Multinational corporations and tax havens: evidence from country-by-country reporting

A Correction to this article was published on 16 March 2021

This article has been updated

Abstract

A growing body of economics literature shows that multinational corporations (MNCs) shift their profits to tax havens. We contribute to this evidence by comparing a range of available data sets focusing on US MNCs, including country-by-country reporting data, a full sample of which has been released in December 2019 for the first time. With each of the data sets, we analyse the effective tax rates that US MNCs face in each country and the amount of profits they report. Using country-by-country reporting data, we have been able to establish that lower effective corporate tax rates are associated with higher levels of reported profits when compared with different indicators of real economic activity. This corresponds to the notion that MNCs often shift profits to countries with low effective tax rates—without also shifting substantive economic activity. Consequently, we identify the most important tax havens for US MNCs as countries with both low effective tax rates and high profits misaligned with economic activity.

This is a preview of subscription content, access via your institution.

Fig. 1

source overlaps. Source: Authors. Note: This is an illustrative diagram only. For representation purposes, the distributions shown are less skewed than the empirical distributions

Fig. 2

Source: Authors on the basis of various data sets. Notes: IRS data on companies with positives profit (CBCR*), IRS data on all companies (CBCR), IRS data on all CFCs with positive profits (CFC*), BEA data (BEA), BEA data without income cost adjustment (BEA 2), Eurostat data and Orbis data on companies with positive profits (Orbis*). The correlation is visualized for the five indicators analysed: a employees, b turnover, c tangible assets, (d) profits, and e taxes accrued

Fig. 3

Source: Authors on the basis of various data sets. Notes: a Correlation between IRS data on companies with positives profits (CBCR*), IRS data on all companies (CBCR), IRS data on all CFCs with positive profits (CFC*), BEA data (BEA), BEA data without income cost adjustment (BEA 2), Orbis data on companies with positive profits (Orbis*), tax returns data from IRS (Dowd et al.) and statutory corporate income tax (CIT) rates. b ETR by region. The tax rate is unweighted for all but Dowd et al. and CIT, since data on profits and taxes by region is unavailable for those data sets

Fig. 4

Source: Authors on the basis of the IRS CBCR, BEA and Orbis data. Notes: a Negative misalignment. b Positive misalignment. The misalignment profits are calculated using the CCCTB formula, where the location of assets, revenue, employees and wages determines the expected location of the profits. The databases used were: IRS data on companies with positive profits (CBCR*), IRS data on all companies (CBCR), IRS data on all CFCs with positive profits (CFC*), BEA data (BEA), BEA data without income cost adjustment (BEA 2), Orbis data on companies with positive profits (Orbis*). The location of the accumulated earnings (divided by 10) is marked in brown (CBCR* (acc. Earn.)

Fig. 5

Source: Authors on the basis of the IRS CBCR data. Notes: a Relationship between the ETR and profit misalignment (measured as profits in excess of expected profits). Note that countries with the highest positive misalignment tend to have lower ETRs. b Relationship between ETR and the probability of positive misalignment. c Relationship between CIT and the probability of positive misalignment for countries with at least $100 million absolute misalignment. Line indicates the modelled logistic regression and shaded area indicates 95% confidence intervals calculated from 1000 bootstrap samples. Countries in b, c have been slightly moved vertically to improve legibility. The confidence intervals for the coefficient of ETR/CIT are b [− 0.67, − 0.13] and c [− 0.19, − 0.006]

Change history

Notes

  1. 1.

    An illuminating case study is Starbucks, which was selected in 2013 by the European Commission as one of the first state aid cases resulting from an advanced pricing agreement; subsequently, in 2019 the General Court of the European Union’s Court of Justice found that Starbucks’ transfer pricing analysis was reasonable based on Dutch law and OECD Transfer Pricing Guidelines in place at the time of the negotiation of the advanced pricing agreement (Byrnes 2019).

  2. 2.

    Our dependent variable (misalignment) contains extreme values, both positive and negative. We use the cubic root of the misalignment to ensure that the residuals are approximately normally distributed, while allowing both positive and negative values.

