Quantifying Profit Shifting: Evidence from the OECD CbCR Statistics and Comparative Analysis with ORBIS Data

This paper presents a comparative empirical analysis of multinational profit shifting using two principal data sources: the OECD Country-by-Country Reporting (CbCR) statistics and ORBIS firm-level financial data. We begin by systematically examining structural and reporting differences across the datasets, identifying substantial variation in coverage, consistency, and jurisdictional representation. While both sources yield broadly similar patterns of profit allocation at aggregate levels, significant divergences emerge at finer levels of disaggregation, with some jurisdictions exhibiting opposing trends. In general, CbCR data provide more comprehensive coverage of tax haven destinations—including European, traditional, and Asian havens—whereas ORBIS data disproportionately emphasize European havens, underreporting others. We estimate the determinants of profit shifting using harmonized panel regressions, focusing on statutory corporate tax rates, financial secrecy, and bilateral Tax Information Exchange Agreements (TIEAs). Across specifications, lower tax rates and higher secrecy scores are associated with increased profit allocation to tax havens, while TIEAs significantly reduce reported profits in these jurisdictions. Notably, estimates based on CbCR data align more closely with theoretical predictions and prior empirical findings, particularly in capturing the responsiveness to tax rate differentials. In contrast, ORBIS-based estimates appear attenuated, particularly for tax effects, suggesting potential underreporting in jurisdictions commonly associated with aggressive tax planning. These findings underscore the importance of dataset architecture and institutional context in empirical research on international tax avoidance.