Inward outward incentive tax base host inward outward

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Inward (Outward) Incentive × Tax Base Host + Inward (Outward) Incentive . All the variables are defined in the Appendix. Heteroskedasticity-robust standard errors are clustered at the firm level and shown in parentheses. The superscripts *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively. Electronic copy available at: Electronic copy available at:
49 Table 7 : Corporate tax reforms, tax base broadening, and inward versus outbound profit shifting The role of each tax base item Dependent Variable: ln ( EBIT ) Profit Shifting: Inward Outward Explanatory Variables: (1) (2) (3) (4) Inward Incentive 0.0732** 0.0590** (0.0294) (0.0294) Inward Incentive × TP & Thin Cap -0.0124 -0.0115 (0.0189) (0.0190) Inward Incentive × Other Tax Rules -0.0392*** -0.0352*** (0.0129) (0.0129) Outward Incentive -0.0840*** -0.0730*** (0.0256) (0.0257) Outward Incentive × TP & Thin Cap 0.0374** 0.0326* (0.0184) (0.0185) Outward Incentive × Other Tax Rules 0.0099 0.0073 (0.0134) (0.0134) TP & Thin Cap 0.0116 0.0114 -0.0092 -0.0071 (0.0139) (0.0139) (0.0147) (0.0147) Other Tax Rules -0.0109 -0.0105 -0.0341** -0.0316** (0.0143) (0.0143) (0.0142) (0.0142) Tax Base Parent 0.0301*** 0.0283*** 0.0312*** 0.0298*** (0.0087) (0.0087) (0.0087) (0.0087) Joint Significance [( Inward Incentive × TP & Thin Cap ) 0.0608*** 0.0475** + ( Inward Incentive )] (0.0232) (0.0232) [( Inward Incentive × Other 0.0340 0.0239 Tax Rules ) + ( Inward Incentive )] (0.0250) (0.0250) [( Outward Incentive × TP & Thin Cap ) -0.0466** -0.0404** + ( Outward Incentive )] (0.0199) (0.0199) [( Outward Incentive × Other -0.0740*** -0.0657*** Tax Rules ) + ( Outward Incentive )] (0.0232) (0.0232) Controls & Firm fixed effects Industry Year fixed effects - - Year fixed effects - - #Observations 101,985 101,985 101,985 101,985 #Affiliates 17,538 17,538 17,538 17,538 Adj. R-Squared 0.870 0.871 0.870 0.871 Notes : Observational units are profit-making multinational subsidiaries per year. All specifications include a full set of affiliate dummies and a full set of industry year dummies (at the one-digit SIC code level). Columns (1) and (2) show the results on inward profit shifting, whereas columns (3) and (4) show the results on outward profit shifting. The dependent variable is the natural logarithm of EBIT . The variable TP & Thin Cap is an index ranging from 0 (no transfer pricing documentation requirements and no restrictions on interest payments deductibility) to 2 (transfer pricing documentation requirements and restrictions on interest payments deductibility). The variable Other Tax Rules is an index ranging from 0 (narrow tax base) to 4 (broad tax base with no tax consolidation, no accelerated depreciation allowances, no loss carryback rule, and loss carryforward up to a maximum of 5 years). The variable Inward (Outward) Incentive is an indicator variable taking the value of one if the difference between the subsidiary tax rate minus the parent tax rate is negative (positive). The variable Joint Significance tests for the effect of Inward (Outward) Incentive × TP & Thin Cap + Inward (Outward) Incentive ( Inward (Outward) Incentive × Other Tax Rules + Inward (Outward) Incentive ). All the variables are defined in the Appendix. Heteroskedasticity-robust standard errors are clustered at the firm level and shown in parentheses. The superscripts *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

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