EconPapers    
Economics at your fingertips  
 

Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment

Petr Janský () and Miroslav Palansky

International Tax and Public Finance, 2019, vol. 26, issue 5, 1048-1103

Abstract: Abstract Governments’ revenues are lower when multinational enterprises avoid paying corporate income tax by shifting their profits to tax havens. In this paper, we ask which countries’ tax revenues are affected most by this tax avoidance and how much. To estimate the scale of profit shifting, we begin by observing that the higher the share of foreign direct investment from tax havens, the lower the reported rate of return on this investment. Similarly to the United Nations Conference on Trade and Development’s World Investment Report 2015, we argue that the reported rate of return is lower due to profit shifting. Unlike the report, however, we provide illustrative country-level estimates of profit shifting for as many countries as possible, including low-income ones, which enables us to study the distributional effects of international corporate tax avoidance. We compare estimated corporate tax revenue losses, relative to their GDP and tax revenues, of country groups classified by income per capita and we find that there are almost no statistically significant differences across these groups. Furthermore, we compare our results with four other recent studies that use different methodologies to estimate tax revenue losses due to profit shifting. In the first such comparison made, we find that most studies identify some differences across income groups, but the nature of these differences varies across the studies.

Keywords: Foreign direct investment; Corporate income tax; Tax avoidance; Base erosion; Profit shifting; Tax havens; Inequality (search for similar items in EconPapers)
JEL-codes: F21 F23 H25 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10797-019-09547-8 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment (2018) Downloads
Working Paper: Estimating the Scale of Profit Shifting and Tax Revenue Losses Related to Foreign Direct Investment (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:26:y:2019:i:5:d:10.1007_s10797-019-09547-8

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-12-03
Handle: RePEc:kap:itaxpf:v:26:y:2019:i:5:d:10.1007_s10797-019-09547-8