Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259395 
Year of Publication: 
2022
Series/Report no.: 
WIDER Working Paper No. 2022/39
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
Illicit financial flows directly impact a country's ability to raise, retain, and mobilize its own resources to finance sustainable development. Against a backdrop of a weak public financial position attributed to capital flight, tax avoidance, and dependence on corporate income taxes, governments in Africa face impediments to their efforts to widen the tax base. Using firm-level annual data from 2015-19 from multinational corporations' audited financial statements, we assess the scale of profit shifting by those corporations with a presence in Kenya. Using a panel analysis, the study delves into the incentives for profit shifting, focusing on internal debt. It finds that a 10 per cent increase in the difference between Kenya's corporate tax rate and that of the lending corporation's home country increases the internal debt ratio by between 1 and 2 per cent. The results provide a basis for the design of targeted tax and revenue administration reforms against the backdrop of rising revenue needs.
Subjects: 
profit shifting
corporate tax rate
multinational corporations
JEL: 
F23
H25
H26
O23
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-170-9
Document Type: 
Working Paper

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