Should countries control international profit shifting?

Susana Peralta, Xavier Wauthy, Tanguy van Ypersele

Research output: Contribution to journalArticlepeer-review

52 Citations (Scopus)


We present a fiscal competition model with two policy instruments: the level of corporate taxation and the tightness of control of profit shifting by multinational firms (MNF). We show that a country may optimally decide not to monitor the MNF for two reasons. Firstly, this country becomes an attractive location for MNF activity despite a high corporate tax. Secondly, as the profits of the MNF become mobile, the focus of tax competition is shifted. Taxation then influences both an MNF's location and the place where it declares its profits.

Original languageEnglish
Pages (from-to)24-37
Number of pages14
JournalJournal Of International Economics
Issue number1
Publication statusPublished - Jan 2006


  • Equilibrium existence
  • Profit shifting
  • Tax competition
  • Taxation of multi-national firms
  • Transfer prices


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