Using a firm-level dataset of Danish exports between 1999-2006, we find robust evidence for profit shifting by multinational corporations. Our triple difference estimations exploit the response of export unit values to acquisitions of foreign affiliates and to changes in statutory corporate tax rates. This identification strategy corrects for a downward bias resulting from firms adjusting arm's length prices to obscure transfer price manipulations. We find that Danish multinationals reduce the unit values of their exports to low tax countries between 5.7 to 9.1 percent. This difference corresponds to a tax revenue loss of 3.24 percent of Danish multinationals' tax returns.
Cristea, Anca D., and Daniel X. Nguyen.
"Transfer Pricing by Multinational Firms: New Evidence from Foreign Firm Ownerships."
American Economic Journal: Economic Policy,
Firm Behavior: Theory
Firm Behavior: Empirical Analysis
Empirical Studies of Trade
Multinational Firms; International Business
Business Taxes and Subsidies including sales and value-added (VAT)
Fiscal Policies and Behavior of Economic Agents: Firm