Corporate Taxes, Profit Shifting and the Location of Intangibles within Multinational Firms
Intangible assets are one major source of profit shifting opportunities due to a highly intransparent transfer pricing process. Our paper argues that multinational enterprises (MNEs) optimize their profit shifting strategy by locating shifting–relevant intangible property at affiliates with a low statutory corporate tax rate. Using panel data for European MNEs and controlling for unobserved time–constant heterogeneity between affiliates, we find that the lower a subsidiary’s tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment. This effect is statistically and economically significant, even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern.
|Date of creation:||Jun 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstr. 28, 80539 Munich, Germany|
Web page: http://www.vwl.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tenreyro, Silvana & Barro, Robert & Alesina, Alberto, 2002.
"Optimal Currency Areas,"
4553033, Harvard University Department of Economics.
- Alberto Alesina & Robert Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," Harvard Institute of Economic Research Working Papers 1958, Harvard - Institute of Economic Research.
- Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," NBER Working Papers 9072, National Bureau of Economic Research, Inc.
- Dischinger, Matthias, 2007. "Profit Shifting by Multinationals: Indirect Evidence from European Micro Data," Discussion Papers in Economics 2029, University of Munich, Department of Economics.
- Robert E. Hall, 2001.
"The Stock Market and Capital Accumulation,"
American Economic Review,
American Economic Association, vol. 91(5), pages 1185-1202, December.
- European Commission, 2006. "Taxation trends in the European Union: 2006 edition," Taxation trends 2006, Directorate General Taxation and Customs Union, European Commission.
- Grubert, Harry, 2003. "Intangible Income, Intercompany Transactions, Income Shifting, and the Choice of Location," National Tax Journal, National Tax Association, vol. 56(1), pages 221-42, March.
- Markusen, James R., 2002.
"Multinational Firms and the Theory of International Trade,"
8380, University Library of Munich, Germany.
- James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
- Huizinga, Harry & Laeven, Luc, 2008.
"International profit shifting within multinationals: A multi-country perspective,"
Journal of Public Economics,
Elsevier, vol. 92(5-6), pages 1164-1182, June.
- Harry Huizinga & Luc Laeven, 2006. "International profit shifting within multinationals: a multi-country perspective," European Economy - Economic Papers 2008 - 2015 260, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Plassmann, Florenz & Tideman, T Nicolaus, 2001. "Does the Right to Carry Concealed Handguns Deter Countable Crimes? Only a Count Analysis Can Say," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 771-98, October.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Alfons Weichenrieder, 2007.
"Profit Shifting in the EU: Evidence from Germany,"
CESifo Working Paper Series
2043, CESifo Group Munich.
- Edmans, Alex, 2011. "Does the stock market fully value intangibles? Employee satisfaction and equity prices," Journal of Financial Economics, Elsevier, vol. 101(3), pages 621-640, September.
- Harry Grubert & Joel Slemrod, 1998.
"The Effect Of Taxes On Investment And Income Shifting To Puerto Rico,"
The Review of Economics and Statistics,
MIT Press, vol. 80(3), pages 365-373, August.
- Harry Grubert & Joel Slemrod, 1994. "The Effect of Taxes on Investment and Income Shifting to Puerto Rico," NBER Working Papers 4869, National Bureau of Economic Research, Inc.
- Valeria Gattai, 2005. "Firm’s Intangible Assets and Multinational Activity: Joint-Venture Versus FDI," Working Papers 2005.122, Fondazione Eni Enrico Mattei.
- Hilary, Gilles & Lennox, Clive, 2005. "The credibility of self-regulation: Evidence from the accounting profession's peer review program," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 211-229, December.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
- Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:4450. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.