Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?
The 2017 Tax Cut and Jobs Act reduced the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.
We thank Carmen Durrer De La Sota for outstanding research assistance. Javier Garcia-Bernardo and Petr Janský acknowledge support from the Czech Science Foundation (CORPTAX, 21-05547M). This work was supported by the Cooperation Program at Charles University, research area Economics. Gabriel Zucman acknowledges support from the Stone foundation and the European Commission grant TAXUD/2020/DE/326. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.