Identification of base erosion and profit shifting using tax evasion rate

Friedrich, Michal ORCID: and Tepperova, Jana (2021) Identification of base erosion and profit shifting using tax evasion rate. Society and Economy, 43 (1). pp. 75-92. DOI

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Multinational enterprises (MNEs) use different methods and structures for base erosion and profit shifting (BEPS) to optimize the tax liability of the group. It is of great interest to the relevant countries to be able to identify such practices and react with appropriate measures. The objective of this paper is to verify whether selected MNEs engaged in the digital economy tend to shift profits from the Czech Republic to jurisdictions with lower taxation using the tax evasion rate (TER) indicator and the transactional net margin method (TNNM). Since the TER method has not been tested yet, this paper also aims to demonstrate its application on real world data and to evaluate its usability. On a sample of five MNEs, the analysis showed a potential tendency to shift profits within Europe for four MNEs (Amazon, Apple, Google and Uber) and a potential tendency to shift profits specifically from the Czech Republic for one MNE (Amazon). The analysis shows that TER is suitable as a preliminary indication of possible risks, rather than their exact quantification.

Item Type:Article
Uncontrolled Keywords:base erosion and profit shifting, tax avoidance, multinational enterprises, transfer pricing, transactional net margin method
JEL classification:H25 - Business Taxes and Subsidies including sales and value-added (VAT)
H26 - Tax Evasion
Subjects:Economic development
ID Code:6417
Deposited By: Veronika Vitéz
Deposited On:13 Apr 2021 11:28
Last Modified:11 Oct 2021 08:58

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