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

Abstract 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 €39 billion per year by shifting profits to low-tax countries. Extrapolating our results to the universe of large multinational enterprises indicates a global loss in corporate tax revenues of €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.