Work detail

Misalignment of Profits and Economic Activity by Multinational Enterprises

Author: Bc. Dominika Cimpová
Year: 2018 - summer
Leaders: doc. Petr Janský Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 87
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/191578/
Abstract: This thesis analyses the profit shifting behaviour of U.S. multinational companies using
panel data set over the period 1983 – 2015. The main objective of the thesis is to compute
the extent of misalignment between reported profit and real economic activity and
consequential revenue losses caused by profit shifting and to estimate the effect of tax
rates on profit shifting behaviour. Using country-level aggregated data published by the
Bureau of Economic Analysis I found a substantially increasing trend in the misaligned
profit reaching 540 bn US$ in 2015 which is accompanied with tax revenue losses 190 bn
US$ in missing profit countries. Majority of the misaligned profit is reported in a small
number of jurisdictions with near zero tax rates such as Netherlands, Ireland and Luxembourg.
Additionally, I found a significant negative effect of tax rate on misalignment in
the recent years, however, only negligible effect at the beginning of the examined period.
Results suggest that 1% increase in the statutory tax rate can cause 2.5% growth in the
magnitude of misalignment. My findings are consistent with the existing literature. According
to the analysis it can be concluded that despite numerous attempts for prevention
of profit shifting, it is becoming more serious problem than ever before.

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