An alternative measure of profit shifting and corporate income tax losses

IF 2.9 3区 经济学 Q2 BUSINESS, FINANCE Journal of Multinational Financial Management Pub Date : 2023-09-25 DOI:10.1016/j.mulfin.2023.100822
Marian Dobranschi, Danuše Nerudová, Veronika Solilová, Marek Litzman
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Abstract

The aim of this paper is to assess an alternative method of estimating the amount of profit shifting and corporate income tax revenue losses. We propose a nonstandard methodology to refine the measurement of profit shifting beyond the traditional semi-elasticity procedure. A four-stage Data Envelopment Analysis (DEA) is used to estimate the relative technical efficiency of profits before taxation reported by foreign-owned companies in Czechia. The efficiency gap resulting from the difference between the first-stage and third-stage technical efficiency scores represents the level of profit shifting. Using the statutory and average effective corporate income tax rates, we calculate the amount of corporate income tax revenue losses attributable to profit shifting. The estimated mean level of profit shifting by foreign subsidiaries involved in the manufacturing and service sectors between 2009 and 2016 is over 570 million EUR, and the mean amount of tax losses exceeds 100 million EUR. In relative terms, profit shifting leads to a decrease in total corporate income tax revenues of 2% in Czechia. Foreign-owned companies involved in the manufacturing sector are less efficient than foreign-owned companies from services industries in terms of relative technical efficiency scores, while companies involved in the service sector have a considerably high efficiency gap with respect to companies involved in the manufacturing sector.

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另一种衡量利润转移和企业所得税损失的方法
本文的目的是评估一种估算利润转移和企业所得税收入损失的替代方法。我们提出了一种非标准的方法来改进利润转移的测量,超越了传统的半弹性过程。采用四阶段数据包络分析(DEA)对捷克境内外资企业申报税前利润的相对技术效率进行了估计。第一阶段和第三阶段技术效率得分的差异所产生的效率差距代表了利润转移的水平。利用法定和平均有效企业所得税税率,我们计算了由于利润转移造成的企业所得税收入损失。据估计,2009年至2016年,涉及制造业和服务业的外国子公司的利润转移平均水平超过5.7亿欧元,平均税收损失超过1亿欧元。相对而言,利润转移导致捷克企业所得税总收入减少2%。制造业外资企业相对技术效率得分低于服务业外资企业,服务业外资企业相对制造业外资企业效率差距较大。
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来源期刊
CiteScore
7.30
自引率
4.80%
发文量
25
审稿时长
30 days
期刊介绍: International trade, financing and investments have grown at an extremely rapid pace in recent years, and the operations of corporations have become increasingly multinationalized. Corporate executives buying and selling goods and services, and making financing and investment decisions across national boundaries, have developed policies and procedures for managing cash flows denominated in foreign currencies. These policies and procedures, and the related managerial actions of executives, change as new relevant information becomes available. The purpose of the Journal of Multinational Financial Management is to publish rigorous, original articles dealing with the management of the multinational enterprise. Theoretical, conceptual, and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • Foreign exchange risk management • International capital budgeting • Forecasting exchange rates • Foreign direct investment • Hedging strategies • Cost of capital • Managing transaction exposure • Political risk assessment • International working capital management • International financial planning • International tax management • International diversification • Transfer pricing strategies • International liability management • International mergers.
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