modelling long run scenarios this paper intends to draw overall lessons from a long term study on co2 emission in france a country with a rather low energy gdp ration and in which transition to non fossil based production of electricity has been achieved more generally it points out the importance of possible bifurcation effects and draws methodological and policy implications from these statements it discusses modelling approaches to the linkages between energy and the rest of economy and addresses the issue of difficulties in cost assessment analysis in the presence of several baseline scenarios finally it proposes a more encompassing definition of no regrets policies

asymmetric fdi and tax treaty bargaining theory and evidence abstract tax treaties are often viewed as a mechanism for eliminating tax competition however this approach ignores the need for bargaining over the treaty s terms this paper focuses on how bargaining can affect the withholding taxes set under the treaty in a simple framework we develop hypotheses about patterns in treaty tax rates a key determinant for these patterns is the relative size of bilateral foreign direct investment fdi activity in plausible situations more asymmetric countries will negotiate treaties with higher tax rates this theory is then tested using 1992 data from us and organization for economic cooperation and development oecd bilateral tax treaties overall the data supports the prediction that greater asymmetric fdi activity increases the negotiated tax rates

multinationals profit response to tax differentials effect size and shifting channels this paper provides a quantitative review of the empirical literature on profit shifting behavior of multinational firms we synthesize the evidence from 25 studies and find a substantial response of profit measures to international tax rate differentials accounting for misspecification biases by means of meta regressions we predict a tax semi elasticity of subsidiary pre tax profits of about 0 8 moreover we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel our results suggest that transfer pricing and licensing are the dominant profit shifting channel

designing economic instruments for the environment in a decentralized fiscal system designing economic instruments for the environment when external effects are important markets will be inefficient and economists have considered several broad classes of economic instruments to correct these inefficiencies however the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants the enforcement authority of various levels of government and the fiscal responsibilities of the levels of government for example externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions also local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction but they may not consider the effects of their actions on other jurisdictions finally the existence of locally generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government the standard analysis therefore focuses mainly upon an aggregate or national perspective it typically ignores the possibility that the externality may be created and addressed by local governments and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems this paper examines the implications of decentralization for the design of corrective policies that is how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities

does a common set of accounting standards affect tax motivated income shifting for multinational firms abstract i test whether adoption of ifrs by individual affiliates of multinational entities mnes for unconsolidated financial reporting facilitates tax motivated income shifting mnes often justify transfer prices to tax authorities by benchmarking intercompany profit allocations against a range of book profit rates reported by economically comparable independent firms that use similar accounting standards additional qualifying benchmark firms resulting from ifrs adoption could allow managers to support more tax advantaged transfer prices using a database of european unconsolidated financial and ownership information over 2003 2012 i first document an increase in the arm s length range of book profits reported by potential ifrs benchmark firms following affiliate adoption of ifrs i then estimate a statistically and economically significant 11 3 percent tax motivated change in reported book pre tax profits following affiliate ifrs adoption relative to pre adoption and non adopter affiliate years

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

repatriation taxes repatriation strategies and multinational financial policy abstract several investment repatriation strategies are added to the standard model of a multinational in which an affiliate is located in a low tax country and is limited to two alternatives repatriating taxable dividends to the parent or investing in its own real operations in our model affiliates can invest in passive assets which the parent can borrow against or in related affiliates which can be used as vehicles for tax favored repatriations we show analytically how the availability of alternative strategies can effect real investment throughout the worldwide corporation we use firm level data for us multinationals to test for the importance of alternative strategies the evidence is generally consistent with the theory particularly the strategies using related affiliates

the effect of taxes on investment and income shifting to puerto rico the income of puerto rican affiliates of u s corporations is essentially untaxed by either puerto rico or the united states this lowers the tax penalty on investment there and also makes it attractive to shift reported taxable income from the u s parent corporation to the puerto rican affiliate this paper investigates these two interrelated impacts of taxation by developing a structural econometric model of the joint decisions regarding investment and income shifting and estimating the model using firm level data on the activity u s corporations in puerto rico the results suggest that the income shifting advantages are the predominant reason for u s investment in puerto rico

