TY - JOUR AU - Harris,David AU - Morck,Randall AU - Slemrod,Joel AU - Yeung,Bernard TI - Income Shifting in U.S. Multinational Corporations JF - National Bureau of Economic Research Working Paper Series VL - No. 3924 PY - 1991 Y2 - December 1991 UR - http://www.nber.org/papers/w3924 L1 - http://www.nber.org/papers/w3924.pdf N1 - Author contact info: david harris E-Mail: david.harris@citigroup.com Randall Morck Faculty of Business University of Alberta Edmonton, AB T6G 2R6 CANADA Tel: 780/492-5683 Fax: 780/492-3325 E-Mail: randall.morck@ualberta.ca Joel Slemrod University of Michigan Business School 701 Tappan Street Room R5396 Ann Arbor, MI 48109-1234 Tel: 734/936-3914 Fax: 734-615-4323 E-Mail: jslemrod@umich.edu Bernard Yeung National University of Singapore Mochtar Riady Building 15 Kent Ridge Drive BIZ 1, Level 6, #6-19 Singapore 119245 Tel: +65 6516 3075 Fax: +65 6779 1365 E-Mail: bizdean@nus.edu.sg M1 - published as David Harris, Randall Morck, Joel B. Slemrod. "Income Shifting in U.S. Multinational Corporations," in Alberto Giovannini, R. Glen Hubbard, and Joel Slemrod, eds., "Studies in International Taxation" University of Chicago Press (1993) AB - It is often claimed that multinational firms avoid taxes by shifting income from high-tax to low-tax countries. Using a five year panel of data for two hundred large U.S. manufacturing firms, we find that U.S. tax liability, as a fraction either of U.S. sales or U.S. assets, is related to the location of foreign subsidiaries in a way that is consistent with tax-motivated income shifting. Having a subsidiary in a tax haven, Ireland, or one of the "four dragon" Asian countries - all characterized by low tax rates - is associated with lower U.S. tax ratios. Having a subsidiary in a high-tax region is associated with higher U.S. tax ratios. These results suggest that U.S. manufacturing companies shift income out of high-tax countries into the U.S., and from the U.S. to low-tax countries. Such behavior certainly lowers worldwide tax liabilities for larger U.S. manufacturing companies and appears to significantly lower their U.S. tax liabilities as well. ER -