Profit Shifting and Investment Effects: The Implications of Zero-Taxable Profits

Arbeitspapier

Recent empirical research documents a tendency of affiliates of multinational enterprises to bunch around zero reported profit. Setting up a model that allows for profitable and loss-making affiliates of multinationals, we show that profit shifting to a low-tax country as well as a loss-related, inverted-type of transfer pricing from the low-tax to the high-tax country induces bunching. Such bunching promotes investment incentives in the low-tax as well as the high-tax country. In equilibrium, affiliates might over-invest and the bunching-related investment effects generate a tendency for too high profit taxes in equilibrium. The finding contrasts existing literature where transfer pricing incentives are insulated from investment incentives and transfer pricing induces inefficiently low taxes.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 6895

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Firm Behavior: Theory ; International Fiscal Issues; International Public Goods
• Thema: tax competition ; profit shifting ; corporate losses ; bunching ; investment

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Köthenbürger, Marko ; Mardan, Mohammed ; Stimmelmayr, Michael
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/176914
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