INTERNATIONAL INCOME SHIFTING BY US MULTINATIONAL-CORPORATIONS

This paper provides estimates of the amount of income shifted across n ational borders within the manufacturing operations of US multinationa l corporations (MNCs) in 1988. It is assumed that each MNC arranges it s investments such that, after accounting for income shifting opportun ities, the after-tax rate of return on a marginal investment is the sa me for all its affiliates, regardless of location. The income shifting is then inferred by comparing shares of after-tax profits, assets and sales of the affiliated members. It is estimated that such shifting a mounted to about $8 billion (on net), which is less than 4% of the wor ldwide taxable income of the manufacturing MNCs.