taxes and the division of foreign operating income among royalties interest dividends and retained earnings abstract how do taxes influence the way u s corporations divide foreign affiliate operating income among royalties dividends interest and retained earnings the paper goes beyond previous work that focused largely on dividend repatriation behavior and provides a comprehensive analysis of the disposition of foreign subsidiary operating income the empirical results show that taxes have a large and statistically significant effect on the composition of payments own tax prices discourage the payment of dividends royalties and interest but dividend and other repatriation taxes do not increase retained earnings they only alter the composition of payments the results are therefore consistent with a generalized hartman sinn model of the mature controlled foreign corporation that has various alternative repatriation vehicles finally this paper integrates the choice of payments with income shifting among countries because the latter may be part of a low tax strategy for repatriations in this general framework conventional composite tax prices are not appropriate because the response to a change in a composite tax price depends on which components changed

credit and deferral as international investment incentives abstract many governments tax the foreign income of their firms using a system that grants credits for foreign taxes paid and permits tax deferral for unrepatriated income this paper shows that such tax systems encourage firms to restrict their equity stakes in new foreign investments and to finance their new investments with considerable debt these incentives exist even when transfer price regulation effectively limits the profit rates foreign subsidiaries can earn the behavior of the foreign subsidiaries of us multinationals in 1984 appears to be consistent with these incentives

in search of predatory pricing can predatory pricing be reproduced in a laboratory environment we report research motivated by this objective we began with conditions that based on the literature appeared to combine the features this literature has suggested are favorable to the emergence of predation next we operationalized what was meant by predatory pricing in our design in order to compare prices with predictions from alternative theories of 10 experiments none evidenced predatory behavior most supported the dominant firm theory the second series of experiments addresses remedies for predation and finds that the effect is to increase prices and reduce efficiency

international corporate tax avoidance a review of the channels magnitudes and blind spots this paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations it surveys evidence on main channels of corporate tax avoidance including transfer mispricing international debt shifting treaty shopping tax deferral and corporate inversions moreover it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting we find that the literature suggests that for the most recent year a 1 percentage point lower corporate tax rate compared to other countries will expand before tax income by 1 5 percent an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time the literature on tax avoidance still has several unresolved puzzles and blind spots that require further research

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

on the taxation of multinational corporate investment when the deferral method is used by the capital exporting country abstract the user cost of capital for a subsidiary is derived when the capital exporter uses the deferral method for the taxation of the parent s foreign source income the hartman sinn result implying that the capital exporter s tax on remitted dividends is irrelevant to a subsidiary using retentions to finance investment is shown to be correct only when host and home countries have similar corporate income tax bases otherwise both the home and host country corporate tax provisions influence the cost of capital it is also shown that a cash flow tax by the capital importer is not neutral owing to interactions with the capital exporter s tax regime

the effect of moving to a territorial tax system on profit repatriation evidence from japan abstract in an increasingly globalized world the design of international tax systems in terms of the taxation of foreign corporate income has attracted much attention from policy makers and economists alike in the past japan s worldwide tax system taxed foreign source income upon repatriation however to stimulate dividend repatriations from japanese owned foreign affiliates the japanese government introduced a foreign dividend exemption system in 2009 that exempted dividends remitted by japanese owned foreign affiliates to their parent firms from home country taxation this paper examines the effect of this dividend exemption system on profit repatriation by japanese multinationals we find that the response of japanese owned affiliates to the dividend exemption was heterogeneous more particularly foreign affiliates with a large stock of retained earnings were generally more responsive to the reform and significantly increased dividend payments to their parent firms in response to the enactment of the dividend exemption system dividend payments by these affiliates also became more sensitive to withholding tax rates on dividends levied by host countries under the new exemption system

