Impact of tax rate differences on profits of US multinationals
|Author:||Bc. Matej Kvorka|
|Year:||2021 - summer|
|Leaders:|| doc. Petr Janský Ph.D.
|Work type:|| Bachelors
|Awards and prizes:|
|Abstract:||Profit shifting has become a global issue over the last decades. Multinational
enterprises’ profit-maximizing strategies negatively impact government revenues.
In the model, we capture profit shifting incentives through international tax rate
differences, considering the extent of economic activities and profit shifting costs.
In this thesis, we exploit the country-by-country reporting data recently published
by the Organisation for Economic Co-operation and Development. We estimate
a semi-elasticity of reported profits with respect to the tax rate difference of 1.44.
We calculate that US-based multinational enterprises shift between 74 and 186.7
billion dollars out of the United States. Contrary to our expectations, we do not
find US-based multinational enterprises to be more sensitive to tax rate differences
compared to other countries covered in the dataset. Finally, we express the need
for the transformation of our tax variable to account for non-linearities