Multinationals’ Profit Response to Tax Differentials: Effect Size and Shifting Channels


Heckemeyer, Jost H. ; Overesch, Michael


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URL: https://ub-madoc.bib.uni-mannheim.de/34049
URN: urn:nbn:de:bsz:180-madoc-340498
Document Type: Working paper
Year of publication: 2013
The title of a journal, publication series: ZEW Discussion Papers
Volume: 13-045
Place of publication: Mannheim
Publication language: English
Institution: Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel)
MADOC publication series: Veröffentlichungen des ZEW (Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H25 , H26 , H32,
Keywords (English): Profit Shifting , Multinational Firm , Corporate Income Tax , Meta-Analysis.
Abstract: This paper provides a quantitative review of the empirical literature on profit-shifting behavior of multinational firms. We synthesize the evidence from 25 studies and find a substantial response of profit measures to international tax rate differentials. Accounting for misspecification biases by means of meta-regressions, we predict a tax semi-elasticity of subsidiary pre-tax profits of about 0.8. Moreover, we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel. Our results suggest that transfer pricing and licensing are the dominant profit-shifting channel.

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