References

  1. Bernard, A. B., Jensen, J. B., & Schott, P. K. (2006). Transfer pricing by U.S.-based multinational firms (working paper no. 12493). National Bureau of Economic Research. https://doi.org/10.3386/w12493

  2. Bilicka, K. A. (2019). Comparing UK tax returns of foreign multinationals to matched domestic firms. American Economic Review, 109(8), 2921–2953. https://doi.org/10.1257/aer.20180496

    Article  Google Scholar 

  3. Blonigen, B. A., Oldenski, L., & Sly, N. (2014). The differential effects of bilateral tax treaties. American Economic Journal: Economic Policy, 6(2), 1–18. https://doi.org/10.1257/pol.6.2.1

    Article  Google Scholar 

  4. Blouin, J., & Robinson, L. A. (2020). Double counting accounting: How much profit of multinational enterprises is really in tax havens? (SSRN Scholarly paper ID 3491451). Social science research network. https://papers.ssrn.com/abstract=3491451. Accessed 28 September 2020.

  5. Bosworth, B., Collins, S. M., & Chodorow-Reich, G. (2007). Returns on FDI: Does the US really do better? Cambridge: National Bureau of Economic Research.

    Book  Google Scholar 

  6. Bouvatier, V., Capelle-Blancard, G., & Delatte, A.-L. (2017). Banks in tax havens: First evidence based on country-by-country reporting. CEPII workking paper. https://ideas.repec.org/p/cpr/ceprdp/12222.html. Accessed 28 September 2020.

  7. Byrnes, W. (2019). Boiling Starbucks’ roasting down to the essence of its residual (SSRN scholarly paper ID 3464990). Social Science Research Network. https://doi.org/10.2139/ssrn.3464990

    Article  Google Scholar 

  8. Clausing, K. A. (2003). Tax-motivated transfer pricing and US intrafirm trade prices. Journal of Public Economics, 87(9–10), 2207–2223. https://doi.org/10.1016/S0047-2727(02)00015-4

    Article  Google Scholar 

  9. Clausing, K. A. (2009). Multinational firm tax avoidance and tax policy. National Tax Journal, 62(4), 703–725.

    Article  Google Scholar 

  10. Clausing, K. A. (2016). The effect of profit shifting on the corporate tax base in the United States and beyond. National Tax Journal, 69(4), 905–934. https://doi.org/10.17310/ntj.2016.4.09

    Article  Google Scholar 

  11. Clausing, K. A. (2020). Profit shifting before and after the tax cuts and jobs act (SSRN scholarly paper ID 3274827). Social Science Research Network. https://papers.ssrn.com/abstract=3274827. Accessed 28 September 2020.

  12. Cobham, A., Faccio, T., & FitzGerald, V. (2019). Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals.

  13. Cobham, A., & Janský, P. (2018). Global distribution of revenue loss from corporate tax avoidance: Re-estimation and country results. Journal of International Development, 30(2), 206–232. https://doi.org/10.1002/jid.3348

    Article  Google Scholar 

  14. Cobham, A., & Janský, P. (2019). Measuring misalignment: The location of US multinationals’ economic activity versus the location of their profits. Development Policy Review. https://doi.org/10.1111/dpr.12315

    Article  Google Scholar 

  15. Cobham, A., Janský, P., & Meinzer, M. (2018). A half-century of resistance to corporate disclosure. Transnational Corporations, 25(3), 1–26.

    Article  Google Scholar 

  16. Cobham, A., & Loretz, S. (2014). International distribution of the corporate tax base: Implications of different apportionment factors under unitary taxation (ICTD working paper 27, pp. 1–38). International Centre for Tax and Development. ictd.ac/sites/default/files/ICTD%20WP27.pdf

  17. Congressional Budget Office. (2017). International comparisons of corporate income tax rates. https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52419-internationaltaxratecomp.pdf

  18. De Mooij, R., Liu, L., & Prihardini, D. (2019). An assessment of global formula apportionment. IMF Working Paper, 2019(213), 1–41.

  19. De Simone, L., & Olbert, M. (2019). Real effects of private country-by-country disclosure (SSRN scholarly paper ID 3398116). Social Science Research Network. https://papers.ssrn.com/abstract=3398116. Accessed 28 September 2020.

