Home Or Away? Profit Shifting with Territorial Taxation

Download or read book Home Or Away? Profit Shifting with Territorial Taxation written by Dominika Langenmayr and published by International Monetary Fund. This book was released on 2022-09-09 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.