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Quantifying International Tax Avoidance: A Review of the Academic Literature

Author

Listed:
  • Riedel Nadine

    (Fak für Wirtschaftswissenschaft, Ruhr University Bochum, Bochum, Germany)

Abstract
This paper provides a brief review of the academic literature that assesses the quantitative importance of tax avoidance behaviour of multinational entities (MNEs) by means of income shifting from high-tax to low-tax affiliates. Existing studies unanimously report evidence in line with tax-motivated profit shifting (despite using different data sources and estimation strategies). In terms of shifting channels, there is evidence consistent with strategic mispricing of intra-firm trade, the location of valuable intellectual property at low-tax affiliates and debt-shifting activities. The quantitative estimates vary across approaches and studies though. The paper moreover stresses that some care should be warranted when interpreting profit shifting estimates as they often rely on non-trivial assumptions.

Suggested Citation

  • Riedel Nadine, 2018. "Quantifying International Tax Avoidance: A Review of the Academic Literature," Review of Economics, De Gruyter, vol. 69(2), pages 169-181, August.
    • Handle: RePEc:lus:reveco:v:69:y:2018:i:2:p:169-181:n:1
    DOI: 10.1515/roe-2018-0004
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    References listed on IDEAS

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    1. Jarle Møen & Dirk Schindler & Guttorm Schjelderup & Julia Tropina, 2011. "International Debt Shifting: Do Multinationals Shift Internal or External Debt?," Working Paper Series of the Department of Economics, University of Konstanz 2011-40, Department of Economics, University of Konstanz.
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    6. Altshuler, Rosanne & Grubert, Harry, 2003. "Repatriation taxes, repatriation strategies and multinational financial policy," Journal of Public Economics, Elsevier, vol. 87(1), pages 73-107, January.
    7. Grubert, Harry, 2003. "Intangible Income, Intercompany Transactions, Income Shifting, and the Choice of Location," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 221-242, March.
    8. Collins, Julie H. & Shackelford, Douglas A., 1997. "Global organizations and taxes: An analysis of the dividend, interest, royalty, and management fee payments between U.S. multinationals' foreign affiliates," Journal of Accounting and Economics, Elsevier, vol. 24(2), pages 151-173, December.
    9. Dharmapala, Dhammika & Riedel, Nadine, 2013. "Earnings shocks and tax-motivated income-shifting: Evidence from European multinationals," Journal of Public Economics, Elsevier, vol. 97(C), pages 95-107.
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    14. Dhammika Dharmapala, 2014. "What Do We Know about Base Erosion and Profit Shifting? A Review of the Empirical Literature," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 421-448, December.
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    16. Anca D. Cristea & Daniel X. Nguyen, 2016. "Transfer Pricing by Multinational Firms: New Evidence from Foreign Firm Ownerships," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 170-202, August.
    17. Dowd, Tim & Landefeld, Paul & Moore, Anne, 2017. "Profit shifting of U.S. multinationals," Journal of Public Economics, Elsevier, vol. 148(C), pages 1-13.
    18. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2006. "The demand for tax haven operations," Journal of Public Economics, Elsevier, vol. 90(3), pages 513-531, February.
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    Full references (including those not matched with items on IDEAS)

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    2. Bruno Casella & Baptiste Souillard, . "A new framework to assess the fiscal impact of a global minimum tax on FDI," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    3. Joana Garcia, 2022. "Multinationals and services imports from havens: when policies stand in the way of tax planning," Working Papers w202214, Banco de Portugal, Economics and Research Department.
    4. Ropponen, Olli, 2021. "Interest Limitation Rules and Business Cycles: Empirical Evidence," ETLA Working Papers 90, The Research Institute of the Finnish Economy.

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    More about this item

    Keywords

    Multinational firms; profit shifting; survey;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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