Micro-evidence of Corporate Tax and Profit Shifting: Focusing on the Role of Intangible Assets

Abstract

This study examines multinational firms’ profit shifting focusing on the role of intangible assets. Global firm level data is collected from the Orbis covering 9,932 parent firms and 179,459 subsidiaries for the period of 2012 to 2020. Our results confirm that profit of the multinational firms’ affiliates is related to tax rate. Multinational firms’ affiliate located in the countries with lower tax rate reports high profit. Moreover,multinational firms’ affiliates located in lower tax rate turn out to have higher intangible assets. Profit shifting activity based on the tax difference become more significant for the group with high intangible assets.