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Multinationals’ Sales and Profit Shifting in Tax Havens

Author

Listed:
  • Sébastien Laffitte

    (CEPS - Centre d'Economie de l'ENS Paris-Saclay - Université Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay)

  • Farid Toubal

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

We show that U.S. multinationals record sales and the profit from these sales in tax havens, while their goods and services are physically sold in other countries. We propose a framework illustrating the strategy of sales shifting. Our results reveal the importance of tax havens which attract a disproportionate fraction of worldwide sales. Our quantification shows a large contribution of sales shifting to multinationals' profit shifting that amounts to $80bn in 2013. Our findings suggest that international corporate tax rules based on sales may not efficiently address profit shifting if the policy designs are unable to identify sales by destination.

Suggested Citation

  • Sébastien Laffitte & Farid Toubal, 2022. "Multinationals’ Sales and Profit Shifting in Tax Havens," Post-Print hal-03960276, HAL.
    • Handle: RePEc:hal:journl:hal-03960276
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    Cited by:

    1. Sarah Godar & Giulia Aliprandi & Tommaso Faccio & Petr Janský & Katia Toledo Ruiz, 2024. "The long way to tax transparency: lessons from the early publishers of country-by-country reports," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 593-634, April.
    2. Tastan, Ipek & Qiu, Kangyu & Khushboo, Tazia & Goff, Leonard, 2023. "A replication analysis of Laffitte and Toubal (2022)," I4R Discussion Paper Series 37, The Institute for Replication (I4R).
    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. Stefania Miricola & Armando Rungi & Gianluca Santoni, 2025. "Ownership Chains in Multinational Enterprises," Working Papers 2025-05, CEPII research center.
    5. Valeria Merlo & Georg Wamser, 2024. "Profit-Shifting Elasticities, Channels, and the Role of Tax Havens: Evidence from Micro-Level Data," CESifo Working Paper Series 11045, CESifo.
    6. Alessandro Ferrari & S'ebastien Laffitte & Mathieu Parenti & Farid Toubal, 2022. "Profit Shifting and International Tax Reforms," Papers 2211.04388, arXiv.org, revised Jan 2025.
    7. 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.
    8. Bricongne, Jean-Charles & Delpeuch, Samuel & Lopez-Forero, Margarita, 2023. "Productivity slowdown and tax havens: Where is measured value creation?," Journal of International Economics, Elsevier, vol. 143(C).
    9. 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).
    10. Radek Šauer, 2022. "Corporate Taxation in Open Economies," CESifo Working Paper Series 9942, CESifo.
    11. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).

    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
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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