Press Release: New research reveals close to $1 trillion in profits shifted to tax havens
Profit shifting by multinational firms is a relatively new phenomenon: in the 1970s less than 2% of multinational profits were shifted to tax havens, by 2019 it was nearly 40%. This phenomenon has attracted considerable attention from economists and policymakers in recent years, with various policies and regulations introduced to try and curb tax avoidance. Despite these developments, we do not have a good sense of the dynamics of global profit shifting.
The UNU-WIDER study provides the first comprehensive look at the historical dynamics of profit shifting, and it reveals that several years after major policy initiatives from the OECD and corporate tax reform in the United States, global profit shifting continued to increase, with close to $1 trillion shifted to tax havens in 2019.
This finding suggests that there remains a dire need for additional policy initiatives to significantly reduce global profit shifting —such as implementing the global minimum corporate tax that more than 130 countries signed onto in 2021, but now remains in limbo as it is being blocked in the EU and the US, explains Ludvig Wier, one of the authors of the study.
Trailblazer source for understanding the magnitude of profit shifting
The research is based on the pioneering database created by research authors Wier and Zucman showing where corporations report their profits globally. The public database makes the data on profit shifting accessible and understandable with an interactive map.
‘The United Nations Sustainable Development Goals clearly state that in order to deliver poverty reduction and to decrease global inequalities illicit financial flows such as profit shifting must decline’, Wier concludes.
• WIDER Working Paper 119/2022: Global profit shifting, 1975-2019
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