International profit shifting within multinationals: Giving new analysis with transfer pricing and geography and a lesson from the European experience

• Main Authors: Cabalu, Mary Clarice Charmaine S., Cabuay, Christopher James R., Parungao, Angelo Gabriel P., So, Stephanie Pearl Q.
• Format: text
• Language: English
• Published: Animo Repository 2010
• Subjects: Tax shifting; Profit
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14727
• Institution: De La Salle University

Due to international tax differences in host countries, multinational firms shift profits and receive incentives for reallocation to reduce tax liabilities (Huizinga & Laeven, 2007). The Proximity-Concentration trade-off and the Gravity Model of Trade and Transportation are confirmed in this study through the established significance of the distance variable in inducing profit shifting. This paper shows as well that the profit shifting phenomenon is consistent in recent time periods and that multinationals shift toward a country that has recently decreased its corporate tax rate as supported by the finding in the Panel Data Analysis that inward shifting increased in 2001, 2005 and 2007 years wherein most of the European countries made significant decreases in the level of their corporate tax rates. It is found in this paper that countries have grown more elastic to shifting with the decrease in corporate tax rates.