Analysis of Where American Companies Report Profits: Indications of Profit Shifting [January 18, 2013] [open pdf - 364KB]
From the Summary: "This report uses data on the operations of U.S. multinational companies (MNCs) to examine the extent to which, if any, MNCs are moving profits out of high-tax countries (or out of the U.S.) and into low-tax countries with little corresponding change in business operations, a practice known as 'profit shifting.' To do this, the profits reported by American firms in two groups of countries are compared with measures of real economic activity in those locations. The first group consists of the five countries commonly identified as being 'tax preferred' or 'tax haven' countries, and includes Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. The second group, which provides a baseline for comparison, consists of five more traditional economies. This group includes Australia, Canada, Germany, Mexico, and the United Kingdom. […] This report may be of interest to Members of Congress for at least four reasons. First, profit shifting has been the specific target of recent Congressional action, including a September 2012 hearing held by the Senate Permanent Subcommittee on Investigations, as well as several bills introduced in the 112th Congress. Second, anti-abuse provisions have been included in general tax reform proposals in the 112th Congress. Third, most general tax reform proposals would lower the top corporate rate which would diminish the incentive to shift profits. And fourth, to the extent that profit shifting is reduced, federal tax revenues would increase, although the net effect on federal tax revenues would depend on the existence and magnitude of offsetting revenue changes, which, in turn, would depend on the approach taken to curb profit shifting."
CRS Report for Congress, R42927