Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?

Javier Garcia-Bernardo, Petr Janský and Gabriel Zucman
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Javier Garcia-Bernardo: Charles University, Utrecht University
Petr Janský: Charles University
Gabriel Zucman: Paris School of Economics, Berkeley

No 42, Working Papers from EU Tax Observatory

Abstract: The 2017 Tax Cut and Jobs Act lowered the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. Between 2017 and 2020, the share of profits booked abroad declined by 1–5 percentage points, in part related to repatriations of intellectual property to the US. However, the share of foreign profits booked in tax havens remained stable at around 50%. While aggregated changes in profit allocation are small, a number of firms responded strongly.

Keywords: Multinational corporation; corporate taxation; profit shifting; effective tax rate; country-by-country reporting; Tax Cuts and Jobs Act (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 H32 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2025-12
New Economics Papers: this item is included in nep-iaf, nep-mac and nep-pub
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