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Research
Jun 14, 2022

The Effect of U.S. Country-by-Country Reporting on U.S. Multinationals’ Tax-Motivated Income Shifting and Real Activities

The Organization for Economic Co-operation and Development introduced country-by-country
reporting (CbCR) for multinational enterprises (MNEs) to help tax authorities combat tax-
motivated income shifting. This study uses confidential U.S. tax administrative data from 2011 to
2018 to examine the effect of U.S. CbCR adoption on the tax-motivated income shifting and real
activities of U.S. MNEs. We first document that while U.S. CbCR provides the Internal Revenue
Service with incremental information about the location of U.S. MNEs’ global activities relative to
existing U.S. tax return disclosures, we observe substantial overlap between U.S. CbCR and
existing disclosures. In contrast with prior CbCR studies in cross-country settings, we fail to find
evidence of a change in U.S. MNEs’ tax-motivated income shifting or a reallocation of real
activities based on tax incentives in response to U.S. CbCR using multiple empirical approaches.
Overall, our study leverages U.S. tax administrative data to provide insights into the impact of the
CbCR initiative on U.S. MNEs.

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