Taxes, Profit Shifting, and the Real Activities of MNEs: Evidence from 159 Corporate Tax Notches
Date and time
February 03, 2022
12:00 - 13:00
This paper exploits exogenous variation in tax notches created by controlled foreign corporation (CFC) rules to better understand the profit-shifting behavior of multinationals. Using new data on CFC rules and bilateral parent-affiliate ownership data, we estimate a profit-shifting semi-elasticity of about 0.32. Furthermore, we provide evidence that the unilateral implementation of anti-tax-avoidance regulation at the parent location leads to profit relocations consistent with tax-minimizing behavior. We do not find any evidence that parent countries benefit from this regulation (in terms of repatriated tax base) or that parent firms bear the economic costs (real outcomes of parents remain unaffected).
Joint work with Valeria Merlo and Georg Wamser
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