An alternative measure of profit shifting and corporate income tax losses

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F62156489%3A43110%2F23%3A43924055" target="_blank" >RIV/62156489:43110/23:43924055 - isvavai.cz</a>

Result on the web

<a href="https://doi.org/10.1016/j.mulfin.2023.100822" target="_blank" >https://doi.org/10.1016/j.mulfin.2023.100822</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.mulfin.2023.100822" target="_blank" >10.1016/j.mulfin.2023.100822</a>

Result language

angličtina

Original language name

An alternative measure of profit shifting and corporate income tax losses

Original language description

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.

Czech name

—

Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

50206 - Finance

Project

<a href="/en/project/GA18-14082S" target="_blank" >GA18-14082S: Fair corporate taxation: Measurement of the impact of the corporate profit shifting on the budget of the Czech Republic</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2023

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Journal of Multinational Financial Management

ISSN

1042-444X

e-ISSN

1873-1309

Volume of the periodical

70-71

Issue of the periodical within the volume

December

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

20

Pages from-to

100822

UT code for WoS article

001084776100001

EID of the result in the Scopus database

2-s2.0-85172320348