  20. Desai, M. A., Foley, C. F., & Hines, J. R. (2004). A multinational perspective on capital structure choice and internal capital markets. The Journal of Finance, 59(6), 2451–2487.

    Article  Google Scholar 

  21. Devereux, M. P., & Griffith, R. (2003). Evaluating tax policy for location decisions. International Tax and Public Finance, 10(2), 107–126.

    Article  Google Scholar 

  22. Dowd, T., Landefeld, P., & Moore, A. (2017). Profit shifting of U.S. multinationals. Journal of Public Economics, 148, 1–13. https://doi.org/10.1016/j.jpubeco.2017.02.005

    Article  Google Scholar 

  23. Dyreng, S. D., Hanlon, M., Maydew, E. L., & Thornock, J. R. (2017). Changes in corporate effective tax rates over the past 25 years. Journal of Financial Economics, 124(3), 441–463. https://doi.org/10.1016/j.jfineco.2017.04.001

    Article  Google Scholar 

  24. European Commission. (2011). Proposal for a council directive on a common consolidated corporate tax base (CCCTB). https://ec.europa.eu/taxation_customs/business/company-tax/common-consolidated-corporate-tax-base-ccctb_en. Accessed 28 September 2020.

  25. European Commission. (2016). Proposal for a council directive on a common consolidated corporate tax base (CCCTB). https://ec.europa.eu/taxation_customs/business/company-tax/common-consolidated-corporate-tax-base-ccctb_en

  26. European Commission. (2018). Taxation trends in the European Union. https://ec.europa.eu/taxation_customs/business/economic-analysis-taxation/taxation-trends-eu-union_en. Accessed 28 September 2020.

  27. Flaaen, A. (2017). The role of transfer prices in profit-shifting by US multinational firms: Evidence from the 2004 homeland investment act. FEDS working paper, 2017(55), 1–40.

    Google Scholar 

  28. Garcia-Bernardo, J., Fichtner, J., Takes, F. W., & Heemskerk, E. M. (2017). Uncovering offshore financial centers: Conduits and sinks in the global corporate ownership network. Scientific Reports, 7(1), 6246. https://doi.org/10.1038/s41598-017-06322-9

    Article  Google Scholar 

  29. Garcia-Bernardo, J., Janský, P., & Tørsløv, T. (2019a). Multinational Corporations and Tax Havens: Evidence from Country by Country Reporting. IES Working Paper Series, 2019(31), 1–34.

    Google Scholar 

  30. Garcia-Bernardo, J., Janský, P., & Tørsløv, T. (2019b). Decomposing multinational corporations’ declining effective tax rates. IES Working Paper Series, 2009(39), 1–32.

    Google Scholar 

  31. Garcia-Bernardo, J., Janský, P., & Tørsløv, T. (2020). Multinational Corporations’ Effective Tax Rates: Evidence from Orbis. IES Working Paper Series, 2020(20), 1–36.

    Google Scholar 

  32. Government Accountability Office. (2008). U.S. multinational corporations effective tax rates are correlated with where income is reported. https://www.gao.gov/assets/280/279648.pdf

  33. Graham, J. R., Raedy, J. S., & Shackelford, D. A. (2012). Research in accounting for income taxes. Journal of Accounting and Economics, 53(1), 412–434.

    Article  Google Scholar 

  34. Grubert, H. (2012). Foreign taxes and the growing share of US multinational company income abroad: Profits, not sales, are being globalized. National Tax Journal, 65(2), 247–282.

    Article  Google Scholar 

  35. Grubert, H., & Mutti, J. (2000). Do taxes influence where US corporations invest? National Tax Journal, 53(4), 825–840. https://doi.org/10.17310/ntj.2000.4.02

    Article  Google Scholar 

  36. Guvenen, F., Mataloni, R. J., Jr., Rassier, D. G., & Ruhl, K. J. (2017). Offshore profit shifting and domestic productivity measurement. Cambridge: National Bureau of Economic Research.

    Book  Google Scholar 

  37. Hanappi, T. (2018). Corporate effective tax rates. https://doi.org/10.1787/a07f9958-en

    Article  Google Scholar 

  38. Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002

    Article  Google Scholar 

  39. Hanlon, M., & Maydew, E. L. (2009). Book-tax conformity: Implications for multinational firms. National Tax Journal, 127–153.

