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.
Laffitte, Sébastien, and Farid Toubal.
"Multinationals' Sales and Profit Shifting in Tax Havens."
American Economic Journal: Economic Policy,
Multinational Firms; International Business
Business Taxes and Subsidies including sales and value-added (VAT)
Tax Evasion and Avoidance
International Fiscal Issues; International Public Goods
Firm Performance: Size, Diversification, and Scope