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Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment

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  • Petr Janský
  • Miroslav Palanský

Abstract

Governments' revenues are lower when multinational enterprises avoid paying corporate income tax by shifting their profits to tax havens. In this paper, we ask which countries' tax revenues are affected most by this tax avoidance and how much. To estimate the scale of profit shifting, we start by observing that the higher the share of foreign direct investment from tax havens, the lower the reported rate of return on this investment.

Suggested Citation

  • Petr Janský & Miroslav Palanský, 2018. "Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment," WIDER Working Paper Series wp-2018-21, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2018-21
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    More about this item

    Keywords

    Foreign Direct Investment; Corporate income tax; Tax avoidance; Base erosion; Profit shifting; Inequality;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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