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Three essays on transfer pricing, base erosion and profit shifting of US multinational companies
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Shukurov, Firuz. Three essays on transfer pricing, base erosion and profit shifting of US multinational companies. Retrieved from https://doi.org/doi:10.7282/t3-py1r-f430

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TitleThree essays on transfer pricing, base erosion and profit shifting of US multinational companies
NameShukurov, Firuz (author); Seiglie, Carlos (chair); Spatareanu, Mariana (internal member); Poniachek, Harvey (internal member); Gonzalez Corzo, Mario (outside member); Rutgers University; Graduate School - Newark
Date Created2020
Other Date2020-01 (degree)
SubjectTax evasion, Management
Extent1 online resource (vii, 93 pages) : illustrations
DescriptionThe dissertation focuses on issues of tax avoidance, base erosion and profit shifting of multinational companies and consists of three essays.

First essay studies multinational’s decision making process regarding tax optimization in the global environment with the choice of placing mobile assets in different tax locations and in the presence of possible enforcement from tax authorities. The decision making process is presented as a decision tree, which is used as a tool to evaluate possible payoffs of multinational in regulated environment. Another novelty of the presented approach is inclusion of intermediate destinations (offshores) into existing two ends scheme – home and foreign subsidiary. The model introduces tax authorities in parent and final destinations, which attempt enforce the firm to apply arm-length rules by means of audit and penalties. The results demonstrate that transfer pricing regulations in high tax countries may compel the firm to move the optimal transfer price close to arm-length, especially if efforts of high tax countries are coordinated.

Second Essay attempts to study tax motivated profit shifting of US companies by constructing structural equation model based on factors that traditionally believed to be associated with income shifting and to investigate the nature of the relationships. Additional advantage of this technique lays in possibility to evaluate the relationships among factors in the presence of multi-co-linearity. Since all variables used in the model are observable, measurement model issues associated with latent indicators are not a concern. Data is constructed by merging Compustat North America Fundamentals and Compustat Execucomp covering the period of 2000-2016. Initial results illustrates that publicly available information can be used to measure income shifting effects. Particularly, application of the simultaneous equations’ method in the current analysis confirms that US companies face (i) higher domestic tax obligations and lower abroad tax obligations (ii) book-to-tax difference can be a good sign of tax aggressiveness, (iii) US companies prefers debt financing to equity financing to reduce domestic taxes rather than overseas taxes, and (iv) intangibles are shifted to jurisdictions with low tax rates to reduce taxes in US.

Third essay discusses Luxembourg tax agreements (LTAs, Agreements initiated by the Government of Luxemburg to boost investments), which became a financial scandal first time leaked to newspapers in November 2014 by the group of journalist from the International Consortium of Investigative Journalists. EU authorities (State Aid) have concerns that those companies involved in LTAs were able to reduce their taxes and these agreements signed by multinationals only for tax avoidance purposes and therefore those taxes to be paid in EU. At the same time multinationals claim that LTA were used by them to pursue other management goals such as expansion of the presence in the EU market and for investment decisions. Current paper evaluates whether US multinational companies from S&P 500, which had been involved in Luxemburg Tax Agreements of 2005-2008, were able to reduce their worldwide tax obligations. By comparing results from various difference-in-difference regressions – traditional, quantile and semiparametric, I have found that these companies may have saved more on taxes then other US companies of the S&P list, what indirectly confirms the arguments of EU authorities about tax aggressiveness of those companies involved in Luxembourg agreements.
NotePh.D.
NoteIncludes bibliographical references
Genretheses, ETD doctoral
Persistent URLhttps://doi.org/doi:10.7282/t3-py1r-f430
LanguageEnglish
CollectionGraduate School - Newark Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.
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