The Role of Headquarters in Multinational Profit Shifting Strategies

Matthias Dischinger () and Nadine Riedel
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Matthias Dischinger: University of Munich

No 1003, Working Papers from Oxford University Centre for Business Taxation

Abstract: This paper stresses the special role of multinational headquarters in corporate profit shifting strategies. Using a large panel of European firms, we show that multinational enterprises (MNEs) are reluctant to shift profits away from their headquarters even if these are located in high-tax countries. Thus, shifting activities in response to corporate tax rate differentials between parents and subsidiaries are found to be significantly larger if the parent observes a lower corporate tax rate than its subsidiary and profit is thus shifted towards the headquarters firm. This result is in line with recent empirical evidence suggesting that MNEs bias the location of profits and highly profitable assets in favor of the headquarters location (for agency cost reasons among others).

Keywords: Multinational Firm; Profit Shifting; Headquarters Location (search for similar items in EconPapers)
JEL-codes: C33 H25 H26 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-acc, nep-bec, nep-ifn and nep-pbe
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Citations: View citations in EconPapers (8)

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