Corporate Profit Misalignment: Evidence from German Headquarter Companies and Their Foreign Affiliates

Petr Janský and Sarah Godar

No 2020/37, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Despite numerous data challenges, economists have established that the multinational corporations´ reported profits are not well aligned with their economic activity across countries. However, uncertainties remain about the extent and patterns of this misalignment. We fill in this gap for German-based multinational corporations and their foreign affiliates. We use the data collected by the Deutsche Bundesbank, which include confidential data on foreign direct investments and a combination of confidential and publicly available balance sheet data. We find that the world´s tax havens attract a considerably higher share of German multinational corporations´ profit than economic activity, while in Eastern European countries, most developing countries and some big European countries reported profits are much lower than economic activity would suggest. We also find that the most important tax haven is the Netherlands, followed by other EU tax havens of Cyprus, Ireland, Luxembourg and Malta.

Keywords: multinational corporations; profit misalignment; tax havens; Germany (search for similar items in EconPapers)
JEL-codes: F21 F23 H25 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-09, Revised 2020-09
New Economics Papers: this item is included in nep-eur
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Citations: View citations in EconPapers (1)

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Journal Article: Corporate profit misalignment: evidence from German headquarter companies and their foreign affiliates (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2020_37

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