Shift or Share? Profit Shifting and Workers’ Profit-Sharing

Alice Chiocchetti, Manon François, Laure Heidmann and Giulia Aliprandi
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Alice Chiocchetti: Paris School of Economics
Manon François: Stanford University
Laure Heidmann: CREST and INSEE
Giulia Aliprandi: Paris School of Economics and EU Tax Observatory

No 39, Working Papers from EU Tax Observatory

Abstract: This paper quantifies how profit shifting erodes workers’ earnings by reducing profit-sharing payouts in French multinational firms. We leverage newly available administrative microdata on the global activity of multinational firms linked to employer-employee data to build a credible counterfactual of profits and profit-sharing absent profit shifting. We estimate that large French multinationals shift 19% of their foreign profits annually to low-tax jurisdictions, resulting in €10.3 billion shifted out of France and €3.7 billion in lost tax revenues. We show that profit shifting reduces annual employees’ earnings by 2.6%. Low-income workers are disproportionately affected. The bottom 10% of workers lose 3.2% of wages, compared to 2.3% for top 10% earners. Changing the profit-sharing formula to account for global profitability, rather than subsidiary-level profitability, would increase wages by 4.1% for workers in profit-shifting subsidiaries.

Keywords: Multinational Firms; Profit shifting; Tax revenue; Incidence (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:dbp:wpaper:039

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