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Profit shifting behaviour between sisters companies: the case of Czech Republic

Author

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  • Danuše Nerudová
  • Veronika Solilová
  • Marian Dobranschi
  • Marek Litzman

Abstract

The aim of this paper is to research the profit shifting behaviour within the same multinational group of companies. We investigate the sensitivity of pre-tax profit to tax differences between Czech subsidiaries and their sister companies placed in other European Union countries. The profit shifting behaviour is indirectly estimated by adopting Hines-Rice method. The objective of this research is to determine whether the reported pre-tax income is sensitive to the corporate income tax (CIT) differences. We expect an inversely related reaction of profit before taxation to tax differential. The degree of sensitivity should depend on the particular tax advantageous position of the Czech Republic relative to the other EU countries high corporate tax rates.

Suggested Citation

  • Danuše Nerudová & Veronika Solilová & Marian Dobranschi & Marek Litzman, 2019. "Profit shifting behaviour between sisters companies: the case of Czech Republic," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 12(3/4), pages 300-310.
    • Handle: RePEc:ids:ijtrgm:v:12:y:2019:i:3/4:p:300-310
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    Cited by:

    1. Petr Prochazka & Iveta Cerna, 2022. "Reinvestment and effective corporate income tax rates in V4 countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(3), pages 581-605, September.

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