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Estimating Bargaining-related Tax Advantages of Multinational Firms

Peter Egger (), Nora Strecker () and Benedikt Zoller-Rydzek ()

No 6979, CESifo Working Paper Series from CESifo

Abstract: Bargaining power may explain the tax differences between multinational and national enterprises beyond MNEs’ profit shifting. Larger firms (mostly MNEs) are more valuable for tax authorities for various reasons. In threatening relocation, larger firms extract greater deductions, resulting in a regressive ETR schedule and lower ETRs for size-related reasons. MNEs face lower relocation costs than NEs, which enhances their bargaining position. Using French firm-level data and entropy balancing, we find that the regressivity of the French tax schedule reduces MNEs’ ETRs by 2.52 percentage points (size effect), while their relocation threat leads to a 3.58 percentage point reduction.

Keywords: profit taxation; multinational firms; entropy balancing (search for similar items in EconPapers)
JEL-codes: C21 F23 H25 H26 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eur, nep-int and nep-pbe
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Journal Article: Estimating bargaining-related tax advantages of multinational firms (2020) Downloads
Working Paper: Estimating Bargaining-related Tax Advantages of Multinational Firms (2018) Downloads
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