Abstract

Using a large panel dataset on worldwide operations of multinational firms, this paper studies one of the most advocated anti-tax-avoidance measures: Controlled Foreign Corporation rules. By including income of foreign low-tax subsidiaries in the domestic tax base, these rules create incentives to move income away from low-tax environments. Exploiting variation around the tax threshold used to identify low-tax subsidiaries, we find that multinationals redirect profits into subsidiaries just above the threshold and change incorporation patterns to place fewer subsidiaries below and more above the threshold. Roughly half of the resulting increase in global tax revenue accrues to the rule-enforcing country.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.