Organizational Capacity and Profit Shifting / Katarzyna A. Bilicka, Daniela Scur.

Format:

Book

Author/Creator:

Bilicka, Katarzyna A.

Contributor:

National Bureau of Economic Research.

Scur, Daniela.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29225.

NBER working paper series no. w29225

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

Good organizational capacity drives productivity and potential taxable profits, but may also enable multinationals (MNEs) to more efficiently re-allocate profits across tax jurisdictions, lowering actual taxable profits. We show that MNE subsidiaries with better organizational capacity report significantly lower profits and have a higher incidence of bunching around zero reported profitability in high-tax countries. This pattern is not present in low-tax countries. Further, responsiveness to corporate tax rate changes in terms of profit reporting is driven by firms with good organizational capacity. We show our results are consistent with profit-shifting behavior and rule out key alternative channels.

Notes:

Print version record

September 2021.