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Should profit shifting be prohibited? The importance of timing

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  • Robert Philipowski

    (Universität Bonn)

Abstract

Measures against profit shifting, such as transfer pricing or thin capitalization rules, impose compliance costs even on firms which do not shift their profits. It is therefore not at all clear whether and under which circumstances such measures are desirable. In this note we investigate the influence of the timing of decisions on this question. In a very general setting we show that prohibiting profit shifting is less desirable if tax havens act as Stackelberg followers than if they take their policy decisions simultaneously with normal countries.

Suggested Citation

  • Robert Philipowski, 2016. "Should profit shifting be prohibited? The importance of timing," Economics Bulletin, AccessEcon, vol. 36(4), pages 2365-2367.
    • Handle: RePEc:ebl:ecbull:eb-16-00668
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Profit shifting; Tax havens; Tax competition; Stackelberg equilibrium;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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