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Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?

Author

Listed:
  • Javier Garcia-Bernardo
  • Petr Janský
  • Gabriel Zucman

Abstract

The 2017 Tax Cut and Jobs Act reduced the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.

Suggested Citation

  • Javier Garcia-Bernardo & Petr Janský & Gabriel Zucman, 2022. "Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?," NBER Working Papers 30086, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30086
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    Cited by:

    1. Katarzyna Bilicka & Michael Devereux & Irem Güçeri, 2023. "Tax-Avoidance Networks and the Push for a “Historic” Global Tax Reform," Tax Policy and the Economy, University of Chicago Press, vol. 37(1), pages 57-108.
    2. Lompo, Miaba Louise & Ouoba, Marie Madeleine, 2022. "How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers," MPRA Paper 113410, University Library of Munich, Germany.
    3. Dhammika Dharmapala, 2023. "The Consequences of the 2017 US International Tax Reform: A Survey of the Evidence," CESifo Working Paper Series 10802, CESifo.
    4. Lompo, Miaba Louise & Ouoba, Marie Madeleine, 2022. "How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers," MPRA Paper 114235, University Library of Munich, Germany.
    5. Christine L. Dobridge & Patrick Kennedy & Paul Landefeld & Jacob Mortenson, 2023. "The TCJA and Domestic Corporate Tax Rates," Finance and Economics Discussion Series 2023-078, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    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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