Conference Agenda

We provide evidence for the heterogenous relationship between GAAP effective tax rates and firm value. Our findings document, based on hand-collected information from 3,750 tax recon-ciliations of large listed European firms, that ETR components differ in their relevance for firm value. Effective tax rate reductions related to the management or accounting for tax losses are associated with a significant increase in firm value, whereas profit shifting and all other com-ponents have, on average, no significant impact. We show that tax-motivated profit shifting has even negative value implications for firms with high ESG scores as well as very large firms.

The EU's recent implementation of a public Country-by-Country Reporting (CbCR) regime under Directive 2021/2101 aims to fortify tax compliance and transparency for multinational enterprises (MNEs). However, its effectiveness relies on its consistent implementation across individual member states and a non-discriminating treatment of EU and non-EU firms. Our study examines these critical dimensions, uncovering disparities among member states regarding reporting scope and format. Furthermore, it underscores a predominant representation of EU-based firms among the affected entities, prompting apprehensions regarding potential discrimination. These findings highlight early challenges and implications of the EU's CbCR regime, offering valuable insights for policymakers. Amid current discussions on public CbCR in the USA and Australia, and sustainability reporting, our research contributes to the broader discourse on tax transparency and fairness within and beyond the EU.

This paper uses newly available microdata from country-by-country reporting (CbCR) to study the profit-shifting behavior of large French multinational firms. We provide a strong methodology to correct CbCR from double counting of intra-group dividends, which we show inflates observed pre-tax profits by about 13%. Using corrected data, we show that about 26% of foreign profits are shifted for tax reasons globally, with one-third going to four tax havens. Finally, we provide evidence on the concentration of profit shifting in the hands of a few large firms: 20 multinationals account for 90% of all shifted profits.

The 2017 Tax Cut and Jobs Act reduced 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. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable at around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.