Publicly defended on September 6, 2022 - Université Libre de Bruxelles

The past decade has been marked by numerous tax scandals (e.g., the Offshore Leaks in 2013, the LuxLeaks in 2014, the SwissLeaks in 2015, the Panama Papers in 2016, the Paradise Papers in 2017, the FinCEN Files in 2020, the Pandora Papers in 2021). They raised awareness about the aggressive strategies adopted by companies to avoid corporate income taxes. They also had special resonance due to increasing income inequalities, persistent budget deficits in high-income countries, and the COVID-19 pandemic.

A group of firms is particularly accused of large-scale tax avoidance: multinational enterprises (MNEs). Apple, Deutsche Bank, Facebook, FedEx, IKEA, Nike, and PepsiCo, to mention only a few, all appear in recent data leaks. With the help of banks and accounting companies, they exploit legal technicalities and set up complex structures to reduce their tax liability. They artificially shift a substantial amount of profits from high- to low-tax countries, and especially to tax havens, where corporate income tax rates are low and where the lack of transparency provides unique opportunities for tax dodging.

Many questions have emerged in the wake of these events. How much profits are transferred to tax havens for tax purposes? The question is natural, but the answer is not trivial. Quantifying profit shifting is highly challenging in essence because it is unobserved. To come up with an estimate, we need to calculate the amount of profits that would have been declared in tax havens in absence of profit shifting, which is not as simple as it seems. What encourages companies to engage in profit shifting? Tax rate differentials certainly play a role. Profits tend to be disproportionately high in jurisdictions with near-zero tax rates. However, tax rates are insufficient to explain why some tax havens attract more profits than others. They are also insufficient to grasp why some high-tax countries are more affected by profit shifting than others and why only a handful of MNEs move profits across borders. What are the consequences, notably in terms of income inequalities? It is often admitted that profit shifting aggravates income inequalities in the public sphere. Yet, there is still little statistical evidence on this topic.

My dissertation tackles some of these questions. It consists of 4 single-authored chapters whose approach combines methods from economics and statistics with insights from accounting, international business, and management. The objective is twofold: better understand the determinants and distributional consequences of profit shifting.