Profit shifting continues despite global tax reform

Global profit shifting continues to increase despite major policy initiatives from the OECD and corporate tax reform in the United States, a new paper finds.

The paper – published by the United Nations University World Institute for Development Economics Research (UNU-WIDER) – constructs a time series of global profit shifting covering the 2015–19 period, during which major international efforts were implemented to curb profit shifting.

The paper finds that, in 2019 – four years into the implementation of the BEPS process and two years after the Tax Cuts and Jobs Act – there was no discernible decline in global profit shifting or in profit shifting by US multinationals (which according to our estimates account for about half of global profit shifting) relative to 2015.
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“Of course, it is possible that absent BEPS and the Tax Cuts and Jobs Act profit shifting would have kept increasing; we do not argue these initiatives had no effect. However, their effect seems, so far, to have been insufficient to lead to a reduction in the global amount of profit shifted offshore,” the paper notes.