The Missing Profits of Nations / Thomas R. Tørsløv, Ludvig S. Wier, Gabriel Zucman.

Format:

Book

Author/Creator:

Tørsløv, Thomas R.

Contributor:

National Bureau of Economic Research.

Wier, Ludvig S.

Zucman, Gabriel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24701.

NBER working paper series no. w24701

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

By exploiting new macroeconomic data known as foreign affiliates statistics, we show that affiliates of foreign multinational firms are an order of magnitude more profitable than local firms in low-tax countries. By contrast, affiliates of foreign multinationals are less profitable than local firms in high-tax countries. Leveraging this differential profitability, we estimate that close to 40% of multinational profits are shifted to tax havens globally. We analyze how the location of corporate profits would change if all countries adopted the same effective corporate tax rate, keeping global profits and investment constant. Profits would increase by about 15% in high-tax European Union countries, 10% in the United States, while they would fall by 60% in today's tax havens. We provide a new international database of GDP, trade balances, and factor shares corrected for profit shifting, showing that the rise of the corporate capital share is significantly under-estimated in high-tax countries.

Notes:

Print version record

June 2018.