JRC B2 Seminar: “Pennies from Haven: Wages and Profit Shifting” – Johannes Scheuerer


The ability of some multinationals to reduce their tax burdens by shifting profits to tax havens has drawn increasing criticism both because of the lost revenues to high-tax countries and the perceived inequality this creates in the tax burden across firms. We demonstrate that such concerns are not the only impacts of profit shifting by using rich matched employer-employee data to show that profit-shifting firms pay higher wages. This is particularly apparent among service firms where the wage premium is approximately 2%. Further, there is substantial within-firm heterogeneity with high-skill occupations earning higher profit-shifting wage premiums. CEOs gain the most, with their wages rising nearly 10%. Finally, our back-of-the envelope calculations indicate that higher wages lead to higher income tax revenues that offset around 12% of the fall in Norway’s corporate tax revenues due to profit shifting. Thus, profit shifting not only impacts government revenues, but contributes meaningfully to aggregate wage inequality.


Johannes Scheuerer is a PhD Candidate in the School of Economics at University College Dublin and a Research Affiliate at SKATTEFORSK Centre for Tax Research. His research interests lie in the field of empirical international economics, with a focus on foreign direct investment and international corporate taxation. His current work revolves around the profit shifting activities of multinational firms and their consequences for the wider society.