Taxation and the allocation of risk inside the multinational firm

• 成果类型: Article
• 署名作者: Becker, Johannes; Johannesen, Niels; Riedel, Nadine
• 署名单位: University of Munster; University of Copenhagen
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2020.104138
• 发表日期: 2020

摘要

This paper provides the first theoretical and empirical analysis of how taxation shapes the joint allocation of risk and profits inside the multinational firm. Theoretically, we identify three mechanisms through which corporate taxes may shape the within-firm allocation of risk: (1) transfer pricing rules requiring risk to be compensated with higher expected returns create incentives to shift risk to low-tax jurisdictions as a means to shift profits; (2) risk-averse owners create incentives to allocate risk to high-tax affiliates to maximize risk-sharing with governments; (3) limited loss offset creates incentives to shift risk to affiliates in other countries. Empirically, we show that multinational firms disproportionately allocate risk to low-tax countries and that the key mechanism is the nexus between risk and profits established by transfer pricing rules. Within-firm differences in risk explain a significant fraction of the well-established correlation between profits and tax rates suggesting that risk shifting is a quantitatively non-negligible channel for profit shifting. (C) 2020 Elsevier B.V. All rights reserved.