Quantifying International Tax Avoidance:A Review of the Academic Literature

Quantifying International Tax Avoidance:
A Review of the Academic Literature

Nadine Riedel
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.

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