MEASURING THE LOCATION OF PRODUCTION IN A WORLD OF INTANGIBLE PRODUCTIVE ASSETS, FDI, AND INTRAFIRM TRADE

Robert E. Lipsey

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Corporate Taxation and Avoidance Taxation and Legal Issues Global trade and economics

Abstract

As production comes to depend more on intangible productive assets, the location of production by multinational firms becomes increasingly ambiguous. The reason is that, within the firm, these assets have no clear geographical location, but only a nominal location determined by the firm's tax or legal strategies. The effects of these location ambiguities, and the resulting distortions for tax reasons of the location of production, are described. It is estimated that for U.S. firms' affiliates in a few tax havens alone, the exaggeration of value added in those locations amounted, in 2005, to about 4 percent of worldwide affiliate sales, and the exaggeration of sales to about 10 percent of worldwide affiliate sales. Some possibilities for estimating the location of production that could supersede the present dependence on accounting measures distorted by tax‐saving policies are described.

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2010Corporate taxes and the location of intangible assets within multinational firms 1957The Theory of International Economic Policy 2004Do Tax Havens Flourish?2007How would the introduction of an EU-wide formula apportionment affect the distribution and size of the corporate tax base? An analysis based on German multinationals 2006How would the introduction of an EU-wide formula apportionment affect the distribution and size of the corporate tax base? An analysis based on German multinationals

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