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Could Country-by-Country Reporting Increase Profit Shifting?

Author

Listed:
  • Ruby Doeleman

    (WU Vienna)

  • Dominika Langenmayr

    (KU Eichstätt-Ingolstadt)

  • Dirk Schindler

    (Erasmus University Rotterdam)

Abstract

Since 2016, Country-by-Country reporting has provided tax authorities with detailed information about multinationals' worldwide activities. We model Country-by-Country reporting as increasing tax planning and tax audit costs for profit-shifting multinationals, where the latter costs depend on the share of profits in tax havens. Then, Country-by-Country reporting makes shifting profits from a high-tax country to a tax haven more attractive compared to shifting from a low-tax country. Thus, while total profits shifted to the haven decrease, profit shifting from high-tax affiliates may increase relative to the situation without Country-by-Country reporting. We confirm these changes in profit-shifting patterns using a difference-in-differences design.

Suggested Citation

  • Ruby Doeleman & Dominika Langenmayr & Dirk Schindler, 2026. "Could Country-by-Country Reporting Increase Profit Shifting?," Tinbergen Institute Discussion Papers 26-027/VI, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20260027
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    References listed on IDEAS

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    1. Peralta, Susana & Wauthy, Xavier & van Ypersele, Tanguy, 2006. "Should countries control international profit shifting?," Journal of International Economics, Elsevier, vol. 68(1), pages 24-37, January.
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    5. Preetika Joshi, 2020. "Does Private Country‐by‐Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from BEPS Action Item 13," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 58(2), pages 333-381, May.
    6. Katarzyna Anna Bilicka, 2019. "Comparing UK Tax Returns of Foreign Multinationals to Matched Domestic Firms," American Economic Review, American Economic Association, vol. 109(8), pages 2921-2953, August.
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    2. Makoto Hasegawa & Takafumi Kawakubo & Takafumi Suzuki & Masayoshi Hayashi, 2026. "Tax-Motivated Transfer Pricing and Country-by-Country Reporting: Evidence from Japanese Customs Data," CIRJE F-Series CIRJE-F-1266, CIRJE, Faculty of Economics, University of Tokyo.
    3. Gabanatlhong, Bathusi, 2025. "Market reaction to private Country-by-Country Reporting," Economic Modelling, Elsevier, vol. 152(C).
    4. Matěj Bajgar & Petr Janský & Tijmen Tuinsma, 2025. "Tax Compliance of Multinationals and Industry Concentration in the European Union," Working Papers 038, EU Tax Observatory.

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    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

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