Profit Shifting in a Globalized World
AbstractThis paper briefly reviews the measurement of the magnitude of profit shifting by multinational firms. Highlighting differences between estimates using microeconomic and macroeconomic approaches, it sketches a conceptual framework that can help explain these divergent estimates. In particular, these approaches arguably differ in their conceptualization of the boundary between tax avoidance and behavioral responses to taxes. The paper also discusses the future of profit shifting, drawing on a data set that codes anti-avoidance measures undertaken by OECD countries over the period of 2000-2014. Governments have significantly strengthened these rules over this period, despite collective action problems that potentially inhibit their implementation.
CitationDharmapala, Dhammika. 2019. "Profit Shifting in a Globalized World." AEA Papers and Proceedings, 109: 488-92. DOI: 10.1257/pandp.20191043
- F23 Multinational Firms; International Business
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- H32 Fiscal Policies and Behavior of Economic Agents: Firm
- L25 Firm Performance: Size, Diversification, and Scope