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Cross-jurisdictional income shifting and tax enforcement: evidence from public versus private multinationals

Author

Listed:
  • Christof Beuselinck

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux])

  • Marc Deloof

    (Accounting and Finance - UA - University of Antwerp)

  • Ann Vanstraelen

Abstract

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 1998–2009, 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.

Suggested Citation

  • Christof Beuselinck & Marc Deloof & Ann Vanstraelen, 2014. "Cross-jurisdictional income shifting and tax enforcement: evidence from public versus private multinationals," Post-Print hal-01563059, HAL.
    • Handle: RePEc:hal:journl:hal-01563059
    DOI: 10.1007/s11142-014-9310-y
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    Citations

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    Cited by:

    1. Alex Augusto Timm Rathke, 2015. "Note on tax enforcement and transfer pricing manipulation," Papers 1506.08743, arXiv.org.
    2. Rathke, Alex A. T., 2015. "Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation," EconStor Conference Papers 129075, ZBW - Leibniz Information Centre for Economics.
    3. Hoppe, Thomas & Schanz, Deborah & Sturm, Susann & Sureth, Caren, 2019. "Measuring tax complexity across countries: A survey study on MNCs," arqus Discussion Papers in Quantitative Tax Research 245, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Hasan, Iftekhar & Kim, Incheol & Teng, Haimeng & Wu, Qiang, 2022. "The effect of foreign institutional ownership on corporate tax avoidance: International evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    5. Rathke, Alex Augusto Timm & Rezende, Amaury José, 2016. "Exploring the characteristics of transfer pricing systems across countries," MPRA Paper 70437, University Library of Munich, Germany.
    6. Alex Augusto Timm Rathke, 2015. "Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation," Papers 1508.03853, arXiv.org.
    7. repec:zbw:bofrdp:2016_026 is not listed on IDEAS
    8. Pier Luigi Marchini & Tatiana Mazza & Alice Medioli, 2020. "Corruption and sustainable development: The impact on income shifting in European international groups," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 717-730, March.
    9. Todtenhaupt, Maximilian & Voget, Johannes, 2018. "International Taxation and Productivity Effects of M&As," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181548, Verein für Socialpolitik / German Economic Association.
    10. Sebastian Beer & Ruud de Mooij & Li Liu, 2020. "International Corporate Tax Avoidance: A Review Of The Channels, Magnitudes, And Blind Spots," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 660-688, July.
    11. Rathke, Alex Augusto Timm & Rezende, Amaury José, 2016. "Exploring the characteristics of transfer pricing systems across countries," EconStor Preprints 130141, ZBW - Leibniz Information Centre for Economics.
    12. Saskia Kohlhase & Jochen Pierk, 2020. "The effect of a worldwide tax system on tax management of foreign subsidiaries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(8), pages 1312-1330, October.
    13. Blaufus, Kay & Schöndube, Jens Robert & Wielenberg, Stefan, 2020. "Strategic interactions between tax and statutory auditors and different information regimes: Implications for tax audit efficiency," arqus Discussion Papers in Quantitative Tax Research 249, arqus - Arbeitskreis Quantitative Steuerlehre.
    14. Rathke, Alex, 2015. "Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation," MPRA Paper 66133, University Library of Munich, Germany.
    15. Rathke, Alex Augusto Timm, 2015. "Note on tax enforcement and transfer pricing manipulation," MPRA Paper 65337, University Library of Munich, Germany.
    16. Todtenhaupt, Maximilian & Voget, Johannes, 2017. "International taxation and productivity effects of M&As," ZEW Discussion Papers 17-014, ZEW - Leibniz Centre for European Economic Research.

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