The impact of offshore profit shifting on the measurement of GDP: the case of the UK. Further analysis (ESCoE DP 2022-09)

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The impact of offshore profit shifting on the measurement of GDP: the case of the UK. Further analysis (ESCoE DP 2022-09)

By Manuel Tong Koecklin

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In this paper, we present additional figures and results with respect to Mion and Tong
(2021) using an extended sample. More specifically, in Mion and Tong (2021) we focused
on MNEs with at least one affiliate located in the UK while imposing a 50% ownership
threshold in each step of an ownership chain to assign membership of a firm to an MNE
group. Using the language of the IMF Balance of Payments and International Investment
Position Manual (Version 6), we thus considered only MNEs’ subsidiaries while leaving
associate relationships, i.e., relationships involving in between 10% and 50% of ownership,
aside. In extending the analysis to associate relationships, we find that the net position of
the UK in terms of those who gained or did not gain from our profit shifting exercise is
largely unaffected in both 2007 and 2017. At the same time, the number of associate
relationships is small compared to the number of subsidiary relationships in our data. In
terms of the quantitative importance of associate relationships, for example in terms of
share of overall revenues and profits within an MNE group, the situation is very different in
2007 compared to 2017. While back in 2007 associate relationships were quite sizeable in
terms of overall MNE group revenues and profits, by 2017 their quantitative importance
had become negligible.