Matching Tax Returns and Financial Statement Data to Measure Income Shifting

• In Event: Tax Havens and Tax Planning

Abstract

We match corporate tax return data with financial statement data to estimate tax-motivated cross-border income shifting in Austria. Our baseline estimate indicates a tax semi-elasticity of taxable income reported on corporate tax returns of -0.9. In contrast, we find little evidence of income shifting when using financial statement profits to proxy for taxable income - a common approach in prior research. However, adjusting financial statement profits for tax-exempt dividend income yields estimates consistent with our main findings. Additional tests indicate that failing to account for dividend income can distort inferences about the relevance of specific income-shifting strategies. Our findings highlight that using financial statement data to approximate taxable income can affect the reliability of income-shifting estimates.

Authors

• Harald Amberger, Vienna University of Economics and Business

• Ruby Doeleman, WU Vienna University of Economics and Business

• Stefanie Pendl, stefanie.pendl@wu.ac.at