NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Thomas R. Tørsløv

University of Copenhagen,
Øster Farimagsgade 5
DK-1353 Copenhagen

E-Mail: thomas.torslov@econ.ku.dk
Institutional Affiliation: University of Copenhagen

NBER Working Papers and Publications

March 2020Externalities in International Tax Enforcement: Theory and Evidence
with Ludvig S. Wier, Gabriel Zucman: w26899
We show that the fiscal authorities of high-tax countries can lack the incentives to combat profit shifting to tax havens. Instead, they have incentives to focus their enforcement efforts on relocating profits booked by multinationals in other high-tax countries, crowding out the enforcement on transactions that shift profits to tax havens, and reducing the global tax payments of multinational companies. This incentive problem can help explain why profit shifting to low-tax countries persists despite its tax revenue cost for high-tax countries. The predictions of our model are motivated and supported by the analysis of two new datasets: the universe of transfer price corrections conducted by the Danish tax authority, and new cross-country data on international tax enforcement. Both of thes...
June 2018The Missing Profits of Nations
with Ludvig S. Wier, Gabriel Zucman: w24701
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...
 
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