Externalities in International Tax Enforcement: Theory and Evidence

We show that the fiscal authorities of high-tax countries can lack incentives to combat profit shifting tax havens. Instead, they have focus their enforcement efforts on relocating profits booked by multinationals in other countries, crowding out transactions shift havens, and reducing global payments multinational companies. The predictions our model are motivated supported analysis two new datasets: universe transfer price corrections conducted Danish authority, cross-country data international enforcement. (JEL E62, F23, H25, H26, H87, K34)