Profit shifting in Brazil and the impact of tax havens

Neste artigo, investigou-se o fenômeno do profit shifting no Brasil, bem como o impacto dos paraísos fiscais no comportamento erosivo das empresas. Pesquisas sobre profit shifting no Brasil são praticamente inexistentes, embora os incentivos para essa prática no país sejam proeminentes. Este estudo preenche essa lacuna com evidências provenientes do novo contexto brasileiro. O profit shifting é uma estratégia de minimização de impostos, na qual empresas multinacionais realizam transações com partes relacionadas, com o intuito de alocar lucros tributáveis a locais com baixos impostos. O Brasil combina um notável conjunto de incentivos ao profit shifting, especialmente uma elevada carga tributária sobre as empresas, um sistema tributário extremamente complexo e regras diferenciadas de preços de transferência. As pesquisas podem aproveitar dos incentivos ao profit shifting no Brasil, pois oferecem a oportunidade de investigar fatores adicionais que afetam o comportamento erosivo das empresas. Analisaram-se 989 observações de transações-por-país para o período entre 2010 e 2017. A análise principal segue a abordagem robusta de mínimos quadrados com covariáveis de controle. O modelo de estimativa linear deriva da função de produção convencional da Cobb-Douglas, a fim de analisar o impacto dos incentivos ao profit shifting sobre a maximização do lucro. Concluiu-se que as empresas brasileiras apresentam um elevado nível de transações com partes relacionadas localizadas em países com baixa tributação, especialmente com paraísos fiscais. Tal constatação representa uma forte evidência da prática de profit shifting em empresas brasileiras.We investigate tax-induced profit shifting in Brazil and the impact of tax havens on the shifting behavior of firms. Profit shifting research in Brazil is virtually non-existent, although the shifting incentives in Brazil are prominent. Our research fills this gap with evidences in the novel Brazilian context. Profit shifting is a tax-minimization strategy where multinational enterprises perform intra-firm transactions to allocate taxable profits to low-tax locations. Brazil combines a remarking set of profit shifting incentives, especially a high corporate tax rate, extremely complex tax system, and distinguished transfer pricing rules. Further researches may leverage from the shifting incentives in Brazil, since it provides opportunities to investigate additional factors that affect the shifting behavior of firms. We analyze 989 transaction-by-country observations for the period of 2010-2017. Baseline analysis follows the robust least squares approach with controlling covariates. Linear estimate model derives from the conventional Cobb-Douglas production function, to analyze the impact of shifting incentives on profit maximization. We find that Brazilian firms have a high level of intra-firm transactions with related parties located in low-tax countries, especially with tax havens. It represents a strong evidence of profit shifting behavior in Brazilian firms.Neste artigo, investigou-se o fenômeno do profit shifting no Brasil, bem como o impacto dos paraísos fiscais no comportamento erosivo das empresas. Pesquisas sobre profit shifting no Brasil são praticamente inexistentes, embora os incentivos para essa prática no país sejam proeminentes. Este estudo preenche essa lacuna com evidências provenientes do novo contexto brasileiro. O profit shifting é uma estratégia de minimização de impostos, na qual empresas multinacionais realizam transações com partes relacionadas, com o intuito de alocar lucros tributáveis a locais com baixos impostos. O Brasil combina um notável conjunto de incentivos ao profit shifting, especialmente uma elevada carga tributária sobre as empresas, um sistema tributário extremamente complexo e regras diferenciadas de preços de transferência. As pesquisas podem aproveitar dos incentivos ao profit shifting no Brasil, pois oferecem a oportunidade de investigar fatores adicionais que afetam o comportamento erosivo das empresas. Analisaram-se 989 observações de transações-por-país para o período entre 2010 e 2017. A análise principal segue a abordagem robusta de mínimos quadrados com covariáveis de controle. O modelo de estimativa linear deriva da função de produção convencional da Cobb-Douglas, a fim de analisar o impacto dos incentivos ao profit shifting sobre a maximização do lucro. Concluiu-se que as empresas brasileiras apresentam um elevado nível de transações com partes relacionadas localizadas em países com baixa tributação, especialmente com paraísos fiscais. Tal constatação representa uma forte evidência da prática de profit shifting em empresas brasileiras

Profit shifting under the arm's length principle

This study analyses the tax-induced profit shifting behaviour of firms and the impact of governments' anti-shifting rules. We derive a model of a firm that combines internal sales and internal debt in a full profit shifting strategy, and which is required to apply the arm's length principle and a general thin capitalisation rule. We find several cases where the firm may shift profits to low-tax countries while satisfying the usual arm's length conditions in all countries. Internal sales and internal debt may be regarded either as complementary or as substitute shifting channels, depending on how the implicit concealment costs vary after changes in all transactions. We show that the cross-effect between the shifting channels facilitates profit shifting by means of accepted transfer prices and interest rates

