Global evidence on profit shifting within firms and across time

Manthos D. Delis, Luc Laeven, Steven Ongena and Fotis Delis

No 3071, Working Paper Series from European Central Bank

Abstract: We provide estimates of profit shifting for over 2 million firm-year observations in 100 countries over the period 2009–2020. Employing nonparametric estimation techniques within a mainstay model of profit shifting, we examine how the profits of both parent and subsidiary firms within a multinational group respond to marginal changes in the composite tax indicator. The key advantage of this approach is that it yields firm-year estimates of profit shifting. Multinational firms engage in extensive profit shifting by maintaining affiliates in low-tax countries and zero-tax havens. Multinational groups with an ultimate tax-haven owner exhibit the largest profit response to tax incentives. Our new database opens important avenues for analyzing the sources and effects of profit shifting. JEL Classification: F23, H25, H26, H32, M41

Keywords: global sample; multinational enterprises; nonparametric estimation; profit shifting; tax arbitrage (search for similar items in EconPapers)
Date: 2025-07
Note: 261593
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253071

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