Close to 40% of multinational profits are shifted to tax havens each year
Researchers from the University of California, Berkeley and the University of Copenhagen estimate that close to 40% of multinational profits (close to $1 trillion in 2019) are shifted to tax havens each year. This shifting reduces corporate income tax revenue by more than $200 billion, or 10% of global corporate tax receipts.
Explore the map to see how much profit and tax revenue your country loses (or attracts) in this game for profits. The tax havens can be hard to find, but you can zoom in by pressing the full-screen button.
This research was published by the Review of Economic Studies in 2022.
About the research
Researchers from the University of California, Berkeley and the University of Copenhagen have produced a database showing where corporations book their profits globally. Exploiting these data, the authors develop a methodology to estimate the amount of profits shifted to tax havens by multinational companies and how much each country loses in profit and tax revenue from such shifting. Globally, multinational firms shifted nearly $1 trillion in profits to tax havens in 2019 and this shifting reduced global corporate tax receipts by 10%.
Multinational firms shift profits to tax havens to reduce their global tax bills. Take the example of Google: In 2017, Google Alphabet reported $23 billion in revenue in Bermuda, a small island in the Atlantic where the corporate income tax rate is zero. Globally, more than $900 billion in profits are shifted to such tax havens by multinational from all countries.
You can explore the map to see which countries attract and lose profits in this shell game. The map covers 86 countries that constitute 92% of global economic activity and more than 70% of World population. By clicking on each country you can see the amount of profits shifted to tax havens and to which havens the profits were shifted. You can also see the implied loss of corporate income tax revenue. Some countries are marked in green; these are tax havens. For the tax havens we report how much profits they attract from high-tax countries and what the effective corporate income tax rate is.
The loss of profit is the highest for the (non-haven) European Union countries. U.S. multinationals shift comparatively more profits (about 60% of their foreign profits) than multinationals from other countries (40% for the world on average). The shareholders of U.S. multinationals thus appear to be the main winners from global profit shifting. Moreover, the governments of tax havens derive sizable benefits from this phenomenon: by taxing the large amount of paper profits they attract at low rates (less than 5%), they are able to generate more tax revenue, as a fraction of their national income, than the United States and non-haven European countries that have much higher tax rates.
Until recently, this research would not have been possible, because firms usually do not publicly disclose the countries in which their profits are booked, and national accounts data did not make it possible to study multinational corporations separately from other firms. But in recent years, the statistical institutes of most of the world’s developed countries (including the key tax havens) have started releasing new macroeconomic data known as foreign affiliates statistics. These data allow to obtain a comprehensive view of where multinational companies book their profits, and in particular to estimate the amount of profit booked in tax havens globally. To further our understanding of this issue we need more and better data. In particular it would be desirable that all countries publish foreign affiliates statistics, and that these statistics be extended to always include information on taxes paid.
This research was published by the Review of Economic Studies in 2022, but is being continously updated by the authors as new data arrive. As aa further edition, Wier and Zucman has created a historical timeline of profit shifting all the way back to 1975 in the 2019 update.
Download the full research
The Missing Profits of Nations (by Thomas Tørsløv, Ludvig Wier and Gabriel Zucman)
Original paper (2015 estimates)
Data (2015 estimates)
Updated results (2016 estimates)
Updated results (2017 estimates)
Updated results (2018 estimates)
About the researchers
PhD in Economics from the University of Copenhagen. His research focuses on tax avoidance by multinational companies. He is currently employed by the Danish Central Bank.
Head of Secretariat at the Danish Ministry of Finance. Formerly a postdoctoral researcher and lecturer at UC Berkeley. Founder of Economists Without Borders. He holds a PhD from the University of Copenhagen. His research focuses on international taxation and development. In that context, he is also working as a consultant to the UNU-WIDER and IMF.
Professor of economics at UC Berkeley who holds a PhD from the Paris School of Economics. His research focuses on global wealth, globalization, inequalities and tax havens. He is also the author of the two books “The Hidden Wealth of Nations: The Scourge of Tax Havens” and “The Triumph of Injustice: How the Rich Dodge Taxes and How To Make Them Pay”
Listen to the research
In the media
The findings from this research project has drawn wide attention from the media and politicians, coverage includes:
Authors discussing the implications of the research with Pierre Moscovici (Commissioner of Economics and Taxation in the EU).