Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 1 of 1
Full-Text Articles in Economics
Profit Shifting And Corruption, Katarzyna Anna Bilicka, André Seidel
Profit Shifting And Corruption, Katarzyna Anna Bilicka, André Seidel
Economics and Finance Faculty Publications
This paper introduces heterogeneous profit shifting costs induced by corrupt tax officials to the analysis of profit shifting of multinationals. Using a theoretically derived corruption weighted tax differential, we show that corruption increases profit shifting of European firms. We use our estimates to calculate the implied tax revenue elasticities for European countries and find that countries with otherwise similar tax rates face lower tax revenue elasticities when they are more corrupt. This means that corruption negatively affects the revenue gains that countries could have from increasing their tax rates.