International income shifting by US multinational corporations
This paper provides estimates of the amount of income shifted across national borders within the manufacturing operations of US multinational corporations (MNCs) in 1988. It is assumed that each MNC arranges its investments such that, after accounting for income shifting opportunities, the after-tax rate of return on a marginal investment is the same for all its affiliates, regardless of location. The income shifting is then inferred by comparing shares of after-tax profits, assets and sales of the affiliated members. It is estimated that such shifting amounted to about $8 billion (on net), which is less than 4% of the worldwide taxable income of the manufacturing MNCs.