Profit shifting and the effect of stricter transfer pricing regulation on tax revenue
Julia Tropina Bakke (),
Arnt Ove Hopland () and
Additional contact information
Julia Tropina Bakke: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Arnt Ove Hopland: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/arnt-ove-hopland/
No 2019/11, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science
Using a 20-year-long, population-wide panel with detailed firm and group level data from Norway, we study the profitability change in companies that shift from being domestic to being multinational as well as companies that shift from being multinational to being domestic. Profitability falls when domestic companies become multinational and increases when multinational companies become domestic. The average change in profitability is about 24 %, all else equal. We attribute our findings to the profit shifting opportunities that are available for multinational companies, and we display several patterns in the data that are consistent with this interpretation. We find that the extent of profit shifting decreases after the introduction of stricter transfer pricing regulations, and an increase in transfer pricing audits, starting in 2007/2008. Our best estimate of the total corporate tax revenue lost due to profit shifting is about 6 % in the last year of the sample, 2012. We estimate that the revenue loss would have been twice as large in absence of the new regulatory framework.
Keywords: Multinational companies; profit shifting; BEPS; Transfer pricing; Tax gap (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 (search for similar items in EconPapers)
Pages: 37 pages
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://hdl.handle.net/11250/2620294 Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhhfms:2019_011
Access Statistics for this paper
More papers in Discussion Papers from Norwegian School of Economics, Department of Business and Management Science NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Stein Fossen ().