state and provincial corporate tax planning income shifting and sales apportionment factor management abstract we empirically document a strategy through which corporations avoid state income taxes examining aggregated american state and canadian provincial data from 1983 1991 we find corporate income tax revenues are concave in corporate tax rates consistent with firms shifting their tax bases to more favourably taxed jurisdictions additional tests exploit unique features of state formula apportionment systems and find manufacturing shipments from states that tax outside their borders throwback states are decreasing in corporate income tax rates on sales

a general unconstrained model for transfer pricing in multinational supply chains multinational supply chains operate in more than one country or tax jurisdiction and face decision problems concerned with trade flows of resources products and services transfer prices and allocation of transport costs between their divisions these decisions must consider for the sake of optimality corporate and governmental parameters such as the payment of dividends and royalties ownership of and control over subsidiaries income taxes differentials duties and quotas etc in this paper we generalize and extend the theory of the multinational firm to the case of multinational supply chains we propose a model that is more general and comprehensive than the previous ones proposed in the literature to be more specific our model integrates many of the previous research factors and includes new ones such as transport costs and duty drawbacks which are critical for supply chains that operate under international trade regulations under the maximization of the repatriated earnings objective we study the optimality conditions of the corporate decision variables to derive managerial guidelines and to determine how decisions regarding trade quantities transfer prices and transport cost allocations affect the amount of taxes to be paid to host governments as well as the total after tax repatriated earnings of the corporation

predation by public enterprises abstract this paper demonstrates that in addition to the usual niskanen type losses generated by excess production by public firms there is an unrecognized second type of loss in order to sell their excess production public firms have to price their output below the competitive price and thereby cause more efficient firms at the margin to be eliminated the discussion is then extended to include the case where public enterprises finance additional expansions of output by price discriminating against inframarginal customers but then face the threat of competition for these inframarginal customers from new potential entry public enterprises are further shown to provide more credible threats to potential entrants since unlike private firms they value the increased output associated with predation and not merely the higher future benefits produced by it

will social welfare expenditures survive tax competition increasing economic openness creates demands for social welfare programmes designed to cushion the impact of economic changes but may also encourage governments to reduce tax rates to attract mobile economic resources competitive tax reductions could then prevent governments from being able to finance significant welfare spending alternatively economic globalization might improve the ability of governments to afford social welfare programmes and several considerations point in this direction first taxes on internationally mobile activity represent only small fractions of total revenue collections personal income taxes value added taxes and social insurance contributions finance most social welfare spending second international competition need not reduce taxes and indeed over the past 25 years corporate tax collections have remained high as fractions of gdp and total taxes third the vitality of a country s economy largely determines its level of social spending to the extent that incomes rise as a result greater economic openness should strengthen provision of social welfare copyright 2006 oxford university press

low carbon society scenario analysis of transport sector of an emerging economy the aim enduse modelling approach abstract the transport sector of a country is the backbone driving the economy forward thailand s land transport sector is modelled using the aim enduse which is a recursive dynamic optimization model based on bottom up modelling principle the travel demand is divided into two major categories which are passenger travel and freight travel the objective of this paper is to analyse the mitigation possible through low carbon society lcs measures and emission tax et two scenario clusters are devised along with the bau case the lcs scenario cluster has three designed scenarios which are lcs l lcs m and lcs h the emission tax et cluster has four scenarios where the taxes of 50 100 200 and 500 usd t co2 are implemented along with this the marginal abatement costs mac of the counter measures cms and the co benefits in terms of energy security productivity and air pollutant mitigation are also assessed results show that lcs scenarios are possible of mitigating up to 1230 mt co2 cumulatively from 2010 to 2050 in terms of macs new vehicles play a pivotal role along with hybrid vehicles the average abatement cost aac assessment shows that the aac of lcs h scenario is in the order of 100 usd t co2 all the lcs and et scenarios show an enhancement in energy security and also a threefold increase in productivity there is distinct mitigation in terms of air pollutants from the transport sector as well

