Evidence for profit shifting with tax sensitive capital stocks

Loretz, Simon (2013) Evidence for profit shifting with tax sensitive capital stocks. In: Annual Congress 2013 of the Verein für Socialpolitik: ‘Competition Policy and Regulation in a Global Economic Order’, 04/09/2013-07/09/2013, Düsseldorf, Germany.

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Abstract

This paper contributes to the literature providing indirect evidence for profit shifting within multinational companies. In contrast to the previous studies we account for the tax responsiveness of the capital stock and analyse the impact of corporate taxes on both pre- and post-tax profitability. Evidence from our large panel dataset of European subsidiaries supports the profit shifting hypothesis. We find that a 10 percentage point decrease in the tax rate increases post-tax profitability by up to 1.1 percentage points. Further, our results suggest that financial profits and losses are particularly responsive to taxes, which indicates that a large part of profit shifting takes places via debt shifting.

Item Type: Conference or Workshop Item (Paper)
Keywords: corporate taxation
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 05 Nov 2013 17:36
Last Modified: 03 Nov 2016 11:54
URI: http://eureka.sbs.ox.ac.uk/id/eprint/4879

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