University of Bochum
- 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, with results at the lower (upper) end suggesting that MNEs transfer less than 5% (30% or more) of their income earned at high-tax affiliates to lower-tax entities.
- The paper, however, also stresses that some care should be warranted when interpreting shifting estimates as they often rely on non-trivial assumptions.