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Profit Shifting, Employee Pay, and Inequalities: Evidence from US-Listed Companies

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  • Baptiste Souillard

Abstract

Corporate tax avoidance has regularly been accused of aggravating income inequalities. Yet, systematic evidence on this matter is still lacking. To fill this gap, the present paper explores the effect of profit shifting on employee pay among S&P 1500 companies. The study shows that its effect indeed varies across occupations. Chief executive officers and chief financial officers receive higher compensations when their firm starts operating in tax havens. Non-executive employees, if anything, see their wages fall in the meantime. Furthermore, the inequality-deepening impact of firm entry into tax havens is driven by companies that reward executives on an after-tax basis and more pronounced in intangible-intensive companies. These new findings enrich our understanding of the distributional consequences of profit shifting. They also cast light on the evolution of income inequalities, public opinion about globalization, and ongoing debates on international tax reforms.

Suggested Citation

  • Baptiste Souillard, 2022. "Profit Shifting, Employee Pay, and Inequalities: Evidence from US-Listed Companies," CESifo Working Paper Series 9720, CESifo.
    • Handle: RePEc:ces:ceswps:_9720
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    Cited by:

    1. Souillard, Baptiste, 2022. "Corporate tax cuts and firm employment: A match made in haven?," Economics Letters, Elsevier, vol. 219(C).

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    More about this item

    Keywords

    employee pay; multinational enterprises; profit shifting; tax havens; income inequalities;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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