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A Comparison of the Tax‐Motivated Income Shifting of Multinationals in Territorial and Worldwide Countries
Author(s) -
Markle Kevin
Publication year - 2015
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12148
Subject(s) - earnings , income tax , economics , demographic economics , international economics , subject (documents) , business , development economics , market economy , accounting , library science , computer science
This paper tests for differences in the tax‐motivated income‐shifting behaviors of multinationals subject to different systems of taxing foreign earnings. I find that, on average, multinationals subject to territorial tax regimes shift more income than those subject to worldwide tax regimes. The difference in shifting, however, is driven by a difference in the subset of shifting that involves the parent country; multinationals in the two groups appear to shift equally among their foreign affiliates. In additional tests, I find that the shifting of worldwide firms is sensitive to reinvestment in the recipient countries, while that of territorial firms is not.