a comparison of posted offer and double auction pricing institutions this paper presents an experimental study of a computerized posted offer pricing mechanism that captures many of the basic institutional features of retail exchange in the u s posted offer market performance is evaluated relative to double auction market performance using two supply and demand designs subject experience with the trading mechanism is explicitly considered as an experimental treatment variable the market data suggest that prices tend to be higher and efficiency lower under posted offer pricing relative to double auction however the institutional effect appears to interact with other design conditions when feasible the predictive power of competitive nash and limit price theoretic equilibria are empirically evaluated

why pay more corporate tax avoidance through transfer pricing in oecd countries this paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of oecd countries we use a new method to disentangle the income shifting effects from the effects of tax rates on real activity our baseline estimates suggest that a substantial share of the revenues from a unilateral increase in the corporate tax rate is lost because of a decline in reported income

reported trade figure discrepancy regulatory arbitrage and round tripping evidence from the china hong kong trade data this study uses reported trade figures from china and hong kong to examine the relationships among market impediments trade figure irregularities and tax induced regulatory arbitrage the empirical findings consistent with our tax induced regulatory arbitrage models and the round tripping phenomenon in china that is moving funds across the mainland chinese border through trade typically to hong kong or an offshore tax haven before re entering china as foreign direct investment provide support for several conclusions first the spurious flows of funds to and from china via the underreporting of exports and the overreporting of imports closely follow the preferential tax incentives accorded to foreign investors second the underreporting of exports is negatively related to export tax rebates third the overreporting of imports is negatively related to import tariffs finally both of these two appear to be most prevalent in state owned enterprises

the demand for tax haven operations what types of firms establish tax haven operations and what purposes do these operations serve analysis of affiliate level data for american firms indicates that larger more international firms and those with extensive intrafirm trade and high r and d intensities are the most likely to use tax havens tax haven operations facilitate tax avoidance both by permitting firms to allocate taxable income away from high tax jurisdictions and by reducing the burden of home country taxation of foreign income the evidence suggests that the primary use of affiliates in larger tax haven countries is to reallocate taxable income whereas the primary use of affiliates in smaller tax haven countries is to facilitate deferral of u s taxation of foreign income firms with sizeable foreign operations benefit the most from using tax havens an effect that can be evaluated by using foreign economic growth rates as instruments for firm level growth of foreign investment outside of tax havens one percent greater sales and investment growth in nearby non haven countries is associated with a 1 5 to 2 greater likelihood of establishing a tax haven operation

saving taxes through foreign plant ownership this paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership we employ a model of endogenous foreign subsidiary ownership to derive a set of empirically testable hypotheses about the differential taxation of foreign and domestically owned subsidiaries we assess these hypotheses in a data set of 33 577 european foreign and domestically owned manufacturing plants we identify a significant tax saving of endogenous foreign owner ship on average foreign owners pay 594 euros per employee or about 56 percent less than domestic owners of similar subsidiaries this effect is larger in thinner markets with fewer plants in markets with a greater relative presence of foreign owners and for foreign owners of larger plants

foreign direct investment in a world of multiple taxes abstract governments impose multiple taxes on foreign investors though studies of the effect of tax policy on the location of foreign direct investment fdi focus almost exclusively on corporate income taxes this paper examines the impact of indirect non income taxes on fdi by american multinational firms using affiliate level data that permit the introduction of controls for parent companies and affiliate industries indirect tax burdens significantly exceed the foreign income tax obligations of foreign affiliates of american companies estimates imply that 10 higher local indirect tax rates are associated with 7 1 lower affiliate assets which is similar to the effect of 10 higher income tax rates affiliate output falls by 2 9 as indirect taxes rise by 10 while higher income taxes have more modest output effects high corporate income tax rates depress capital labor ratios and profit rates of foreign affiliates whereas high indirect tax rates do not these patterns reveal the impact of indirect taxes and suggest the mechanisms by which direct and indirect taxes affect fdi

