September 17, 2022
Cross-border profit shifting by multinational corporations (MNCs) gradually declines after 2011, consistent with the BEPS initiative and the emergence of more stringent policies to fight it. However, this does not apply for firms across industries with the highest intangibles ratios, most particularly in the education, financial, and information and communications technology sectors. Here, profit shifting is still increasing, and BEPS measures struggle to find traction. Amazon is a prime example how to shift profits and avoid taxes within Europe. Maybe not a good example, considering the hype of investors on ESG criteria and good citizenship (read here for example).
There are various factors influencing profit shifting activity, including corporate events (M&A), corporate tax increases, and quality of political and governmental institutions.
But above all, the nature of intangible assets plays a major role in profit shifting activities. Trademark intensive MNCs engage in considerably more profit shifting than patent/technology intensive firms.
These are the top-level findings of a global profit-shifting database with subsidiary–year measures of profit shifting across a maximum of 95 countries for the period 2009 to 2017. See Delis, Delis, Laeven, Ongena 2022; Valle Ruiz, Voget 2022.
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