Global Profit Shifting of Multinational Companies: Evidence from Country-by-Country Reporting Micro Data

We use micro data from country-by-country reports of more than 3 600 multinational companies to analyze global profit shifting to avoid taxes. Unlike other data sets, country-by-country reports provide detailed information about the global economic activities of multinational companies, including those in tax haven countries. We find that these companies reduce their tax burden by EUR 39 billion per year by shifting profits to low-tax countries. Extrapolating our results to the universe of large MNEs indicates a global loss in corporate tax revenues of EUR 162 billion per year (12% of their overall tax payments). We show that taking into account non-linearities in profit shifting and subsidiaries reporting zero profits is key for accurately estimating profit shifting. (JEL Codes: F23, H25, H26)