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A clean and discreet service: the role of corruption and secrecy in profit shifting by multinational firms

Binhadab, Nouf ORCID: 0000-0003-3409-8424, Gillanders, Robert ORCID: 0000-0001-9462-0005 and McCluskey, Thomas (2023) A clean and discreet service: the role of corruption and secrecy in profit shifting by multinational firms. Journal of International Development, 35 . ISSN 0954-1748

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Abstract

We investigate the importance of corruption in shaping the profit-shifting behaviour of multinational firms. Using country-level panel data, we find a significant and positive correlation between corruption and profit shifting. Our findings are consistent with several theoretical arguments predicting that corruption may both facilitate and provide an incentive to firm behaviour that deprives poorer countries of much needed tax revenues. Our findings are robust across a number of corruption and profit shifting measures, as well as to an instrumental variable approach that controls for the potential endogeneity between profit shifting and corruption. Our findings also indicate a negative and significant relationship between financial secrecy and outward profit shifting. We conclude that corruption and financial secrecy undermine global efforts to tackle profit shifting by multinational firms.

Item Type:Article (Published)
Refereed:Yes
Uncontrolled Keywords:taxation; profit shifting; corruption; secrecy; multinational corporations (MNCs) and enterprises (MNEs)
Subjects:Business > Business ethics
DCU Faculties and Centres:DCU Faculties and Schools > DCU Business School
Publisher:Wiley
Official URL:https://dx.doi.org/10.1002/jid.3739
Copyright Information:© 2022 © John Wiley & Sons Ltd
Funders:Open access funding provided by IReL.
ID Code:27957
Deposited On:20 Feb 2023 15:24 by Thomas Murtagh . Last Modified 20 Feb 2023 15:24

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