Where Do Multinationals Locate Profits: Evidence from Country-by-Country Reporting

Tomas Boukal ()
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Tomas Boukal: Institute of Economic Studies, Charles University, Prague, Czech Republic

No 2024/31, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Multinational enterprises are increasingly using offshore locations to pay lower taxes on their profits. This behavior has distortive effects on the global economy, as the concentration of multinational activities mirrors global tax patterns. In this paper, I exploit the OECD country-by-country reporting statistics to analyze the determinants behind the location of profits. I find that profit allocation is sensitive to both effective tax rates and geographical proximity, confirming the significance of these factors in MNEs´ tax planning strategies. Building on the work of Dharmapala and Hines (2009), this study also uncovers that MNEs are more likely to report profits to jurisdictions with superior governance quality, integrating both Global Governance Indicators and factors linked to financial secrecy. However, the findings indicate that tax haven jurisdictions exhibit a degree of reluctance when it comes to implementing recently introduced policies aimed at combating corruption and tax abuses.

Keywords: international taxation; tax havens; country-by-country reporting; gravity models; governance quality (search for similar items in EconPapers)
JEL-codes: F23 G15 G28 H26 H32 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2024-09, Revised 2024-09
New Economics Papers: this item is included in nep-geo, nep-ifn, nep-int, nep-pbe, nep-pub and nep-tra
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