Why pay more? Corporate tax avoidance through transfer pricing in OECD countries

This paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of OECD countries. We use a new method to disentangle the income shifting effects from the effects of tax rates on real activity. Our baseline estimates suggest that a substantial share of the revenues from a unilateral increase in the corporate tax rate is lost because of a decline in reported income. (C) 2003 Elsevier B.V. All rights reserved.