Working Paper: NBER ID: w30086
Authors: Javier Garciabernardo; Petr Jansk; Gabriel Zucman
Abstract: The 2017 Tax Cut and Jobs Act reduced the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.
Keywords: Tax Cuts and Jobs Act; profit shifting; US multinational companies
JEL Codes: F23; H25; H26; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax Cuts and Jobs Act (K34) | Reduced incentives for US firms to shift profits to tax havens (H26) |
| Tax Cuts and Jobs Act (K34) | Share of profits booked abroad by US multinationals fell by 35 percentage points (F23) |
| Share of profits booked abroad fell (D33) | Repatriation of intellectual property to the US (O34) |
| Large firms (L25) | Decrease in share of foreign earnings by over 20 percentage points (F29) |
| Changes in profit shifting behavior (H32) | Overall decline in foreign profit booking (F21) |
| Tax Cuts and Jobs Act (K34) | Stability of foreign profits booked in tax havens (F21) |