EconPapers    
Economics at your fingertips  
 

Turning on the Light: A New Assessment of Measurement Error in International Tax Data

Rosanne Altshuler, Lysle Boller and Juan Carlos Suárez Serrato

Tax Policy and the Economy, 2025, vol. 39, issue 1, 83 - 116

Abstract: A central issue in international taxation is the extent to which multinational corporations shift profits to low-tax jurisdictions. Policy analysis is obscured by difficulties in quantifying foreign earnings using existing data sets, which can be affected by measurement error. This paper sheds new light on this issue by examining a key source of measurement error in administrative international tax data: aggregation error that leads to double counting of foreign income and distortions in foreign tax rate calculations. We link data from tax filings and public disclosures to construct a firm-level proxy that uses “book-tax” differences to quantify the extent to which commonly used aggregation techniques may result in double counting. A comparison of book and tax data allows us to proxy for levels of aggregation error in tax data and reveals an increasing trend over time consistent with larger measurement error. We show that applying a simple correction significantly harmonizes measures of foreign income and tax rates across firms’ book and tax filings and resolves a systematic relationship between book-tax differences and the size of multinational corporations’ foreign affiliate networks. Finally, we reexamine estimates from prior literature after correcting for aggregation error and find that their conclusions are generally robust to this correction.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/734962 (application/pdf)
http://dx.doi.org/10.1086/734962 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
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:ucp:tpolec:doi:10.1086/734962

Access Statistics for this article

More articles in Tax Policy and the Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2025-05-23
Handle: RePEc:ucp:tpolec:doi:10.1086/734962