Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?

The 2017 Tax Cut and Jobs Act lowered the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. Between 2017 and 2020, the share of profits booked abroad declined by 1–5 percentage points, in part related to repatriations of intellectual property to the US. However, the share of foreign profits booked in tax havens remained stable at around 50%. While aggregated changes in profit allocation are small, a number of firms responded strongly.

Global Offshore Wealth, 2001–2023

This paper constructs homogeneous time series of global household offshore wealth covering the 2001–2023 period, during which major international efforts were implemented to curb offshore tax evasion. We find that: (i) global offshore wealth remained broadly stable as a fraction of global GDP since 2001, following a sharp increase in the 1980s and 1990s; (ii) the location of offshore wealth changed markedly, with a decline in the share held in Switzerland and a rise of Asian financial centers, the United Kingdom, and the United States; and (iii) a growing fraction comes from developing countries.

Racial Inequality and Redistribution in Post-Apartheid South Africa

We study post-Apartheid inequality dynamics in South Africa using a new microdatabase that combines survey, tax, national accounts, and budget data from 1993 to 2019. Until 2005, pretax inequality rose, racial disparities widened, and redistribution stagnated. Thereafter, pretax inequality fell back toward its 1993 level, while major expansions in tax-and-transfer progressivity sharply reduced posttax inequality. Rapid growth of top Black incomes contributed to halving the White-to-Black pretax income ratio and shifted 20% of taxes from Whites to top Black earners. Despite reaching its lowest point in history in 2019, the racial gap remains extreme by international standards, even after redistribution.

Shift or Share? Profit Shifting and Workers’ Profit-Sharing

This paper quantifies how profit shifting erodes workers’ earnings by reducing profit-sharing payouts in French multinational firms. We leverage newly available administrative microdata on the global activity of multinational firms linked to employer-employee data to build a credible counterfactual of profits and profit-sharing absent profit shifting. We estimate that large French multinationals shift 19% of their foreign profits annually to low-tax jurisdictions, resulting in €10.3 billion shifted out of France and €3.7 billion in lost tax revenues. We show that profit shifting reduces annual employees’ earnings by 2.6%. Low-income workers are disproportionately affected. The bottom 10% of workers lose 3.2% of wages, compared to 2.3% for top 10% earners. Changing the profit-sharing formula to account for global profitability, rather than subsidiary-level profitability, would increase wages by 4.1% for workers in profit-shifting subsidiaries.

Tax Progressivity and Inequality in Brazil: Evidence from Integrated Administrative Data

We use population-wide administrative micro-data to provide new estimates of income inequality and effective tax rates by income groups in Brazil, capturing all income and all tax payments. Our data allow us to link businesses to their owners and thus to allocate business income and associated taxes to the corresponding individual firm owners. We provide sharp upward revisions to official inequality estimates: the top 1% earns 27.4% of total income in 2019, one of the highest level recorded in the world. The tax system, which relies heavily on consumption taxes, is regressive: while the average tax rate in the economy is 42.5%, this rate falls to 20.6% for million-dollar earners (roughly the top 0.01% of the distribution), due to the non-taxation of dividends and provisions that reduce corporate tax liabilities. We provide evidence suggesting that inequality in developing countries may be systematically underestimated, as even in Brazil—where dividends are untaxed, and hence incentives to retain income within companies are limited—attributing profits to business owners substantially raises income inequality.

Measurement Matters: How profit measurement affects profit shifting

This paper examines how the choice between book profits and taxable income affects profit shifting estimation. Using administrative tax data from France (2014-2022) covering the universe of firms with matched tax returns and financial statements, we document substantial book-tax differences, with book profits exceeding taxable income by a factor of 3 to 4. Book profits explain only 23.3% of taxable income variation, challenging the assumption that financial statement data can reliably proxy for tax bases. We demonstrate that measurement choices systematically bias profit shifting estimates. The profitability gap between multinational enterprises and domestic firms is substantially larger using taxable income than book profits. Semi-elasticity estimates vary dramatically by profit measures: pre-tax profit increase by 1.1 percent when the foreign tax rate increases by 1 percentage point, while taxable income increases by 1.9 percent. Tax haven analysis reveals missing profits of €17.7-38.9 billion over 2014-2022, depending on the measure used. These findings suggest studies using financial statement data may substantially underestimate profit shifting and have important implications for policies like the OECD’s Global Minimum Tax.

