If a firm books a sale in a tax haven while the goods are sold somewhere else, what does that look like in the statistics?
Multinationals' Sales and Profit Shifting in Tax Havens
Sébastien Laffitte, Farid Toubal (2022) · American Economic Journal: Economic Policy
Replication data ↗ (openICPSR)
The archive requires an account we do not hold, so the files were not opened. What follows rests on the published abstract and on this platform's own observations.
What the authors found
Laffitte and Toubal show that US multinationals record sales, and the profit on those sales, in tax havens while the goods and services are physically sold elsewhere. Havens attract a disproportionate share of recorded worldwide sales, and the authors quantify sales shifting as a large contributor to measured profit shifting — meaning the geography in the accounts is not the geography of the economy.
What our data adds
Intellectual property receipts are one of the channels this runs through, and they are visible in open balance of payments data. Scaled by GDP, the ranking is not a ranking of research powers. Cyprus receives 8.12 per cent of its GDP in payments for the use of intellectual property, Switzerland 3.36, Singapore 2.60 and Luxembourg 2.41. Sweden and Finland follow at 1.79 and 1.42, and those two plausibly reflect research. The United States, which receives by far the largest absolute sum at 189 billion dollars, collects well under one per cent of its GDP. A small economy taking eight per cent of national income in royalties is telling you where contracts are signed, not where laboratories are.
| Figure | Value | Indicator |
|---|---|---|
| Cyprus, IP receipts as a share of GDP | 8.12% | BX.GSR.ROYL.CD |
| Switzerland | 3.36% | BX.GSR.ROYL.CD |
| Singapore | 2.60% | BX.GSR.ROYL.CD |
| United States, absolute receipts | 189bn USD | BX.GSR.ROYL.CD |
Every figure here is computed from observations in this database and can be charted, downloaded or queried.
What this cannot show
This is corroboration of a mechanism, not a measurement of shifting. Intellectual property receipts mix genuine licensing of real inventions with intra-group transfers priced for tax, and nothing in the balance of payments separates them. Cyprus and Luxembourg are small enough that a single corporate restructuring moves the national figure, and the paper's subject is sales shifting, of which royalties are only one part.