The Role of Headquarters in Multinational Profit Shifting Strategies

Dischinger, Matthias and Riedel, Nadine (2010) The Role of Headquarters in Multinational Profit Shifting Strategies. Centre for Business Taxation WP 10/03.

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Abstract

This paper stresses the special role of multinational headquarters in corporate profit shifting strategies. Using a large panel of European firms, we show that multinational enterprises (MNEs) are reluctant to shift profits away from their headquarters even if these are located in high-tax countries. Thus, shifting activities in response to corporate tax rate differentials between parents and subsidiaries are found to be significantly larger if the parent observes a lower corporate tax rate than its subsidiary and profit is thus shifted towards the headquarters firm. This result is in line with recent empirical evidence suggesting that MNEs bias the location of profits and highly profitable assets in favor of the headquarters location (for agency cost reasons among others).

Item Type: Other Working Paper
Keywords: multinational firm, profit shifting, headquarters location
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 25 Apr 2012 11:57
Last Modified: 15 Oct 2015 02:18
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3267

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