Could Country-by-Country Reporting Increase Profit Shifting?

Ruby Doeleman, Dominika Langenmayr and Dirk Schindler
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Ruby Doeleman: WU Vienna
Dominika Langenmayr: KU Eichstätt-Ingolstadt
Dirk Schindler: Erasmus University Rotterdam

No 26-027/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Since 2016, Country-by-Country reporting has provided tax authorities with detailed information about multinationals' worldwide activities. We model Country-by-Country reporting as increasing tax planning and tax audit costs for profit-shifting multinationals, where the latter costs depend on the share of profits in tax havens. Then, Country-by-Country reporting makes shifting profits from a high-tax country to a tax haven more attractive compared to shifting from a low-tax country. Thus, while total profits shifted to the haven decrease, profit shifting from high-tax affiliates may increase relative to the situation without Country-by-Country reporting. We confirm these changes in profit-shifting patterns using a difference-in-differences design.

Keywords: Country-by-Country-Reporting; Profit Shifting; Anti-Tax-Avoidance Rules (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 (search for similar items in EconPapers)
Date: 2026-06-03
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