The Dominant Role of Large Firms in Profit Shifting

Ludvig Wier () and Hayley Erasmus
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Ludvig Wier: University of California
Hayley Erasmus: National Treasury of South Africa

IMF Economic Review, 2023, vol. 71, issue 3, No 8, 816 pages

Abstract: Abstract Globally, the largest 0.001 per cent of firms earn one-third of all corporate profits. Nonetheless, there is little understanding of how profit shifting differs across firm size. Using the universe of South African corporate tax returns and global financial accounts, we find that profit shifting is concentrated among a few very large firms and that previous micro studies underestimate profit shifting by failing to account for firm size. This aids to explain the notable gap between micro and macro estimates of profit shifting. We revisit OECD’s micro estimate and find that this may underestimate profit shifting by 40 per cent.

JEL-codes: H25 H26 H87 O23 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41308-022-00180-w

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