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Multinational Corporations and Tax Havens: Evidence from Country-by-Country Reporting

Author

Listed:
  • Javier Garcia-Bernardo

    (University of Amsterdam, Faculty of Social and Behavioural Sciences, Spui 21, 1012 WX Amsterdam, The Netherlands)

  • Petr Jansky

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)

  • Thomas Torslov

    (Faculty of Social Sciences, Oster Farimagsgade 5, DK-1353 Copenhagen K, Denmark)

Abstract

A growing body of economics literature shows that multinational corporations (MNCs) shift their profits to tax havens. We contribute to this evidence by comparing a range of available data sets focusing on US MNCs, including country-by-country reporting data which has been released in December 2018 for the first time. With each of the datasets, we analyse the effective tax rates that US MNCs face in each country and the amount of profits they report. Using country-by-country reporting data, we have been able to establish that lower effective corporate tax rates are associated with higher levels of reported profits when compared with different indicators of real economic activity. This corresponds to the notion that MNCs often shift profits to countries with low effective tax rates – without also shifting substantive economic activity. Consequently, we identify the most important tax havens for US MNCs as countries with both low effective tax rates and high profits misaligned with economic activity.

Suggested Citation

  • Javier Garcia-Bernardo & Petr Jansky & Thomas Torslov, 2019. "Multinational Corporations and Tax Havens: Evidence from Country-by-Country Reporting," Working Papers IES 2019/31, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2019.
    • Handle: RePEc:fau:wpaper:wp2019_31
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    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • 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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