Measuring Misalignment - The Location of Us Multinationals’ Economic Activity Versus the Location of Their Profits

ICTD Working Paper 42

30 Pages Posted: 13 Feb 2018

See all articles by Alex Cobham

Alex Cobham

Center for Global Development

Petr Jansky

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies

Date Written: November 2015

Abstract

A major international effort – the OECD Base Erosion and Profit Shifting (BEPS) initiative – aims to reduce the extent of misalignment between the profits of multinational groups, and the location of their real economic activity. Recent research using balance sheet data has shown major misalignments, with a number of small jurisdictions capturing a tax base disproportionate to their economic activity, but has also revealed the limitations of available balance sheet data for lower-income countries. This paper uses survey data on the international operations of US-headquartered multinational groups to expand the research to a broader group of host countries (albeit for only one home economy), and confirms major misalignments of profit. A small number of ‘profit-haven’ jurisdictions are seen to have captured a disproportionate share of total profits, resulting in serious disadvantages for most G20 countries, regardless of income level.

Keywords: multinational tax avoidance; corporate tax reform, formula apportionment, unitary taxation, base erosion, profit shifting, BEPS

Suggested Citation

Cobham, Alex and Jansky, Petr, Measuring Misalignment - The Location of Us Multinationals’ Economic Activity Versus the Location of Their Profits (November 2015). ICTD Working Paper 42, Available at SSRN: https://ssrn.com/abstract=3119824 or http://dx.doi.org/10.2139/ssrn.3119824

Alex Cobham (Contact Author)

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States

Petr Jansky

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://ies.fsv.cuni.cz/en/staff/jansky

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