Income Shifting Aggressiveness and the Regulatory Environment

The past decade has witnessed numerous changes to tax regulations aimed at decreasing aggressive income shifting, with a particular focus on income shifting to tax haven jurisdictions. Using a firm-specific, time-varying measure, we study how incomeshifting aggressiveness has changed over time. We find that income-shifting aggressiveness increases from approximately 2009 through 2015 and then decreases significantly from 2016 through 2022. Although we observe no consistent trend in income-shifting aggressiveness depending on whether the headquarter country has relatively high or low tax rates, we observe an overall increasing trend in income-shifting aggressiveness on average over time among tax-haven-headquartered multinationals. Further, the income-shifting aggressiveness of multinationals with a high share of tax haven affiliates is effectively flat over time, contrasting with the overall declining trend. Additional results reveal interesting heterogeneities across industries and measures of tax incentives. Our results suggest that coordinated global efforts to reduce income shifting have been effective on average, but less effective for multinationals with significant operations in tax haven.