New publication in the Journal of Public Economics

Multinational corporations reduce their tax burden in high-tax countries by shifting profits into low-tax countries. This reduces tax revenue in countries with relatively high corporate tax rates, as for example Germany, and increases tax revenues in countries with relatively low corporate tax rates. To prevent profit shifting activities, several high tax countries have introduced or tightened anti-tax avoidance regulations, in particular with respect to the mispricing of intra-firm trade. In “Leveling the playing field: Contraints on multinational profit shifting and the performance of national firms”, Patrick Gauß, Michael Kortenhaus, Nadine Riedel (all University of Münster) and Martin Simmler (Thünen-Institute) use European firm level data and show that these regulation increase – as expected – the tax burden of multinational firms. In addition, they find that the tighter anti-tax avoidance regulations also increase turnover and profits of purely national firms with high exposure to multinational firm competitors in product markets.

https://www.sciencedirect.com/science/article/pii/S0047272724000525

Contact: Dr. Martin Simmler