THE EFFECT OF PROFIT SHIFTING ON THE CORPORATE TAX BASE IN THE UNITED STATES AND BEYOND

This paper estimates the effect of profit shifting on corporate tax base erosion for the United States, using Bureau of Economic Analysis survey data on U.S. multinational corporations during 1983 to 2012. I find that profit shifting is likely costing the U.S. government between $77 billion and $111 billion in corporate tax revenue by 2012, and these revenue losses have increased substantially in recent years. The paper also extends this analysis to other countries, finding that corporate tax base erosion is likely a large problem in countries without low tax rates. The paper discusses suggested reforms.