NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The Missing Profits of Nations

Thomas R. Tørsløv, Ludvig S. Wier, Gabriel Zucman

NBER Working Paper No. 24701
Issued in June 2018, Revised in April 2020
NBER Program(s):Corporate Finance, International Finance and Macroeconomics, International Trade and Investment, Public Economics

By exploiting new macroeconomic data known as foreign affiliates statistics, we show that affiliates of foreign multinational firms are an order of magnitude more profitable than local firms in low-tax countries. By contrast, affiliates of foreign multinationals are less profitable than local firms in high-tax countries. Leveraging this differential profitability, we estimate that close to 40% of multinational profits are shifted to tax havens globally. We analyze how the location of corporate profits would change if all countries adopted the same effective corporate tax rate, keeping global profits and investment constant. Profits would increase by about 15% in high-tax European Union countries, 10% in the United States, while they would fall by 60% in today's tax havens. We provide a new international database of GDP, trade balances, and factor shares corrected for profit shifting, showing that the rise of the corporate capital share is significantly under-estimated in high-tax countries.

download in pdf format
   (1137 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24701

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us