Territorial tax reform and profit shifting by US and Japanese multinationals Makoto Hasegawa
By: Hasegawa, Makoto
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Material type: 
ArticleSubject(s): EMPRESAS MULTINACIONALES | JAPON | ESTADOS UNIDOS | EROSIÓN DE LA BASE IMPONIBLE Y TRASLADO DE BENEFICIOS | IMPUESTO DE SOCIEDADES
In:
National Tax Journal v. 76, n. 4, December 2023, p. 771-804Summary: In 2009, Japan adopted a territorial tax regime by exempting dividends paid by Japanese-owned foreign subsidiaries to their parent firms from home-country taxation. This paper examines the impact of this tax reform on profit shifting by Japanese multinationals. I find that the semielasticity of pretax profits with respect to host-country corporate tax rates for Japanese-owned foreign subsidiaries, particularly large subsidiaries, increased after the 2008 announcement of the implementation of the territorial tax regime, relative to that for US-owned foreign subsidiaries. This suggests that large Japanese-owned foreign subsidiaries responded to the incentive for profit shifting provided by the territorial tax reform.
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Resumen.
Bibliografía.
In 2009, Japan adopted a territorial tax regime by exempting dividends paid by Japanese-owned foreign subsidiaries to their parent firms from home-country taxation. This paper examines the impact of this tax reform on profit shifting by Japanese multinationals. I find that the semielasticity of pretax profits with respect to host-country corporate tax rates for Japanese-owned foreign subsidiaries, particularly large subsidiaries, increased after the 2008 announcement of the implementation of the territorial tax regime, relative to that for US-owned foreign subsidiaries. This suggests that large Japanese-owned foreign subsidiaries responded to the incentive for profit shifting provided by the territorial tax reform.
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