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Profit Shifting of Multinational Corporations Worldwide

Author

Listed:
  • Javier Garcia-Bernardo

    (Tax Justice Network, CORPTAX, Charles University in Prague)

  • Petr Jansky

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

Abstract

We exploit the new multinational corporations´ country-by-country reporting data with unparalleled country coverage to study profit shifting to tax havens. We show that a logarithmic function is preferable to linear and quadratic ones for modelling the extremely non-linear relationship between profits and tax rates. Using this methodology, we reveal that multinational corporations shifted US$1 trillion of profits in 2016 and that those headquartered in the United States and China did so most aggressively. We establish that the Cayman Islands is the largest tax haven, whereas countries with lower incomes tend to lose more tax revenue relative to total tax revenues.

Suggested Citation

  • Javier Garcia-Bernardo & Petr Jansky, 2021. "Profit Shifting of Multinational Corporations Worldwide," Working Papers IES 2021/14, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies.
    • Handle: RePEc:fau:wpaper:wp2021_14
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6432
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    Cited by:

    1. Demetrio Guzzardi & Elisa Palagi & Tommaso Faccio & Andrea Roventini, 2023. "In search of lost time: An ensemble of policies to restore fiscal progressivity and address the climate challenge," LEM Papers Series 2023/28, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Henk L. M. Kox, 2025. "Repairing a Historical Mistake in Bilateral FDI Statistics: A New Dataset Covering 2001–2022," Review of International Economics, Wiley Blackwell, vol. 33(5), pages 1093-1114, November.
    3. Alessandro Ferrari & Sébastien Laffitte & Mathieu Parenti & Farid Toubal, 2022. "Profit Shifting Frictions and the Geography of Multinational Activity," Working Papers halshs-04103710, HAL.
    4. Alessandro Ferrari & S'ebastien Laffitte & Mathieu Parenti & Farid Toubal, 2022. "Profit Shifting and International Tax Reforms," Papers 2211.04388, arXiv.org, revised Jan 2025.
    5. Chen, Xuyang & Sun, Rui, 2025. "The Global Minimum Tax, Investment Incentives and Asymmetric Tax Competition," MPRA Paper 126538, University Library of Munich, Germany.
    6. Mona Barake, 2023. "Tax Planning by European Banks," Working Papers halshs-03925346, HAL.
    7. Petr Janský, 2023. "Corporate Effective Tax Rates for Research and Policy," Public Finance Review, , vol. 51(2), pages 171-205, March.
    8. Kox, Henk L.M., 2024. "Towards time-consistent bilateral FDI statistics: A new dataset covering 2001-2022," MPRA Paper 122883, University Library of Munich, Germany.
    9. Laudage Teles, Sabine & Riedel, Nadine & Strohmaier, Kristina, 2024. "On the effects of anti-profit shifting regulations: A developing country perspective," Journal of Public Economics, Elsevier, vol. 235(C).
    10. Javier Garcia-Bernardo & Petr Janský & Thomas Tørsløv, 2022. "Decomposing Multinational Corporations’ Declining Effective Tax Rates," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(2), pages 338-381, June.
    11. Johannesen, Niels, 2022. "The global minimum tax," Journal of Public Economics, Elsevier, vol. 212(C).
    12. 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).
    13. Liu Yang & Yaozhong Wang & Baichuan Peng, 2024. "Dynamic Mechanisms of R&D Innovation in Chinese Multinational Corporations: The Impact of Government Support, Market Competition and Entrepreneurial Spirit," Sustainability, MDPI, vol. 16(22), pages 1-25, November.
    14. Guttorm Schjelderup & Frank Stähler, 2024. "The economics of the global minimum tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 935-952, August.
    15. Bruno Casella & Baptiste Souillard, . "A new framework to assess the fiscal impact of a global minimum tax on FDI," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    16. Andreas Haufler & Hirofumi Okoshi & Dirk Schindler, 2025. "Will the Global Minimum Tax Hurt Developing Countries?," CESifo Working Paper Series 12329, CESifo.
    17. Tomáš Boukal & Petr Janský & Miroslav Palanský, 2025. "Global Minimum Tax and Profit Shifting," Working Papers 025, EU Tax Observatory.
    18. Souillard, Baptiste, 2022. "Intra-industry spillovers of profit shifting and investments in tax havens," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 581-599.

    More about this item

    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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