CEPII, Recherche et Expertise sur l'economie mondiale
The Instruments of Profit Shifting


Kevin Parra Ramirez
Vincent Vicard

 Points clés :
  • Using firm-level data, we provide the first joint quantification of the three main profit-shifting channels: transfer mispricing in goods trade, intangible assets and services traded with tax havens, and intra-firm debt.
  • Transfer mispricing in goods trade is the dominant channel in France, accounting for €10 billion (0.4% of French GDP) in shifted profits, followed by services (up to €6 billion) and debt (€2 billion).
  • Although significant, direct estimates of profit shifting explain only half of France's total missing profits estimated from indirect evidence.
  • We identify cross-border digital payments and understudied debt instruments as key blind spots likely contributing to the remaining missing profits.

 Résumé :
While multinational enterprises (MNEs) shift hundreds of billions in profits to low-tax jurisdictions annually, how they do remains disputed. Using firm-level data for France in 2018, we provide the first joint quantification of the three main profit-shifting channels: transfer mispricing in goods trade, intangible assets and services traded with tax havens, and intra-firm debt. We find empirical evidence for all three instruments, but transfer mispricing dominates quantitatively (€10 billion, 0.4\% of GDP), followed by services (up to €6 billion) and debt (€2 billion). Although significant, these direct estimates account for half of total missing profits in France, as estimated indirectly from the location of MNE profits. We document two key blind spots likely to close this gap: cross-border digital payments by households and understudied debt instruments (e.g., securities).


 Mots-clés : Tax Avoidance | Multinational Firms | Profit Shifting | FDI | Trade

 JEL : H26, H25, H32, F14, F23
CEPII Working Paper
N°2025-16, November 2025

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