Where Does Multinational Profit Go with Territorial Taxation? Evidence from the UK

Konferenzbeitrag

In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that profits of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries, by an average of 2.1 percentage points. The increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2020: Gender Economics

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; International Fiscal Issues; International Public Goods ; Multinational Firms; International Business
• Subject: profit shifting ; territorial tax system ; multinational firms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Langenmayr, Dominika ; Liu, Li
• Event: Veröffentlichung
• (who): ZBW - Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/224516
• Last update: 10.03.2025, 11:44 AM CET