When Bankers Become Informants: Behavioral Effects of Automatic Exchange of Information

Over the past decade, more than 100 jurisdictions have signed automatic exchange of financial information agreements (AEoI) in an effort to fight cross-border tax evasion. This paper studies the effectiveness and coverage of these agreements using account data leaked from an Isle of Man bank with a large customer base in countries participating to AEoI. We establish three sets of results. First, we find that the design of the governing AEoI agreement absolved the bank from reviewing and reporting a very large share (81%) of all the wealth owned by tax residents of AEoI participating countries, and instead the responsibility passed to smaller entities with weaker incentives to comply. Second, out of the wealth that fell under the bank’s reporting responsibility, foreign tax authorities only received reports covering 50% of what their tax residents held at the bank. We estimate that a further 32% went unreported due to loopholes in rule design. The rest of the accounts did not appear to have been reported, although through the information available in the leak we classified them as reportable. Third, we find evidence that bank clients who were more at risk of being reported on preemptively closed their accounts, potentially circumventing the AEoI reporting process. This paper provides new evidence on the potential limits of these agreements and how sophisticated individuals can ultimately avoid the AEoI transparency shock.

Effective Tax Blacklists: Rethinking Criteria For the 21st Century

This report examines the evolution of harmful corporate tax practices in recent years, as well as the development of blacklists intended to identify such practices. First, it shows that harmful tax practices are no longer confined to easily identifiable jurisdictions known for aggressive tax policies. Second, it finds that current blacklists—although they may be linked to potentially effective sanctions—are generally too limited in scope to produce significant economic effects. Finally, the report proposes enhanced criteria for constructing blacklists of harmful tax regimes. In particular, it argues that introducing a quantitative criterion based on effective tax rates is essential to account for the recent evolution of harmful tax competition.

The New Face of Corporate Tax Competition

This policy note highlights the main conclusions of the Working Paper entitled “Declining Tax Rates of Multinationals: The Hidden Role of Tax Base Reforms” (2025) by EU Tax Observatory researchers Sarah Godar and Jules Ducept.

The effective tax rate of multinational companies declined by 2.7 percentage points in the European Union between 2014 and 2022, shows a new EU Tax Observatory analysis of a decade of corporate tax reforms. The decline was exacerbated by tax competition between Member States. During that period, corporate tax reforms generated a tax revenue loss equivalent to 3.5% of tax collected from sample firms.

The analysis reveals that Member States are shifting away from the traditional “cut rate – broaden base” corporate tax policy towards base-narrowing tax policies. The contribution of statutory rate reforms to the decrease in effective tax rates is estimated to be 0.9 percentage points. Despite multiple anti-avoidance reforms adopted to protect the tax base against erosion, the net contribution of base reforms represents an additional reduction by 0.6 percentage points.

The implementation of the Global Minimum Tax is likely to accelerate the shift towards base-narrowing tax policies. Public announcements by governments show countries inside and outside Europe are increasingly reforming their incentive regime to be compliant with the Global Minimum Tax. This will require an inclusive conversation on the nature and the extent of tax incentive policies in the context of fair tax competition.

Enforcing Taxes on Cryptocurrencies

Cryptocurrencies pose substantial challenges to tax enforcement due to their anonymous and decentralized properties, undermining conventional regulatory practices. We study the impact of an ambitious new enforcement initiative aimed at addressing these challenges: domestic third-party reporting of crypto income. We estimate tax compliance and behavioral responses to this new policy by combining unique Danish microdata from domestic crypto platforms, administrative tax records, and cross-border bank transfers. Despite the introduction of domestic third-party reporting, over 90% of crypto investors do not declare crypto income. Moreover, we identify a significant and persistent evasion response to the policy as investors shift trading activity from domestic platforms, subject to third-party reporting, to foreign platforms outside regulatory reach. Our findings underscore the limits of domestic enforcement strategies in addressing tax evasion for decentralized, borderless assets like cryptocurrencies, highlighting the need for international coordination.