Do personal income taxes affect corporate tax-motivated profit shifting?

This paper examines the role of personal income taxes on multinationals’ corporate tax-induced profit shifting. As mandated in most OECD countries, firms need economic substance in low corporate-tax countries to justify profit shifting to these countries. Because high personal income taxes raise lab...

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Autores: De-Vito, A. (Antonio)|||/items/63639642-1abe-424a-bb32-23673853ed9d, Hillmann, L. (Lisa)|||/items/c0d9b9c2-0ac5-4094-bfd7-3740d6262b50, Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482, Vossebürger, R. (Robert)|||/items/2cd5410e-8447-4c6a-90dd-d8c6182e2acf
Formato: artículo
Fecha de publicación:2025
País:España
Recursos:Universidad de Navarra
Repositorio:Dadun. Depósito Académico Digital de la Universidad de Navarra
Idioma:inglés
OAI Identifier:oai:dadun.unav.edu:10171/116760
Acesso em linha:https://hdl.handle.net/10171/116760
Access Level:acceso abierto
Palavra-chave:Personal income taxes
Profit shifting
Corporate income taxes
Anti-Tax avoidance rules
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spelling Do personal income taxes affect corporate tax-motivated profit shifting?De-Vito, A. (Antonio)|||/items/63639642-1abe-424a-bb32-23673853ed9dHillmann, L. (Lisa)|||/items/c0d9b9c2-0ac5-4094-bfd7-3740d6262b50Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482Vossebürger, R. (Robert)|||/items/2cd5410e-8447-4c6a-90dd-d8c6182e2acfPersonal income taxesProfit shiftingCorporate income taxesAnti-Tax avoidance rulesThis paper examines the role of personal income taxes on multinationals’ corporate tax-induced profit shifting. As mandated in most OECD countries, firms need economic substance in low corporate-tax countries to justify profit shifting to these countries. Because high personal income taxes raise labor costs and thus the cost of providing economic substance, we predict that personal income taxes mute profit shifting. Using data from 26 European countries, we find that personal income taxes substantially reduce profit shifting to low corporate-tax jurisdictions, particularly when parent countries impose strict substance requirements. We also find that firms use employees to justify economic substance and that the effect of the personal income tax is related to its incidence falling partly on firms. Our results show important interactions between personal and corporate income taxes that reduce multinationals’ profit-shifting activities when substance requirements are implemented as in the European Union or many OECD countries.ElsevierDadun. Depósito Académico Digital Universidad de Navarra20252025-01-0120252025-01-01journal articlehttp://purl.org/coar/resource_type/c_6501info:eu-repo/semantics/articletext/htmlhttps://hdl.handle.net/10171/116760reponame:Dadun. Depósito Académico Digital de la Universidad de Navarrainstname:Universidad de NavarraInglésengopen accesshttp://purl.org/coar/access_right/c_abf2info:eu-repo/semantics/openAccessoai:dadun.unav.edu:10171/1167602026-06-21T12:47:57Z
dc.title.none.fl_str_mv Do personal income taxes affect corporate tax-motivated profit shifting?
title Do personal income taxes affect corporate tax-motivated profit shifting?
spellingShingle Do personal income taxes affect corporate tax-motivated profit shifting?
De-Vito, A. (Antonio)|||/items/63639642-1abe-424a-bb32-23673853ed9d
Personal income taxes
Profit shifting
Corporate income taxes
Anti-Tax avoidance rules
title_short Do personal income taxes affect corporate tax-motivated profit shifting?
title_full Do personal income taxes affect corporate tax-motivated profit shifting?
title_fullStr Do personal income taxes affect corporate tax-motivated profit shifting?
title_full_unstemmed Do personal income taxes affect corporate tax-motivated profit shifting?
title_sort Do personal income taxes affect corporate tax-motivated profit shifting?
dc.creator.none.fl_str_mv De-Vito, A. (Antonio)|||/items/63639642-1abe-424a-bb32-23673853ed9d
Hillmann, L. (Lisa)|||/items/c0d9b9c2-0ac5-4094-bfd7-3740d6262b50
Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482
Vossebürger, R. (Robert)|||/items/2cd5410e-8447-4c6a-90dd-d8c6182e2acf
author De-Vito, A. (Antonio)|||/items/63639642-1abe-424a-bb32-23673853ed9d
author_facet De-Vito, A. (Antonio)|||/items/63639642-1abe-424a-bb32-23673853ed9d
Hillmann, L. (Lisa)|||/items/c0d9b9c2-0ac5-4094-bfd7-3740d6262b50
Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482
Vossebürger, R. (Robert)|||/items/2cd5410e-8447-4c6a-90dd-d8c6182e2acf
author_role author
author2 Hillmann, L. (Lisa)|||/items/c0d9b9c2-0ac5-4094-bfd7-3740d6262b50
Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482
Vossebürger, R. (Robert)|||/items/2cd5410e-8447-4c6a-90dd-d8c6182e2acf
author2_role author
author
author
dc.contributor.none.fl_str_mv Dadun. Depósito Académico Digital Universidad de Navarra
dc.subject.none.fl_str_mv Personal income taxes
Profit shifting
Corporate income taxes
Anti-Tax avoidance rules
topic Personal income taxes
Profit shifting
Corporate income taxes
Anti-Tax avoidance rules
description This paper examines the role of personal income taxes on multinationals’ corporate tax-induced profit shifting. As mandated in most OECD countries, firms need economic substance in low corporate-tax countries to justify profit shifting to these countries. Because high personal income taxes raise labor costs and thus the cost of providing economic substance, we predict that personal income taxes mute profit shifting. Using data from 26 European countries, we find that personal income taxes substantially reduce profit shifting to low corporate-tax jurisdictions, particularly when parent countries impose strict substance requirements. We also find that firms use employees to justify economic substance and that the effect of the personal income tax is related to its incidence falling partly on firms. Our results show important interactions between personal and corporate income taxes that reduce multinationals’ profit-shifting activities when substance requirements are implemented as in the European Union or many OECD countries.
publishDate 2025
dc.date.none.fl_str_mv 2025
2025-01-01
2025
2025-01-01
dc.type.none.fl_str_mv journal article
http://purl.org/coar/resource_type/c_6501
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://hdl.handle.net/10171/116760
url https://hdl.handle.net/10171/116760
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv text/html
dc.publisher.none.fl_str_mv Elsevier
publisher.none.fl_str_mv Elsevier
dc.source.none.fl_str_mv reponame:Dadun. Depósito Académico Digital de la Universidad de Navarra
instname:Universidad de Navarra
instname_str Universidad de Navarra
reponame_str Dadun. Depósito Académico Digital de la Universidad de Navarra
collection Dadun. Depósito Académico Digital de la Universidad de Navarra
repository.name.fl_str_mv
repository.mail.fl_str_mv
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