What is Driving the Decline in Contributions of Multinational Firms to Corporate Tax Revenues?

Abstract

This paper explores reasons for declining contributions of multinational firms to corporate tax revenues. Using a population of UK firms, I show that over the period 2000 - 2014 multinationals paid a declining fraction of corporate tax revenues, while expanding in size. In 2014 over 70% of total assets reported on UK company balance sheets were held by companies that paid no tax and were part of a multinational group. Further, tax incentives for small and medium companies have increased the number and the corporate tax revenues from those companies. I analyze potential reasons for why these patterns occurred.