Multinationals’ Sales and Profit Shifting in Tax Havens

We show that U.S. multinationals record sales and the profit from these sales in tax havens, while their goods and services are physically sold in other countries. We propose a framework illustrating the strategy of sales shifting. Our results reveal the importance of tax havens which attract a disproportionate fraction of worldwide sales. Our quantification shows a large contribution of sales shifting to multinationals' profit shifting that amounts to $80bn in 2013. Our findings suggest that international corporate tax rules based on sales may not efficiently address profit shifting if the policy designs are unable to identify sales by destination.