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Firms, Trade and Profit Shifting: Evidence from Aggregate Data

Sébastien Laffitte () and Farid Toubal

No 7171, CESifo Working Paper Series from CESifo Group Munich

Abstract: Using aggregate data on U.S. multinational firms’ activities, we document the impact of tax havens on the organization and trade of multinational firms. Conventional wisdom says that MNEs set up foreign sales platforms close to large markets to benefit from the proximity to consumers. We show, both theoretically and empirically, that the tax environment plays an important role in explaining the location of the foreign sales platforms. We document that foreign sales platforms in tax havens fuel profit shifting especially in services industries. We shed lights on the attractiveness of different tax havens for distinctive sectoral activities. The back-of-the-envelope computation shows that profit shifting by foreign sales platforms in tax haven amounts to $83bn in 2013.

Keywords: foreign platforms; tax havens; profit shifting; firms’ organization (search for similar items in EconPapers)
JEL-codes: F23 H26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2018
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