A study of cross‐border profit shifting channels: Evidence from Australia

We investigate two cross‐border profit shifting channels used by foreign multinational enterprises (MNEs) in Australia and assess the effectiveness of the related measures adopted by the Australian Parliament to combat base erosion and profit shifting (BEPS). Overall, we find that Australian subsidi...

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Bibliographic Details
Published inAccounting and finance (Parkville) Vol. 64; no. 1; pp. 869 - 901
Main Authors Tran, Alfred, Xu, Wanmeng
Format Journal Article
LanguageEnglish
Published Clayton Blackwell Publishing Ltd 01.03.2024
Subjects
Australian countermeasures
base erosion and profit shifting
debt financing
interest expense loading
transfer pricing
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Summary:We investigate two cross‐border profit shifting channels used by foreign multinational enterprises (MNEs) in Australia and assess the effectiveness of the related measures adopted by the Australian Parliament to combat base erosion and profit shifting (BEPS). Overall, we find that Australian subsidiaries of foreign MNEs used tax‐induced intra‐group transfer pricing and, to a lesser extent, interest expense loading to shift profit out of Australia throughout the period from 2007 to 2020. However, we find no evidence indicating that profit shifting out of Australia via the two channels has reduced after the implementation of related BEPS countermeasures in Australia from 2013.
ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.13166