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Cross-jurisdictional income shifting and tax enforcement

Journal Contribution - Journal Article

Subtitle:evidence from public versus private multinationals
This paper examines the impact of tax enforcement and public listing status on income shifting by multinational corporations (MNCs). For a sample of over 8,000 subsidiaries that are majority-owned by 959 European MNCs over the period 19982009, we find strong evidence of income shifting from high to low tax countries and that income is shifted more out of high-tax countries when local tax enforcement is weak. In addition, we show that private MNCs exploit weak tax enforcement more to shift income out of the parent country compared to public MNCs. Combined, our results suggest that tax enforcement plays a crucial role in MNC income shifting decisions and that shifting is more aggressive when MNCs are less affected by nontax shifting costs as is the case in private MNCs.
Journal: Review of Accounting Studies
ISSN: 1380-6653
Volume: 20
Pages: 710 - 746
Publication year:2015
Keywords:Economics, business & management