American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Multinationals' Sales and Profit Shifting in Tax Havens
American Economic Journal: Economic Policy
vol. 14,
no. 4, November 2022
(pp. 371–96)
Abstract
We show that US multinationals record sales and the profits from these sales in tax havens while their goods and services are physically sold in other countries. We propose a framework illustrating the strategy of sales shifting. Our results reveal the importance of tax havens, which attract a disproportionate fraction of worldwide sales. Our quantification shows a large contribution of sales shifting to multinationals' profit shifting, which amounted to $80 billion in 2013. Our findings suggest that international corporate tax rules based on sales may not address profit shifting efficiently if the policy designs are unable to identify sales by destination.Citation
Laffitte, Sébastien, and Farid Toubal. 2022. "Multinationals' Sales and Profit Shifting in Tax Havens." American Economic Journal: Economic Policy 14 (4): 371–96. DOI: 10.1257/pol.20200203Additional Materials
JEL Classification
- F23 Multinational Firms; International Business
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- H87 International Fiscal Issues; International Public Goods
- L25 Firm Performance: Size, Diversification, and Scope