Profit shifting of multinational enterprises: A refined FDI approach
| Author: | Bc. Lukáš Nepivoda |
|---|---|
| Year: | 2019 - summer |
| Leaders: | PhDr. Miroslav Palanský M.A., Ph.D. |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 59 |
| Awards and prizes: | |
| Link: | https://is.cuni.cz/webapps/zzp/detail/202875/ |
| Abstract: | Base erosion and profit shifting by multinational enterprises is an issue which has recently been getting increased attention from many researchers and other stakeholders. The main objective of this thesis is to quantify the scale of profit shifting and the resulting tax revenue losses incurred by individual governments. For this purpose, we exploit data on foreign direct investment from the International Monetary Fund’s database. We begin by testing our main hypothesis that there is a negative relationship between the rate of return on FDI and the share of investment originating from low-tax jurisdictions. Assuming that this relationship is negative due to profit shifting, we arrive at a global estimate of shifted profits in the amount of $611 billion in 2016. Resulting tax revenue losses reach almost $200 billion which represents 0.39% of countries’ GDP. In total, we deliver estimates for 46 individual countries of which the majority belongs to the high-income class. Our results suggest that the tax revenue losses of a number of high-income countries are higher than some of the existing studies have estimated. |
