Are Less Developed Countries More Exposed to Multinational Tax Avoidance? Method and Evidence from Micro-Data

By Niels Johannesen, Thomas Tørsløv, Ludvig Wier. World Bank Economic Review, 2019

148 citations recorded by the source corpus.

This paper uses a global dataset with information about 210,000 corporations in 142 countries to investigate whether tax avoidance by multinational firms is more prevalent in less-developed countries. The paper proposes a novel approach to studying cross-border profit shifting, which has relatively low data requirements and is therefore particularly well-suited for the context of developing countries. The results consistently show that the sensitivity of reported profits to profit-shifting incentives is negatively related to the level of economic and institutional development. This may explain why many developing countries opt for low corporate tax rates in spite of urgent revenue needs and severe constraints on the use of other tax bases.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/3eb7c066747fe95f7f5001d4326ddb9ec810689b

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Alex Cobham
2. P. Janský
3. Thomas Elkjaer
4. Jannick Damgaard
5. Niels Johannesen
6. G. Zucman

In Economics and Econometrics

1. Alex Cobham
2. P. Janský
3. Thomas Elkjaer
4. Jannick Damgaard
5. Niels Johannesen
6. G. Zucman

Citations in the corpus

• Comparing UK Tax Returns of Foreign Multinationals to Matched Domestic Firms (2019, unknown): “Johannesen et al. (2016) and Dharmapala and Hebous (2018) are the two recent papers, which use accounting data to examine bunching around zero accounting profits.”
• What is Real and What is Not in the Global FDI Network? (2019, background): “…in the literature on international taxation to document how multinational firms allocate assets (Clifford, 2019), liabilities (Huizinga et al., 2008), profits (Huizinga and Laeven, 2008; Johannesen et al, 2016) and risk (Becker et al., 2018) across affiliates in response to tax incentives.”
• Global distribution of revenue loss from corporate tax avoidance: re‐estimation and country results (2018, background): “Answering a similar research question and arguing that Orbis has recently increased its coverage considerably in less-developed countries, Johannesen, Tørsløv, and Wier (2017) use it to find that profit shifting is more prevalent in less-developed countries.”