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Tax Avoidance and the Complexity of Multinational Enterprises

Author

Listed:
  • Manon François

    (EU Tax - EU Tax Observatory, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Vincent Vicard

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

Abstract

Does the complexity of the ownership structure of multinational enterprises' (MNEs) enable tax avoidance? We characterize as complex an MNE's ownership structure in which the headquarter owns its subsidiaries through a chain of intermediaries and we build a measure defined as the mean number of layers between affiliates and the headquarter. We use firm-level cross-country data to show that affiliates belonging to more complex MNEs are more likely to report zero profit, which is consistent with complexity enabling tax avoidance by multinationals. Our results underline that only the more complex MNEs shift profits away from their high-tax affiliates, while MNEs with flat ownership structures do not display such pattern.

Suggested Citation

  • Manon François & Vincent Vicard, 2023. "Tax Avoidance and the Complexity of Multinational Enterprises," Working Papers halshs-04103793, HAL.
    • Handle: RePEc:hal:wpaper:halshs-04103793
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04103793v1
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    Cited by:

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    2. 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).
    3. Stefania Miricola & Armando Rungi & Gianluca Santoni, 2023. "Ownership Chains in Multinational Enterprises," Papers 2305.12857, arXiv.org, revised May 2025.
    4. Le, Manh-Duc & Zamarian, Marco, 2025. "Tax-avoidance profit shifting by multinational firms: evidence from Vietnam," Economic Systems, Elsevier, vol. 49(2).

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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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