Vincent Aussilloux, Jean-Charles Bricongne, Samuel Delpeuch, Margarita Lopez Forero, 21 September 2021

French multinational enterprises have been expanding their activity abroad, including for profit-shifting purposes. These tax planning activities may alter the measurement and our understanding of their real activity. This column uses French micro-data from 1997 to 2015 to show that firm-measured productivity declines in the years following multinationals’ establishment of tax havens. Had these new presences in tax havens not been established, the annual growth of French aggregate labour productivity would have been 0.06% higher, which is tantamount to 9.7% of the observed annual aggregate labour productivity growth. 

Romesh Vaitilingam, 06 July 2021

The G7 recently reached an agreement on the taxation of multinational corporations. The IGM Forum at Chicago Booth invited its panels of leading European and US economists to express their views on the challenges ahead. As this column reports, a strong majority (94% of the panelists) agrees that a global minimum corporate tax rate would limit the benefits of profit-shifting to low-tax jurisdictions without biasing where firms invest. But there is considerably more uncertainty among respondents about whether an international tax system with such a global minimum is achievable; and whether taxes based on where firms make their sales would be more efficient than taxes based on where their headquarters and production are located. 

Thomas Tørsløv, Ludvig Wier, Gabriel Zucman, 21 April 2020

Despite the legal frameworks and large amounts of lost tax revenue, profit-shifting practices persist around the world. This column argues that fiscal authorities of high-tax countries face an incentive problem in combatting profit shifting to tax havens. Enforcement efforts are focused on relocating profits booked in other high-tax countries rather than those in tax havens. This can ultimately result in lower global tax payments of multinational companies. The results call for a global corporate tax reform in order to save resources that currently go to wasteful and inconsequential tax enforcement.

Vincent Bouvatier, Gunther Capelle-Blancard, Anne-Laure Delatte, 11 September 2018

Tax havens are estimated to concentrate 8% of global private financial wealth, reducing annual global tax revenues by about $200 billion. This column uses new country-by-country regulatory data on the foreign commercial presence of EU banks and compares it against gravity model predictions to examine the contribution of EU banks to tax evasion. It finds that bank activity in tax havens is three times larger than what is predicted by the gravity model, and that British and German banks are particularly present in tax havens. 

Thomas Tørsløv, Ludvig Wier, Gabriel Zucman, 23 July 2018

Between 1985 and 2018, the global average statutory corporate tax rate fell by more than half. This column uses new macroeconomic data to argue that profit shifting is a key driver of this decline. Close to 40% of multinational profits were artificially shifted to tax havens in 2015, and this massive tax avoidance – and the failure to curb it – are in effect leading more and more countries to give up on taxing multinational companies. 

Kai Konrad, Tim Stolper, 22 November 2016

The reasons why a country would comply with international standards of transparency in the face of sizeable returns in the tax haven business are unclear. This column highlights fundamental coordination problems in the fight against offshore secrecy regimes and their implications for optimal policies, and explores whether the fight will be successful or not.

Anna Gumpert, James Hines, Monika Schnitzer, 05 October 2016

Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. This column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance does appear to be a motive, particularly for manufacturing firms. Policies that raise the costs of reallocating profits maybe be effective in attenuating firms’ use of tax havens.

Ronald Davies, Julien Martin, Mathieu Parenti, Farid Toubal, 05 January 2015

Allegations of tax-avoiding transfer pricing by multinational firms are common, but economic evidence is scarce. This column discusses detailed price data for intra-firm and arm’s length transactions that reveals tax-driven transfer pricing, and suggests that it may be reduced by focusing on a small number of large firms in a small number of tax havens. 

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