designing economic instruments for the environment in a decentralized fiscal system when external effects are important markets will be inefficient and economists have considered several broad classes of economic instruments to correct these inefficiencies however the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants the enforcement authority of various levels of government and the fiscal responsibilities of the levels of government for example externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions also local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction but they may not consider the effects of their actions on other jurisdictions finally the existence of locally generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government the standard analysis therefore focuses mainly upon an aggregate or national perspective it typically ignores the possibility that the externality may be created and addressed by local governments and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems this paper examines the implications of decentralization for the design of corrective policies that is how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities

the impact of controlled foreign company legislation on real investments abroad a multi dimensional regression discontinuity design controlled foreign company cfc rules are frequently imposed by countries as part of their anti tax avoidance legislation this paper aims at quantifying the impact of the german cfc rule on the universe of foreign investments held by german multinational firms the german cfc legislation gives rise to a multi dimensional regression discontinuity design which allows us to estimate local average treatment effects along the dimensions determining treatment our results suggest a significant and economically large impact of the cfc legislation on multinationals real activity abroad we also find evidence of some heterogeneity in estimated treatment effects according to parametric as well as nonparametric estimates

going to haven corporate social responsibility and tax avoidance this study examines the endogenous relation between corporate social responsibility csr and tax avoidance by focusing on a common strategy of corporate tax avoidance i e establishing entities in offshore tax havens using hand collected data on a sample of u s firms we find that firms csr ratings increase substantially in the two years after they first open tax haven affiliates we provide evidence by using the controlled foreign corporations cfc look through rule enacted by congress in 2006 that facilitates offshore profit shifting we find that firms that are affected by the cfc legislation increase their csr practices in response overall our results are consistent with the risk management theory which argues that firms hedge against the potential negative consequences of aggressive tax avoidance practices through an increase in positive csr activities

effects of corporate tax reforms on smes investment decisions under the particular consideration of inflation corporate tax reforms carried out in eu countries since 1980 entail lower statutory tax rates and reductions in generous tax depreciation provisions several countries including the uk have reduced tax rates for small and medium sized enterprises smes this study compares incentive effects of such reforms on the smes investment decisions adopting a simple present value model ceteris paribus tax rates and depreciation rules vary in the model simulation while the application of historical cost accounting method in inflationary phases leads to fictitious increases in nominal net present value apart from the construction of international ranking country specific patterns of reform effects are also illustrated

an experimental evaluation of strategic preemption abstract this paper reports the results of a series of two stage two person noncooperative games where one player can strategically preempt the other in one of our designs the subgame perfect equilibrium entails complete preemption in the other it entails partial preemption the data show that players tend to completely preempt when it is privately optimal however when partial preemption is privately optimal a non trivial fraction of players persist in choosing the non preemptive structure this may result because of occasional irrational behavior following preemptive play which induces some dominant agents to play less aggressively

energy policies for low carbon sustainable transport in asia abstract transformation of asia s transport sector has vital implications for climate change sustainable development and energy indicators papers in this special issue show how transport transitions in asia may play out in different socio economic and policy scenarios including a low carbon scenario equivalent to 2 c stabilization accounting for heterogeneity of national transport systems these papers use diverse methods frameworks and models to assess the response of the transport system to environmental policy such as a carbon tax as well as to a cluster of policies aimed at diverse development indicators the analysis shows that co2 mitigation in a transport system is achieved more effectively by aligning mitigation policies with sustainable development policies and measures such as mandates for mode share and choices such as urban design information and communication systems and behavioral measures authors therefore advocate policies that target multiple dividends vis a vis carbon mitigation energy security and local air quality whereas four papers focus on emissions mitigation policies one paper examines challenges to adapt fast growing transport infrastructures to future climate change induced risks collectively the papers exemplify a set of policies and measures that can deliver co benefits and also demonstrate the use of methods frameworks and models to delineate the optimal mix of such policies and measures

