Profit Shifting and International Tax Reforms

Alessandro Ferrari, S\'ebastien Laffitte, Mathieu Parenti () and Farid Toubal

Papers from arXiv.org

Abstract: International taxation rules are outdated, allowing multinationals to shift profits to tax havens. This paper examines how tax reforms affect profit shifting and cross-country welfare. We propose a model that separates real economic profits from paper profits, introducing 'triangle identities' to estimate bilateral profit-shifting flows. Using macro- and firm-level data, paper profits' elasticity is three times that of the tax base. Global minimum tax reforms improve welfare by increasing public goods funding and reducing tax competition. We also identify optimal minimum rates under various taxing-right scenarios and demonstrate that unilateral destination-based-cash-flow-tax reforms' welfare effects depend highly on trade imbalances.

Date: 2022-11, Revised 2025-01
New Economics Papers: this item is included in nep-acc, nep-geo, nep-int and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://arxiv.org/pdf/2211.04388 Latest version (application/pdf)

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:arx:papers:2211.04388

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().