Data suggests public scrutiny may influence whether firms disclose offshore subsidiaries
MNCs seem to be sensitive to being called out for having a subsidiary in a notorious tax haven. They also tend to not disclose operations in countries that might invite increased scrutiny
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How multinational firms should be taxed and how governments can prevent them shifting income to low-tax countries known as tax havens is an ongoing international debate.
Scott Dyreng, an accounting professor at Duke University’s Fuqua School of Business, researches how multinational firms use subsidiaries in countries such as the Cayman Islands and Bermuda to lower their tax rates.
In a paper published in the Journal of Accounting Research, Dyreng used data from the Internal Revenue Service to show that some multinationals are not disclosing significant foreign subsidiaries in their annual reports, in violation of U.S. Securities & Exchange Commission rules.Dyreng discussed the findings in this Q&A.
[This article has been reproduced with permission from Duke University's Fuqua School of Business. This piece originally appeared on Duke Fuqua Insights]