managing valuable knowledge in weak ip protection countries although knowledge assets provide multinational corporations mncs with competitive advantages in foreign markets it can be difficult for firms to protect their knowledge in foreign countries especially countries with weak intellectual property ip protection building on and extending the knowledge management institutional theory and expatriate literatures this article explores whether home country expatriates can substitute for weak ip protection and drive an increase in more and more valuable knowledge transfers to foreign operations located in weak ip protection countries because of their ties to headquarters knowledge of parent firm assets priorities and routines and activities in local operations i argue that home country expatriates can transform the local operation to offer higher protection for parent firm knowledge in weak ip countries in ways that local managers cannot the results from a comprehensive panel of us multinationals suggest that home country expatriates can substitute for weak ip protection but that this effect is contingent on the manufacturing and knowledge capabilities of foreign operations for higher value parent firm knowledge transfers overall this article extends our understanding of the global management and protection of knowledge by mncs by exploring how organizational practices can buffer country level institutional deficiencies for firm knowledge

review on fuel economy standard and label for vehicle in selected asean countries abstract sustainable supply of energy at affordable prices is vital to ensure the human development asean is committed pursuing for a clean and green region with fully established mechanisms for sustainable development to ensure the protection of regional environment resources and the high quality of people s life nowadays energy use in the transportation sector represents an important issue in asean countries therefore it is believed that the introduction of fuel economy standards and labels is the key to save energy in this sector fuel economy standards and labels are relatively cheap measure to influence consumer behaviour and to induce car manufacturers to produce more efficient vehicles fuel economy standards and labels for vehicle are being implemented in many countries around the world to save fuel consumption and mitigate co2 emission this paper is a review on fuel economy standard and labels for vehicle in some selected asean countries such as singapore indonesia malaysia philippines thailand and vietnam it has been found that singapore is the leading country in asean that has implemented fuel economy standards and labels moreover it has been found that the implementation of cleaner fuels standard play a crucial role in protecting public health and the environment from transportation sector emissions the most common alternative fuels used in asean are biodiesel ethanol methanol propane hydrogen and natural gas

low carbon scenarios for transport in india co benefits analysis abstract dependence on oil for transport is a concern for india s policymakers on three counts energy security local environment and climate change rapid urbanisation and accompanying motorisation has created some of the most polluting cities in india and rising demand for oil is leading to higher imports besides causing more co 2 emissions the government of india wants to achieve the climate goals through a sustainability approach that simultaneously addresses other environment and developmental challenges this paper analyses a sustainable low carbon transport slct scenario based on sustainable strategies for passenger and freight mobility vehicle technologies and fuel using global co 2 prices that correspond to 2 c global stabilisation target the scenarios span from years 2010 to 2050 and are analysed using the energy system model answer markal the slct scenario has improved energy security cumulative oil demand lower by 3100 mtoe improved air quality pm 2 5 emissions never exceed the existing levels and the cumulative co 2 emissions are lower by 13 billion t co 2 thereby showing that achieving development objectives with co 2 co benefits is feasible

international profit shifting within multinationals a multi country perspective abstract we model the opportunities and incentives generated by international tax differences for international profit shifting by multinationals the model considers not only profit shifting arising from international tax differences between affiliates and parent companies but also from tax differences between affiliates in different host countries our model yields the prediction that a multinational s profit shifting in a country depends on a weighted average of international tax rate differences between all countries where the multinational is active using a unique dataset containing detailed firm level information on the parent companies and subsidiaries of european multinationals and information about the international tax system we test our model and empirically examine the extent of intra european profit shifting by european multinationals on average we find a semi elasticity of reported profits with respect to the top statutory tax rate of 1 3 while shifting costs are estimated to be 0 6 of the tax base international profit shifting leads to a substantial redistribution of national corporate tax revenues many european nations appear to gain revenues from profit shifting by multinationals largely at the expense of germany