  40. Hanlon, M., Maydew, E. L., & Shevlin, T. (2008). An unintended consequence of book-tax conformity: A loss of earnings informativeness. Journal of Accounting and Economics, 46(2–3), 294–311.

    Article  Google Scholar 

  41. Hines, J. R. (2010). Treasure Islands. Journal of Economic Perspectives, 24(4), 103.

    Article  Google Scholar 

  42. Hines, J. R., & Rice, E. M. (1994). Fiscal paradise: Foreign tax havens and American business. Quarterly Journal of Economics, 109(1), 149–182. https://doi.org/10.2307/2118431

    Article  Google Scholar 

  43. Huesecken, B., & Overesch, M. (2015). Tax Avoidance through advance tax rulings—Evidence from the LuxLeaks firms (SSRN scholarly paper ID 2664631). Social Science Research Network. https://papers.ssrn.com/abstract=2664631. Accessed 28 September 2020.

  44. ICIJ. (2014). Luxembourg leaks: Global companies’ secrets exposed. International Consortium of Investigative Journalists. https://www.icij.org/project/luxembourg-leaks. Accessed 28 September 2020.

  45. ICIJ. (2017). Paradise papers. https://www.Icij.org/Investigations/paradise-papers/. Accessed 28 September 2020.

  46. IRS. (2019a). About form 8975|Internal revenue Service. About Form 8975, Country by Country Report. https://www.irs.gov/forms-pubs/about-form-8975

  47. IRS. (2019b). SOI tax stats—Controlled foreign corporations. Internal Revenue Service.

  48. IRS. (2020). Tax year 2017 country by country tables. Internal Revenue Service.

  49. Janský, P. (2020a). European banks and tax havens: evidence from country-by-country reporting. Applied Economics, 52(54), 5967–5985. https://doi.org/10.1080/00036846.2020.1781773

    Article  Google Scholar 

  50. Janský, P. (2019). Effective tax rates for multination entreprises in the EU (pp. 1–41) [Policy paper for Greens/EFA group in the European Parliament.].

  51. Janský, P. (2020b). The costs of tax havens: evidence from industry-level data. Applied Economics, 52(29), 3204–3218. https://doi.org/10.1080/00036846.2019.1707765

    Article  Google Scholar 

  52. Janský, P. (2020c). Corporate Effective Tax Rates for Research and Policy. IES Working Paper Series, 2020(41), 1–24.

    Google Scholar 

  53. Janský, P., & Palanský, M. (2019). Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment. International Tax and Public Finance, 26(5), 1048–1103. https://doi.org/10.1007/s10797-019-09547-8

    Article  Google Scholar 

  54. Johannesen, N., Tørsløv, T., & Wier, L. (2020). Are less developed countries more exposed to multinational tax avoidance? Method and evidence from micro-data. The World Bank Economic Review. https://doi.org/10.1093/wber/lhz002

    Article  Google Scholar 

  55. Joint Committee on Taxation. (2018). General Explanation of Public Law 115–97. https://www.jct.gov/publications.html?func=startdown&id=5152. Accessed 28 September 2020.

  56. Keightley, M. P., & Stupak, J. M. (2015). Corporate tax base erosion and profit shifting (BEPS): An examination of the data. Congressional Research Service. https://www.fas.org/sgp/crs/misc/R44013.pdf

  57. Klaassen, P., & Bobeldijk, A. (2019). Country-by-country reporting and the effective tax rate: How effective is the effective tax rate in detecting tax avoidance in country-by-country reports? Intertax, 47(12), 1057–1069.

