Where multinational corporations report their profits? Evidence from the new data set
| Thesis title in Czech: | Kde nadnárodní korporace reportují své zisky? Výsledky z nových dat |
|---|---|
| Thesis title in English: | Where multinational corporations report their profits? Evidence from the new data set |
| Key words: | přesouvání zisků, daňové ráje, nadnárodní společnosti, efektivní daňová sazba |
| English key words: | profit shifting, tax havens, multinational corporations, effective tax rate |
| Academic year of topic announcement: | 2022/2023 |
| Thesis type: | Bachelor's thesis |
| Thesis language: | angličtina |
| Department: | Institute of Economic Studies (23-IES) |
| Supervisor: | prof. Petr Janský, Ph.D. |
| Author: | hidden - assigned by the advisor |
| Date of registration: | 22.06.2023 |
| Date of assignment: | 22.06.2023 |
| Date and time of defence: | 09.09.2024 09:00 |
| Venue of defence: | Opletalova, O314, místnost. č. 314 |
| Date of electronic submission: | 31.07.2024 |
| Date of proceeded defence: | 09.09.2024 |
| Opponents: | Bc. Daniel Kolář, M.Sc., Ph.D. |
| References |
| Garcia-Bernardo J. and Jansky P. (2021): "Profit Shifting of Multinational Corporations Worldwide" IES Working Papers 14/2021. IES FSV. Charles University.
Garcia-Bernardo, J., & Janský, P. (2023). Profit Shifting of Multinational Corporations Worldwide. Working paper. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4435224 Tuinsma T., De Witte K., Janský P., Palanský M., Titl V (2023): " Effects of Corporate Transparency on Tax Avoidance: Evidence from Country-by-Country Reporting" IES Working Papers 4/2023. IES FSV. Charles University. Clausing, Kimberly A., How Big is Profit Shifting? (May 17, 2020). Available at SSRN: https://ssrn.com/abstract=3503091 or http://dx.doi.org/10.2139/ssrn.3503091 Guvenen, Fatih, Raymond J. Mataloni Jr., Dylan G. Rassier, and Kim J. Ruhl. 2022. "Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share." American Economic Review, 112 (6): 1848-84. Laffitte, Sébastien, and Farid Toubal. 2022. "Multinationals' Sales and Profit Shifting in Tax Havens." American Economic Journal: Economic Policy, 14 (4): 371-96. Thomas Tørsløv and others, The Missing Profits of Nations, The Review of Economic Studies, Volume 90, Issue 3, May 2023, Pages 1499–1534, https://doi.org/10.1093/restud/rdac049 Beer, S., de Mooij, R. and Liu, L. (2020), INTERNATIONAL CORPORATE TAX AVOIDANCE: A REVIEW OF THE CHANNELS, MAGNITUDES, AND BLIND SPOTS. Journal of Economic Surveys, 34: 660-688. https://doi.org/10.1111/joes.12305 |
| Preliminary scope of work in English |
| Research question and motivation
The primary research question addressed in this thesis is: "Where do multinational corporations report their profits?" This question aims to investigate the reporting behavior of multinational corporations (MNCs) regarding the allocation of profits across different jurisdictions, specifically focusing on the presence and magnitude of profit shifting to tax havens. By analyzing the patterns of profit reporting, the study aims to estimate the volume of profit shifting to tax havens using a linear regression model applied to the OECD CbCR data for the years 2018, 2019, and 2020. The motivation behind this specific topic stems from the increasing concern surrounding profit shifting practices employed by multinational corporations and their implications for global tax systems and economic inequality. Previous literature has highlighted the prevalence of profit shifting to tax havens, where MNCs exploit loopholes and discrepancies in international tax regulations to reduce their tax liabilities. This behavior has significant consequences for both developed and developing countries, as it undermines tax revenues, distorts economic competition, and exacerbates wealth inequality. By focusing on the reporting behavior of MNCs and estimating the volume of profit shifting, this study aims to contribute to the existing body of literature on international taxation and profit shifting. It aligns with the growing interest among scholars, policymakers, and international organizations in understanding the extent of profit shifting and devising effective measures to combat it. Additionally, the utilization of the OECD CbCR data, which provides comprehensive and standardized information on MNCs' operations, allows for a rigorous analysis of profit shifting dynamics over multiple years. The findings of this research have implications for policy-making, as they can inform the design and implementation of tax policies aimed at curbing profit shifting practices. Furthermore, the study may shed light on the effectiveness of existing regulations and initiatives, such as the Base Erosion and Profit Shifting (BEPS) project led by the OECD, and provide insights into potential areas for improvement. By addressing this research question, the study contributes to the broader discourse on international taxation, corporate behavior, and the need for a fair and sustainable global tax system. Contribution One significant contribution of this thesis is the utilization of a new data set, namely the OECD CbCR data for the years 2018, 2019, and 2020. The incorporation of this new and comprehensive data set enhances the existing literature by providing a more recent and detailed analysis of multinational corporations' profit shifting practices. By leveraging the OECD CbCR data, which offers standardized and reliable information on MNCs' operations, the thesis can provide up-to-date insights into profit shifting patterns and the jurisdictions involved. Furthermore, the use of new data enables the identification of emerging trends and changes in profit reporting behavior over the specified time frame. The results derived from the analysis of the new data set can be valuable for policymakers, tax authorities, and international organizations seeking to stay abreast of the latest developments in profit shifting practices. Methodology The thesis will utilize a quantitative research approach to address the research question. The primary data source for the analysis will be the OECD CbCR (Country-by-Country Reporting) data for the years 2018, 2019, and 2020 (Data for 2019 and 2020 will be realesed in summer 2023). This dataset provides comprehensive information on the financial activities and profit allocation of MNCs across different jurisdictions. To estimate the volume of profit shifting to tax havens, a linear regression model will be employed. Using logarithmic function to capture non-linear relationship between profit and tax rates as in Garcia-Bernardo J. and Jansky P. (2021). Outline 1. Introduction a. Background and context of profit shifting by multinational corporations b. Research question and objectives c. Significance and motivation of the study d. Brief overview of the thesis structure 2. Literature review 3. Methodology a. Data b. Explanation of constructed models. c. Description of sensitivity analysis approach. 4. Results a. Presentation and interpretation of the findings from the linear regression analysis b. Analysis of the estimated coefficients and their significance c. Discussion of the factors influencing profit shifting and their magnitude d. Comparison of profit shifting patterns across the years 2018, 2019, and 2020 e. Comparison with other estimates in literature 5. Conclusion a. Summary of the main findings and their implications b. Recapitulation of the research question and objectives c. Discussion of the contributions of the study to the existing literature d. Evaluation of the limitations and potential avenues for future research e. Policy implications and recommendations based on the research findings |