We study how the OECD transfer pricing guidelines aimed at curbing tax-motivated transfer pricing practices affect investment incentives. Our theoretical model integrates the different OECD's transfer pricing methods into the tax planning cost function of an MNC to evaluate how the choice of...

Since 2016, Country-by-Country reporting has provided tax authorities with detailed information about multinationals’ worldwide activities. It has been hailed as a game-changer for corporate taxation, enabling tax authorities to target multinational firms with high profits in tax havens. We...

This chapter provides a description of one of the key anti-tax-avoidance rules to combat profit shifting by multinational corporations, so called Controlled Foreign Corporation (CFC) rules that directly target income in low-tax countries. We explain some key institutional features of CFC...

The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyse tax competition between a tax haven and a non-haven country for heterogeneous multinationals to evaluate the effects of...

There is a growing concern that governments lose substantial corporate tax revenue because of profit shifting through transfer-pricing and thin-capitalization strategies. Existing literature studies profit shifting and transfer pricing separately. In practice, the choice of debt-to-asset ratios...

We demonstrate that the choice of the transfer price and its effect on intra-firm trade and investment depends on the probability of detection and thus on the measure, on which tax authorities base their audit. A policy implication of the paper is that it should be preferable to condition audits...

Multinational companies can exploit the tax advantage of debt more aggressively than national companies by shifting debt from affiliates in low tax countries to affiliates in high tax countries. Previous papers have either omitted internal debt or external debt from the analysis. We are the...

This paper examines the flexibility of multinational firms to use income-shifting strategies within a tax year to react to operating losses. First, we develop an analytical model that considers how affiliate losses can be adjusted by using the transfer prices of tangible and intangible assets,...

By introducing controlled-foreign-company (CFC) rules, the parent country of a multinational firm reserves the right to tax the income of the firm's foreign affiliates if the tax rate in the affiliate's host country is below a specified threshold. We identify the conditions under which binding...

This study develops theory and discusses implications of inflexibility in tax-motivated income shifting. We show that inflexibility to adjust income-shifting strategies within a tax year in response to losses implies that income-shifting incentives are based on the expected rather than the...