Recent years have seen the introduction of profit comparisons by national tax authorities to cope with multinationals' profit shifting activities. The authors argue that a country that switches from price-related transfer pricing rules to profit-related measures can reduce imports without...

The paper evaluates the working of German CFC rules that restrict the use of foreign subsidiaries located in low-tax countries to shelter passive investment income from home taxation. While passive investments make up a significant fraction of German outbound FDI, we find that German CFC rules...