Identification of base erosion and profit shifting using tax evasion rate
Identification of base erosion and profit shifting using tax evasion rate
Author(s): Michal Friedrich, Jana TepperováSubject(s): Business Economy / Management, Business Ethics
Published by: Akadémiai Kiadó
Keywords: base erosion and profit shifting; tax avoidance; multinational enterprises; transfer pricing; transactional net margin method
Summary/Abstract: 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.
Journal: Society and Economy. In Central and Eastern Europe ǀ Journal of the Corvinus University of Budapest
- Issue Year: 43/2021
- Issue No: 1
- Page Range: 75-92
- Page Count: 18
- Language: English