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Corporate tax reforms and tax-motivated profit shifting

  • This paper examines the sensitivity of profit shifting to the corporate tax rate difference between a subsidiary and its parent company. We exploit tax rate variation stemming from European tax reforms over the period 2003-2013 while accounting for tax base adjustments that might affect firms’ profit shifting response to tax rate changes. We find that affiliates’ profits are sensitive to tax rate changes. However, tax base broadening reforms mitigate the tax rate incentives for profit shifting and significantly reduce the semi-elasticity of profits with respect to corporate tax rates. Finally, we provide evidence of a downward trend in the tax sensitivity of profit shifting, suggesting that the spread of anti-avoidance regulation may have successfully constrained profit-shifting strategies.

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Metadaten
Author:Anna Alexander, Antonio De Vito, Martin Jacob
URN:urn:nbn:de:hbz:992-opus4-6476
URL:https://ssrn.com/abstract=2841246
Subtitle (English):evidence from the EU
Series (Serial Number):FAccT Center Working Paper Series (23/2016)
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Document Type:Working Paper
Language:English
Date of Publication (online):2018/06/09
Year of first Publication:2016
Release Date:2018/06/09
Tag:Europäische Union; Gewinnverlagerung; Internationales Steuerrecht; Multinationale Unternehmen; Steuerpolitik
European Community; International taxation; Multinational firms; Profit shifting; Tax policy
Page Number:31
Institutes:WHU Centers / WHU Financial Accounting & Tax Center (FAccT Center)
JEL-Classification:F International Economics / F2 International Factor Movements and International Business / F23 Multinational Firms; International Business
H Public Economics / H2 Taxation, Subsidies, and Revenue / H25 Business Taxes and Subsidies
H Public Economics / H2 Taxation, Subsidies, and Revenue / H26 Tax Evasion
Licence (German):Copyright for this publication