Thursday, April 21, 2022
Tax Deficits And The Earnings Shifting Of U.S. Multinationals
Scott Dyreng (Duke; Google Scholar), Robert Hills (Penn State; Google Scholar) & Kevin Markle (Michigan State; Google Scholar), Tax Deficits and the Earnings Shifting of U.S. Multinationals:
Important controversy has emerged in regards to the scope of the worldwide tax planning of U.S. multinational companies, with estimates of revenue shifted out of the U.S., income acknowledged in tax havens, and income loss ballooning over time. Most research that derive these empirical estimates use macroeconomic knowledge which help inferences drawn at an mixture degree however usually are not conducive to analyses at extra granular ranges. On this examine, we use microeconomic knowledge from companies’ publicly accessible monetary statements to derive firm-year estimates that we use to guage present mixture estimates. We discover that many estimates based mostly on macroeconomic knowledge are considerably overstated. We additionally use our firm-year estimates to investigate the distributions of those quantities throughout the economic system. We present that each one dimensions of worldwide tax planning are concentrated in three industries and dominated by a small variety of very massive companies.
Conclusion
We use firm-year knowledge to re-examine prior macroeconomic research of the tax avoidance habits of multinational companies. First, we present that the downward tendencies in international efficient tax charges highlighted in prior analysis (e.g., Wright and Zucman [2018]) are pushed by just a few very massive, worthwhile companies and that, due to this fact, the inferences drawn from these tendencies is probably not relevant past these companies. Certainly, our knowledge counsel that the everyday agency acknowledges about 10% of its international income in tax havens, considerably lower than the 50% inferred by Wright and Zucman [2018] utilizing macro knowledge. We additionally estimate U.S. income loss (i.e., the U.S. tax deficit) as a result of revenue shifting out of the U.S. Our estimates counsel income loss figures which are about 20% of these in Clausing [2016], and are per these in Blouin and Robinson [2020].
Our findings counsel warning in matching acceptable knowledge to the empirical query being requested. As a result of macroeconomic knowledge are implicitly weighted by agency measurement (typically international revenue), conclusions drawn from macroeconomic knowledge is likely to be pushed by just a few massive companies and never reflective of the everyday multinational agency. To the extent that insurance policies are carried out to unravel revenue shifting issues and have an effect on all companies when the issue resides in only some companies, vital financial prices might be imposed on smaller, much less worthwhile companies. Thus, researchers and policymakers ought to train warning when extrapolating from the macro degree to the micro degree.
https://taxprof.typepad.com/taxprof_blog/2022/04/tax-deficits-and-the-income-shifting-of-us-multinationals.html
