Abstract

We undertake the first empirical analysis of profit shifting by U.S. firms during foreign tax holidays. We show that foreign tax holidays have become a prevalent and powerful tax planning strategy among U.S. firms. We find that U.S. firms significantly increase their outbound profit shifting while participating in foreign tax holidays. However, we also find that profit shifting associated with tax holidays comes at the cost of increased tax uncertainty. Our results have important implications for policy making and for understanding firm behavior.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.

---

• Keyword(s):
• international tax 18

View Working Paper