Research

Working paper:

• Tax regimes and profit shifting (with P.Karavitis, P.Kazakis, and T.Sougiannis)- coming soon

In this paper, we examine whether and how the Imputation tax regime of parent and (or) subsidiary affects a multinational's profit shifting. This is the first study that examines not only the parent or subsidiary tax system but also considers the combined tax system of parent and subsidiary. We find that parent located under an Imputation tax system, on average shifts less taxable income to subsidiaries in low tax jurisdictions. This reduction comes via reductions in the transfer pricing and in the relocation of intangibles. Further, we find that the parent has a preference to shift income to low-tax subsidiaries located in the Imputation tax regimes over low-tax subsidiaries located in non-Imputation tax regimes. The main channel to do this shifting is debt shifting. Also, We find that the pair of a parent with the non-Imputation tax regime and a subsidiary with the Imputation tax regime has a higher tendency to shift income.

Best paper in Accounting award at Financial Management & Accounting Research Conference (FMARC), Limassol, 2022.