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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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    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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