    Google Scholar 

  58. Laplante, S. K., & Nesbitt, W. L. (2017). The relation among trapped cash, permanently reinvested earnings, and foreign cash. Journal of Corporate Finance, 44, 126–148. https://doi.org/10.1016/j.jcorpfin.2017.03.005

    Article  Google Scholar 

  59. Mesias, R. (2015). The coordinated direct investment survey guide 2015. International Monetary Fund. https://www.elibrary.imf.org/abstract/IMF069/22557-9781513519418/22557-9781513519418/22557-9781513519418.xml

  60. Mock, R. P., & Simon, A. (2010). Permanently reinvested earnings: Priceless. Austl. Tax F., 25, 535.

    Google Scholar 

  61. Country-by-country reporting. Holding multinational corporations to account wherever they are. Task force on financial integrity and economic development

  62. Mutti, J., & Grubert, H. (2004). Empirical asymmetries in foreign direct investment and taxation. Journal of International Economics, 62(2), 337–358. https://doi.org/10.1016/S0022-1996(03)00016-3

    Article  Google Scholar 

  63. OECD. (2008). OECD Benchmark definition of foreign direct investment (BD4).

  64. OECD. (2013). Addressing base erosion and profit shifting. OECD. www.keepeek.com/Digital-Asset-Management/oecd/taxation/addressing-base-erosion-and-profit-shifting_9789264192744-en

  65. OECD. (2015). Measuring and monitoring BEPS, Action 11. OECD. https://www.oecd-ilibrary.org/content/book/9789264241343-en. Accessed 28 September 2020.

  66. OECD. (2018). OECD/G20 inclusive framework on BEPS: Progress report July 2017–June 2018—OECD. OECD. https://www.oecd.org/ctp/inclusive-framework-on-beps-progress-report-june-2017-july-2018.htm. Accessed 28 September 2020.

  67. OECD. (2019). Programme of work to develop a consensus solution to the tax challenges arising from the digitalisation of the economy. OECD. https://www.oecd.org/tax/beps/programme-of-work-to-develop-a-consensus-solution-to-the-tax-challenges-arising-from-the-digitalisation-of-the-economy.pdf. Accessed 28 September 2020.

  68. Setser, B. (2019). Why the U.S. tax reform’s international provisions need to be reformed. Council on Foreign Relations. https://www.cfr.org/blog/why-us-tax-reforms-international-provisions-need-be-reformed. Accessed 28 September 2020.

  69. Sikka, P., & Murphy, R. (2015). Unitary taxation: Tax base and the role of accounting (ICTD working paper 34). International Centre for Tax and Development.

  70. Spengel, C., Elschner, C., Endres, D., Bartholmess, A., Dressler, D., Evers, L., et al. (2014). Effective tax levels using the Devereux/Griffith methodology. Project for the EU Commission TAXUD/2013/CC/120.

  71. Stewart, J. (2014). PwC/world bank report ‘Paying Taxes 2014’: An assessment (IIIS discussion paper no. 442; pp. 1–10). Trinity College. https://www.tcd.ie/iiis/documents/discussion/abstracts/IIISDP442.php. Accessed 28 September 2020.

  72. Sullivan, M. (2004). Data show dramatic shift of profits to tax havens. Tax Notes, 13, 1190–1200.

    Google Scholar 

  73. Tørsløv, T., Wier, L., & Zucman, G. (2020). The missing profits of nations. National Bureau of Economic research working paper, 2018, revised April 2020(24071). https://www.nber.org/papers/w24701

  74. United States Joint Committee on Taxation. (2014). Technical explanation, estimated revenue effects, distributional analysis, and macroeconomic analysis of the Tax Reform Act of 2014: A discussion draft of the Chairman of the House Committee on Ways and Means to reform the Internal Revenue Code (Reference JCS-1–14.). United States Government Printing Office.

  75. Wójcik, D. (2015). Accounting for globalization: Evaluating the potential effectiveness of country-by-country reporting. Environment and Planning C: Government and Policy, 33(5), 1173–1189. https://doi.org/10.1177/0263774X15612338

    Article  Google Scholar 

  76. World Population Review. (2020). Median income by country 2020. https://worldpopulationreview.com/countries/median-income-by-country/

  77. Wright, T., & Zucman, G. (2018). The exorbitant tax privilege. National Bureau of Economic Research Working Paper, 24983. https://www.nber.org/papers/w24983

  78. Zucman, G. (2014). Taxing across borders: Tracking personal wealth and corporate profits. Journal of Economic Perspectives, 28(4), 121–148.