On the state-space model of unawareness

We show that the knowledge of an agent carrying non-trivial unawareness violates the standard property of 'necessitation', therefore necessitation cannot be used to refute the standard state-space model. A revised version of necessitation preserves non-trivial unawareness and solves the classical Dekel-Lipman-Rustichini result. We propose a generalised knowledge operator consistent with the standard state-space model of unawareness, including the model of infinite state-space.Comment: working paper, please reference this version in further studie

The detection of tightly closed flaws by nondestructive testing (NDT) methods

Liquid penetrant, ultrasonic, eddy current and X-radiographic techniques were optimized and applied to the evaluation of 2219-T87 aluminum alloy test specimens in integrally stiffened panel, and weld panel configurations. Fatigue cracks in integrally stiffened panels, lack-of-fusion in weld panels, and fatigue cracks in weld panels were the flaw types used for evaluation. A 2319 aluminum alloy weld filler rod was used for all welding to produce the test specimens. Forty seven integrally stiffened panels containing a total of 146 fatigue cracks, ninety three lack-of-penetration (LOP) specimens containing a total of 239 LOP flaws, and one-hundred seventeen welded specimens containing a total of 293 fatigue cracks were evaluated. Nondestructive test detection reliability enhancement was evaluated during separate inspection sequences in the specimens in the 'as-machined or as-welded', post etched and post proof loaded conditions. Results of the nondestructive test evaluations were compared to the actual flaw size obtained by measurement of the fracture specimens after completing all inspection sequences. Inspection data were then analyzed to provide a statistical basis for determining the flaw detection reliability

IFRS accounting quality in Latin America: A comparison with anglo-saxon and continental European countries and the role of cross-listing in the U.S.

This study analyses the level of IFRS accounting quality in Latin America, when compared to Anglo-Saxon and Continental European countries. It also analyses the role of crosslisting in the US when comparing the level of accounting quality of Latin American firms with foreign firms. Prior literature has focused on developed countries. There is a lack of knowledge about less developed countries, especially in Latin America, despite their relevant role on the global economy. This paper fills this gap in the literature by analysing the level of IFRS accounting quality in the main Latin American Countries applying IFRS (Brazil and Chile), when compared to the main Anglo-Saxon countries with IFRS tradition (United Kingdom and Australia), but also when compared with the main European Continental economies (France and Germany). The results show that Latin American firms present a lower level of accounting quality, even when only those firms cross-listed in the U.S., regarded as global players, are compared. Thus, even with a unique set of high quality accounting standards (IFRS) and strong reporting incentives, countries’ specific characteristics still play an important role in the way as IFRS are applied.info:eu-repo/semantics/submittedVersio

Detection of tightly closed flaws by nondestructive testing (NDT) methods in steel and titanium

X-radiographic, liquid penetrant, ultrasonic, eddy current and magnetic particle testing techniques were optimized and applied to the evaluation of 4340 steel (180 KSI-UTS) and 6Al-4V titanium (STA) alloy specimens. Sixty steel specimens containing a total of 176 fatigue cracks and 60 titanium specimens containing a total of 135 fatigue cracks were evaluated. The cracks ranged in length from .043 cm (0.017 inch) to 1.02 cm (.400 inch) and in depth from .005 cm (.002 inch) to .239 cm (.094 inch) for steel specimens. Lengths ranged from .048 cm (0.019 inch) to 1.03 cm (.407 inch) and depths from 0.010 cm (.004 inch) to .261 cm (0.103 inch) for titanium specimens. Specimen thicknesses were nominally .152 cm (0.060 inch) and 0.635 cm (0.250 inch) and surface finishes were nominally 125 rms. Specimens were evaluated in the "as machined" surface condition, after etch surface and after proof loading in a randomized inspection sequence

The effects of corruption on earnings management

This study provides empirical evidence on the effects of corruption, as proxied by Transparency International’s Corruption Perception Index, on earnings management. It tests the hypothesis of positive association between the countries’ level of corruption and the level of earnings management using a sample of foreign firms with American Depositary Receipts (ADR) in the U.S. market. Findings indicate that corruption perception is related to higher incentives for firms to manipulate earnings in the case of emerging countries. Such results are not identified in developed countries.info:eu-repo/semantics/publishedVersio