Three Essays onProfit Shifting

International Taxation;Profit Shifting;Economics;Business and Economics;Social Sciences;Economics

Saunders-Scott, Molly J.Slemrod, Joel B. ;

University of Michigan

关键词: International Taxation;    Profit Shifting;    Economics;    Business and Economics;    Social Sciences;    Economics;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/108965/mojusaun_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

Multinational corporations often have affiliates located across many different countries.Differences in corporate tax rates across countries provide an incentive for these corporations to move profits from affiliates that face high tax rates to affiliates that face low tax rates.While the incentives for profit shifting have been studied in detail by the economics literature, the determinants of the cost of profit shifting have been ignored.The three chapters in this dissertation focus on the cost of profit shifting.The first chapter considers the effect of increases in transfer-pricing enforcement on the reported profits of affiliates of multinational corporations.Transfer pricing manipulation is a major method by which corporations shift profits.Recognizing this, governments have increasingly put in place regulations intended to make transfer pricing manipulation more costly. Transfer-pricing regulation, however, can have a number of effects: it can limit profit shifting, it can increase compliance costs, and it can change where operations are located.This chapter finds evidence that the last two effects dominate.When a country increases its transfer-pricing regulation, there is a reduction in the reported profits of local affiliates of multinationals.The second chapter shows that differences in enforcement policy across countries can result in an incentive for profit shifting that goes against the tax differential.In a theoretical framework, it is shown that, if a high-tax country has lax enforcement or focuses enforcement on deviations between reported profits and earned profits, then this can create an incentive for a corporation to shift profits from a medium-tax country to a high-tax country in order to facilitate shifting on to a low-tax country.Tax information exchange has also been focused on as a way to reduce tax avoidance.The third chapter considers the effect of bilateral tax information exchange agreements on the reported profits of local affiliates of multinational corporations.It finds evidence that as that share of higher-tax affiliates covered by information exchange increases, the reported profits of an affiliate decrease.There is no evidence, however, that the reported profits of an affiliate change as the share of lower-tax affiliates covered by information exchange increases.