Home or Away? Profit Shifting with Territorial Taxation
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Summary:
In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
Series:
Working Paper No. 2022/177
Frequency:
regular
English
Publication Date:
September 9, 2022
ISBN/ISSN:
9798400216992/1018-5941
Stock No:
WPIEA2022177
Pages:
38
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