    Article  Google Scholar 

Download references

Acknowledgements

We are grateful for great comments from Kimberly Clausing, Tim Dowd, Miroslav Palanský, Alexandra Rusu, Caroline Schimanski and Francis Weyzig. Javier Garcia-Bernardo has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement number 638946). Petr Janský acknowledges support from the Czech Science Foundation (P403/18-21011S). To ensure transparency and replicability, and in line with open science practices, our entire database and code can be found here: https://osf.io/ew67b/.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Petr Janský.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

The original online version of this article was revised: The co-author name “Javier Garcia-Bernando” should read “Javier Garcia-Bernardo”.

Appendix

Appendix

List of countries by region

EU28 = Bosnia and Herzegovina (BA), Cyprus (CY), Romania (RO), Croatia (HR), Finland (FI), Luxembourg (LU), Spain (ES), Austria (AT), Latvia (LV), Slovak Rep. (SK), Poland (PL), Italy (IT), Norway (NO), United Kingdom (GB), Netherlands (NL), France (FR), Hungary (HU), Germany (DE), Portugal (PT), Greece (GR), Bulgaria (BG), Belgium (BE), Estonia (EE), Denmark (DK), Malta (MT), Sweden (SE), Slovenia (SI), Ireland (IE), Lithuania (LT).

Africa = Sierra Leone (SL), Uganda (UG), Sudan (SD), Lesotho (LS), Eritrea (ER), South Sudan (SS), Réunion (RE), Togo (TG), Saint Helena, Ascension and Tristan da Cunha (SH), Seychelles (SC), Gabon (GA), Morocco (MA), Egypt, Arab Rep. (EG), Sao Tome and Principe (ST), Mauritania (MR), Ghana (GH), Malawi (MW), Equatorial Guinea (GQ), Madagascar (MG), Djibouti (DJ), Botswana (BW), Angola (AO), Guinea-Bissau (GW), Mauritius (MU), Congo (Dem. Rep.) (CD), Zimbabwe (ZW), Guinea (GN), Cameroon (CM), Burundi (BI), Ethiopia (ET), Niger (NE), Mali (ML), Rwanda (RW), Benin (BJ), Comoros (KM), Cabo Verde (CV), Tanzania, United Republic of (TZ), Senegal (SN), Kenya (KE), Algeria (DZ), Central African Republic (CF), Ivory Coast (CI), Mayotte (YT), Zambia (ZM), The Gambia (GM), Liberia (LR), Somalia (SO), Nigeria (NG), Libya (LY), Mozambique (MZ), Eswatini (SZ), Burkina Faso (BF), South Africa (ZA), Tunisia (TN), Chad (TD), Congo, Rep. (CG).

Southeast_Asia = Malaysia (MY), Singapore (SG), Laos (LA), Cambodia (KH), Timor-Leste (TL), Viet Nam (VN), Philippines (PH), Indonesia (ID), Myanmar (MM), Thailand (TH), Brunei Darussalam (BN).

Northeast_Asia = Russia (RU), Taiwan (TW), China (CN), Japan (JP), Korea, Democratic People's Rep. of (KP), South Korea (KR), Mongolia (MN).

Middle_East = Lebanon (LB), Jordan (JO), Oman (OM), Kuwait (KW), Ukraine (UA), Israel (IL), Iran (IR), Bahrain, Kingdom of (BH), West Bank (PS), Syrian Arab Republic (SY), Turkey (TR), Yemen, Republic of (YE), Iraq (IQ), Qatar (QA), Saudi Arabia (SA).

OFCs = Cyprus (CY), St. Vincent and the Grenadines (VC), Togo (TG), Seychelles (SC), Anguilla (AI), Samoa (WS), Liechtenstein (LI), Belize (BZ), Isle of Man (IM), UK Caribbean (Montserrat (MS), Cayman Islands (KY), Turks and Caicos Islands (TC), Virgin Islands, British (VG)), Mauritius (MU), Panama (PA), St. Kitts and Nevis (KN), Guyana (GY), Cayman Islands (KY), Bermuda (BM), Netherlands Islands, Caribbean (CW), Guernsey (GG), Gibraltar (GI), Marshall Islands, Republic of (MH), Jersey (JE), Barbados (BB), Virgin Islands, British (VG), Liberia (LR), Bahamas, The (BS),

Source: Authors.

