University Library of Munich, Germany.
    21. Giulia Aliprandi & Gerrit von Zedlitz, 2023. "Benchmarking Country-by-Country Reports," Working Papers halshs-04103852, HAL.

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    Keywords

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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
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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