Home or away? Profit shifting with territorial taxation

Dominika Langenmayr and Li Liu

Journal of Public Economics, 2023, vol. 217, issue C

Abstract: In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. The shifted profits originate largely in the UK headquarters and its domestic affiliates, not in other high-tax affiliates.

Keywords: Profit shifting; Territorial tax system; Multinational firms (search for similar items in EconPapers)
JEL-codes: F23 H25 H87 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272722001785
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Home or Away? Profit Shifting with Territorial Taxation (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:217:y:2023:i:c:s0047272722001785

DOI: 10.1016/j.jpubeco.2022.104776

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().