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International Profit-Shifting out of Developing Countries and the Role of Tax Havens

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  • Petr Janský
  • Alex Prats

Abstract

type="main" xml:id="dpr12113-abs-0001"> This article contributes to the debate on how tax avoidance and evasion can hamper development efforts by investigating the link between profit-shifting out of developing countries and tax havens. Analysis of more than 1500 multinational corporations (MNCs) operating in India shows that in 2010 those MNCs with links to tax havens reported lower profits and paid less in taxes per unit of asset than MNCs with no such links. This confirms the notion that when corporations have links to tax havens they enjoy higher incentives, because of the low tax rates, and opportunities to shift income because of the secrecy provisions tax havens offer.

Suggested Citation

  • Petr Janský & Alex Prats, 2015. "International Profit-Shifting out of Developing Countries and the Role of Tax Havens," Development Policy Review, Overseas Development Institute, vol. 33(3), pages 271-292, May.
    • Handle: RePEc:bla:devpol:v:33:y:2015:i:3:p:271-292
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    File URL: http://hdl.handle.net/10.1111/dpr.2015.33.issue-3
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    Citations

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    Cited by:

    1. Vít Jedlička, 2017. "International Tax Planning: Current State of Knowledge," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2017(4), pages 31-46.
    2. Karel Brychta & Aleksandra Sulik-Górecka, 2019. "Legal Regulation for Advance Pricing Agreements in the Czech Republic and Poland - a Comparative Case Study," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(1), pages 209-224.
    3. Kodjo Adandohoin & Jean-Francois Brun, 2021. "The Role of Income and Property Taxes in Tax Transition and the Mediating Effect of Financial Development," Post-Print hal-03470540, HAL.
    4. Kodjo Adandohoin & Jean-Francois Brun, 2020. "Are incomes and property taxes effective instruments for tax transition?," CERDI Working papers hal-03053683, HAL.
    5. Danuse Nerudova & Veronika Solilova & Marek Litzman & Petr Janský, 2020. "International tax planning within the structure of corporate entities owned by the shareholder‐individuals through Panama Papers destinations," Development Policy Review, Overseas Development Institute, vol. 38(1), pages 124-139, January.
    6. Kodjo Adandohoin & Jean-Francois Brun, 2020. "Are incomes and property taxes effective instruments for tax transition?," Working Papers hal-03053683, HAL.
    7. Petr Janský, 2015. "Indicators of Taxation of Multinational Enterprises in the Czech Republic [Ukazatele zdanění mezinárodních společností v České republice]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2015(4), pages 24-38.
    8. Petr Janský, 2023. "Corporate Effective Tax Rates for Research and Policy," Public Finance Review, , vol. 51(2), pages 171-205, March.
    9. Kirsten Martinus & Thomas Sigler & Iacopo Iacopini & Ben Derudder, 2019. "The role of tax havens and offshore financial centers in Asia-Pacific networks: evidence from firm-subsidiary connections," Asian Business & Management, Palgrave Macmillan, vol. 18(5), pages 389-411, November.
    10. Hodula, Martin, 2023. "Fintech credit, big tech credit and income inequality," Finance Research Letters, Elsevier, vol. 51(C).
    11. Samer Khouri & Lubos Elexa & Michal Istok & Andrea Rosova, 2019. "A Study from Slovakia on the Transfer of Slovak Companies to Tax Havens and Their Impact on the Sustainability of the Status of a Business Entity," Sustainability, MDPI, vol. 11(10), pages 1-18, May.
    12. Driffield, Nigel & Jones, Chris & Kim, Jae-Yeon & Temouri, Yama, 2021. "FDI motives and the use of tax havens: Evidence from South Korea," Journal of Business Research, Elsevier, vol. 135(C), pages 644-662.
    13. Caroline Schimanski, 2018. "Do multinational companies shift profits out of developing countries?: How data availability may hide the evidence," WIDER Working Paper Series wp-2018-52, World Institute for Development Economic Research (UNU-WIDER).
    14. Maxim Ananyev, 2019. "Political Economy of Cross-Border Income Shifting: A Protection Racket Approach," Melbourne Institute Working Paper Series wp2019n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    15. Abdullah Almutairi & Baban Eulaiwi & Robert Evans & Grantley Taylor, 2023. "Tax Haven Use and Related‐Party Transactions: Evidence from Australia," Australian Accounting Review, CPA Australia, vol. 33(4), pages 352-374, December.
    16. Dobranschi, Marian & Nerudová, Danuše & Solilová, Veronika & Litzman, Marek, 2023. "An alternative measure of profit shifting and corporate income tax losses," Journal of Multinational Financial Management, Elsevier, vol. 70.
    17. Ananyev, Maxim, 2022. "Political economy of cross-border income shifting: A protection racket approach," Journal of Comparative Economics, Elsevier, vol. 50(4), pages 1087-1102.

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