Title: Profit-shifting through Panama Papers destinations: a case study for the Czech Republic

Authors: Veronika Solilová; Danuše Nerudová; Marek Litzman; Marian Dobranschi

Addresses: Faculty of Business and Economics, Department of Accounting and Taxation, Zemědělská 1, 61300, Brno, Czech Republic ' Faculty of Business and Economics, Department of Accounting and Taxation, Mendel University of Brno, Zemědělská 1, 61300, Brno, Czech Republic ' Faculty of Business and Economics, Department of Accounting and Taxation, Zemědělská 1, 61300, Brno, Czech Republic ' Faculty of Business and Economics, Department of Accounting and Taxation, Zemědělská 1, 61300, Brno, Czech Republic

Abstract: This paper exploits firm-level data from the ORBIS database to identify international tax planning by the Czech multinational enterprises (MNEs) through Panama Papers destinations. Profit shifting is measured by comparing a tax payable per unit of profits of the Czech MNEs having links to the Panama Papers destinations with the results of the same indicator of the Czech non-multinational entities i.e., without any cross-border links and thus without any profit shifting opportunities. Results are based on the sample of 116,312 entities and provide evidence about the importance of the Panama Papers destinations in profit-shifting from the Czech Republic. Overall, the estimated base erosion ranges from EUR 159 up to EUR 2.92 mil., which corresponds up to approximately CZK 14 mil. of corporate tax revenues losses. Results also show that anonymous ownership and financial secrecy play an important role in the world economy and contribute to the tax planning and profit shifting.

Keywords: Panama Papers; profit shifting; Czech Republic; ORBIS; individuals; MNEs; multinational enterprises; base erosion; tax havens; tax revenues losses; service-oriented industries.

DOI: 10.1504/IJMEF.2020.108826

International Journal of Monetary Economics and Finance, 2020 Vol.13 No.3, pp.179 - 188

Received: 21 Oct 2019
Accepted: 12 Feb 2020

Published online: 28 Jul 2020 *

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