See Figs. 6, 7, 8, 9, 10,  11,  12, 13 and  14, Tables 5 and 6.

Fig. 6
figure6

Source: Authors on the basis of the IRS CBCR data

Comparison between the 2016 and 2017 CBCR data releases.

Fig. 7
figure7

Source: Authors on the basis of the IRS CBCR data. Notes: The absolute values of taxes paid minus accrued are displayed. The left side (blue) shows negative values of taxes paid minus taxes accrued. The right side (red) shows positive values

Tax accrued versus tax paid.

Fig. 8
figure8

Source: Authors on the basis of the IRS CBCR data

Effective tax rate using tax accrued versus tax paid.

Fig. 9
figure9

Source: Authors based on GDP data (x axis) and the Gallup World Poll survey on median income per capita (y axis), collected from World Population Review (2020)

Comparison between wages estimated using GDP per capita and median income per capita.

Fig. 10
figure10

Source: Authors on the basis of various data sets. Notes: IRS data on companies with positives profit (CBCR*), IRS data on all companies (CBCR), IRS data on all CFCs with positive profits (CFC*), BEA data (BEA), BEA data without income cost adjustment (BEA 2), Eurostat data and Orbis data on companies with positive profits (Orbis*). The correlation is visualized for the five indicators analysed: a employees, b turnover, c tangible assets, d profits, and e taxes accrued. For each of the coloured squares, representing the correlation between CBCR* and other databases, a scatter plot showing the outliers is shown

Correlation between the data sets.

Fig. 11
figure11

Source: Authors on the basis of various data sets. Notes: aggregated values of IRS data on companies with positives profits (CBCR*) compared with the following data sets: IRS data on all companies (CBCR), IRS data on all CFCs with positive profits (CFC*), BEA data (BEA), BEA data without income cost adjustment (BEA 2), Eurostat data and Orbis data on companies with positive profits (Orbis*) samples. Coverages below one (shaded in green) indicate higher values in the CBCR* data set. The list of countries by region is found in Appendix. Note that the BEA sample is more comparable with CBCR (not CBCR*), since both samples include all companies, including those with negative profits. Orbis uses fixed assets instead of tangible assets, which leads to the overestimation of assets in (a)

Differences between samples by region.

Fig. 12
figure12

Source: Authors on the basis of various data sets. Notes: a Correlation between IRS data on companies with positives profits (CBCR*), IRS data on all companies (CBCR), IRS data on all CFCs with positive profits (CFC*), BEA data (BEA), BEA data without income cost adjustment (BEA 2), Orbis data on companies with positive profits (Orbis*), tax returns data from IRS (Dowd et al.) and statutory corporate income tax (CIT) rates. b ETR by region. The tax rate is unweighted for all but Dowd et al. and CIT, since data on profits and taxes by region is unavailable for those data sets. cg Correlation between CBCR* and c CIT rates, d CBCR, e BEA, f Orbis*, and g Dowd et al. Countries where the estimations differ by more than 50% are annotated

Estimates of effective tax rates.

Fig. 13
figure13

Source: Authors on the basis of the IRS CBCR, BEA and Orbis data

Top 10 countries with the largest negative (a) and positive (b) misaligned profits with the US included (in contrast with Fig. 4).

Fig. 14
figure14

Source: Authors on the basis of the IRS CBCR data

Correlation between ETR and misalignment profits using accumulated earnings.

Table 5 Indicative comparison of published IRS and expected OECD tables.
Table 6 Overview of the available data sources relevant for US MNCs.

.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Garcia-Bernardo, J., Janský, P. & Tørsløv, T. Multinational corporations and tax havens: evidence from country-by-country reporting. Int Tax Public Finance (2021). https://doi.org/10.1007/s10797-020-09639-w

Download citation

Keywords

  • Effective tax rate
  • Profit shifting
  • Tax haven
  • Country-by-country reporting
  • Multinational corporation
  • Foreign direct investment
  • Tax competition

JEL Classification

  • C81
  • F21
  • F23
  • H25
  • H26