Multinationals’ Sales and Profit Shifting in Tax Havens

Farid Toubal and Sébastien Laffitte

No 16675, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that U.S. multinationals record sales and the profit from these sales in tax havens, while their goods and services are physically sold in other countries. We propose a framework illustrating the strategy of sales shifting. Our results reveal the importance of tax havens which attract a disproportionate fraction of worldwide sales. Our quantification shows a large contribution of sales shifting to multinationals’ profit shifting that amounts to $80bn in 2013. Our findings suggest that international corporate tax rules based on sales may not efficiently address profit shifting if the policy designs are unable to identify sales by destination.

Keywords: Multinational firms; International taxation; Tax avoidance; Transfer pricing; Tax havens; Profit shifting; Sales shifting (search for similar items in EconPapers)
JEL-codes: F23 H26 H73 (search for similar items in EconPapers)
Date: 2021-10
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