Highlights :

• We investigate whether the complexity of the ownership structure of multinational enterprises facilitates profit shifting.
• We use firm-level cross-country data.
• Affiliates belonging to more complex MNEs are more likely to bunch around zero profit, which is consistent with complexity enabling tax avoidance by multinationals.
• Only the more complex MNEs shift profits away from their high-tax affiliates, while MNEs with flat ownership structures do not display such pattern.

 Abstract :
Does the complexity of the ownership structure of multinational enterprises' (MNEs) serve tax avoidance? We use firm-level cross-country data to show that affiliates belonging to more complex MNEs are more likely to bunch around zero profit, which is consistent with complexity enabling tax avoidance by multinationals. Our results show that only the more complex MNEs shift profits away from their high-tax affiliates, while MNEs with flat ownership structures do not display such pattern.

 Keywords : Complexity | Firm organization | Multinational enterprises | Profit shifting | Tax avoidance

 JEL : F23, H2, L22