Publication detail

Tax haven investors and corporate profitability - Evidence of profit shifting by German affiliates of multinational firms

Author(s): Sarah Godar M.A.,
Type: Articles in journals with impact factor
Year: 2021
Number: 0
Published in: FinanzArchiv (forthcoming)
Publishing place:
Keywords: tax avoidance, multinational firms, tax revenue, tax havens
JEL codes:
Suggested Citation:
Grants: Berlin Equal Opportunity Program (BCP) Corporate profits of German multinational enterprises (GAUK Project No. 1142218)
Abstract: This paper uses confidential firm-level panel data to provide new estimates of corporate profit shifting by German affiliates of multinational corporations. The estimated semi-elasticity suggests that the profits of German affiliates are highly sensitive to foreign tax rate changes. The semi-elasticity is higher when at least one investor is located in a tax haven and not significant when a company has never had a tax haven investor. Using the Tax Attractiveness Index as an alternative operationalisation of the profit-shifting incentive yields similar but less robust results. The estimated effects are used to extrapolate aggregate revenue losses, which range between EUR 1.5 and 5.8 billion in 2016. The results suggest that ownership links to tax havens are an informative indicator of whether or not a company engages in international profit shifting.




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