A1 - Vincent Vicard
TI - The Exorbitant Privilege of High Tax Countries
IS - 2019-06
T3 - Working Papers
KW - Proft Shifting
KW - Multinational Firms
KW - Investment Income
KW - Tax Avoidance
N2 - The well documented US excess returns on its net foreign assets is no exception at the world level. Excess returns on foreign assets owe largely to yield differential within the FDI asset class and are correlated to the corporate tax rate for a large sample of countries, consistently with tax motivated profit shifting by multinational corporations. Using French firm level data on dividends and reinvested earnings from foreign affiliates, I provide evidence and quantify the impact of corporate tax avoidance on international asset returns. Profit shifting inflates the investment income balance and accounts for the average 2 percentage points return differential between French FDI assets and liabilities. Missing profts in France, estimated at €36 billions or 1.6% of GDP in 2015, are mostly shifted to EU countries.
ER -