 How much profit shifting do European banks do?Serena Fatica and Wildmer Daniel Gregori Economic Modelling, 2020, vol. 90, issue C, 536-551 Abstract: This paper studies whether and to what extent the largest and systemically relevant European multinational banks engage in profit shifting to lower their tax burden. We exploit unique data on bank operations reported on a country-by-country basis since 2015 in compliance with European legislation. The dataset contains information on profits, turnover, taxes paid and employment of bank affiliates worldwide, including tax and regulatory havens. In our empirical model, profits shifting incentives are captured through a weighted average of international tax rate differences between all countries where the bank is active. We find that international tax differences trigger the geographical distribution of profits within multinational banks, and that low tax jurisdictions, notably tax havens, attract disproportionately high profits. Our results suggest that, overall, 21% of profits is shifted. Moreover, profits in tax havens are 51% higher than they would be without tax-motivated profit shifting, pointing to a significant reduction of tax bases in high-tax countries. Keywords: Multinational banks; Profit shifting; Corporate taxation; Tax havens; Tax burden; Tax base erosion (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:90:y:2020:i:c:p:536-551 DOI: 10.1016/j.econmod.2020.01.026 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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