Working Paper: CEPR ID: DP2543
Authors: Eric J. Bartelsman; Roel M. W. J. Beetsma
Abstract: This paper presents evidence of profit shifting in response to differences in corporate tax rates for a large selection of OECD countries. In our estimates we control for the effects of tax rate changes on real activity. Our baseline estimates suggest that, on average, a unilateral increase in the corporate tax rate does not lead to an increase in corporate tax revenues owing to a more than offsetting decline in reported profits.
Keywords: Corporate tax rates; Profit shifting; Transfer pricing
JEL Codes: F20; H20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Corporate Tax Rate (H29) | Reported Profits (D33) |
| Corporate Tax Rate (H29) | Value Added to Labor Compensation Ratio (J39) |
| Profit Shifting (H22) | Reported Profits (D33) |
| Capital Structure Adjustments (G32) | Profit Shifting (H22) |
| Transfer Pricing Practices (L11) | Profit Shifting (H22) |
| Stricter Enforcement of Transfer Pricing Regulations (H26) | Profit Shifting (H22) |