Profit shifting and tax-rate uncertainty

Delis, M. D., Hasan, I. and Karavitis, P. I. (2020) Profit shifting and tax-rate uncertainty. Journal of Business Finance and Accounting, 47(5-6), pp. 645-676. (doi: 10.1111/jbfa.12429)

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Using firm‐level data for 1,084 parent firms in 24 countries and for 9,497 subsidiaries in 54 countries, we show that tax‐motivated profit shifting is larger among subsidiaries in countries that have stable corporate tax rates over time. Our findings further suggest that firms move away from transfer pricing and toward intragroup debt shifting that has lower adjustment costs. Our results are robust to several identification methods and respecifications, and they highlight the important role of tax‐rate uncertainty in the profit‐shifting decision while pointing to an adjustment away from more costly transfer pricing and toward debt shifting.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Karavitis, Dr Panagiotis
Authors: Delis, M. D., Hasan, I., and Karavitis, P. I.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of Business Finance and Accounting
ISSN (Online):1468-5957
Published Online:21 December 2019
Copyright Holders:Copyright © 2019 John Wiley and Sons Ltd
First Published:First published in Journal of Business Finance and Accounting 47(5-6): 645-676
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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