Abstract
PurposeProfit shifting is a matter of great concern for governments internationally. It leads to the loss of tax revenues and puts multinational corporations (MNCs) in a disparate position. Lately, due to the aggressive stance of the Indian taxman, several Indian MNCs are planning to minimise their tax outflows. This paper aims to study profit-shifting drawing from the institutional theory for the Indian MNCs.Design/methodology/approachThe sample comprises 679 MNCs listed on the Bombay Stock Exchange or the National Stock Exchange with either Indian parents with foreign subsidiaries (553) or Indian subsidiaries of a foreign parent (126) for FY 2013–14 to FY 2018–19. A fixed-effect panel regression technique was invoked to examine tax rate differential motivated profit-shifting undertaken by MNCs with the moderating effect of international presence and patents.FindingsThe results suggest that MNCs shift their profits to take advantage of differences in global tax rates when they have an international presence in at least five tax countries. Further, profit shifting is likely towards no-tax compared to low-tax countries, with the presence of patents in an MNC group having no significant impact.Originality/valueLosses to the government revenue due to profit shifting by MNCs are rather severe in emerging economies. The study provides the first empirical evidence of the direction of profit shifting with the moderating effect of the extent of global presence and group patents, which would interest scholars in the field. The findings provide valuable insights to the policymakers, highlighting the urgent need to operationalise the general anti-avoidance taxation rules.
Subject
General Earth and Planetary Sciences,General Environmental Science
Reference94 articles.
1. Alstadsaeter, A., Bjørkheim, J.B., Davies, R.B. and Scheuerer, J. (2022), “Pennies from haven: Wages and profit shifting”, CESifo Working Paper No. 9590, available at: https://doi.org/10.2139/ssrn.4042434 (accessed 10 January 2022).
2. How large is the corporate tax base erosion and profit shifting? A general equilibrium approach;Economic Systems Research,2022
3. Does corruption cause tax evasion? Evidence from an emerging economy;Journal of Money Laundering Control,2019
4. Tax morale and prosocial behaviour: evidence from a Palestinian survey;Cambridge Journal of Economics,2016
5. Corporate governance, incentives and tax avoidance;Journal of Accounting and Economics,2015
Cited by
1 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献