Thread by @Brad_Setser

A bit more evidence that Trump's tax reform didn't change incentives to offshore profits: the enormous profits that U.S. firms report in low tax jurisdictions continues to rise.

In fact, there was a bit of a jump up over the course of 2018.

The gap between the profits US firms report in the world's main low tax jurisdictions/ corporate tax centers and the profits they report in large countries with large markets more or less speaks for itself.

There is a lot of profit shifting still going on ...

There a couple of indicators to track to see if the tax cuts have induced US firms to "reshore" their "offshored" profits

One is the total profit reported abroad v IP exports. Total offshore profit should fall if firms are moving IP back home. So far, nothing is happening

Another is the global distribution of the profit. Do the super-profits US firms earn abroad remain concentrated in the major corporate tax havens?

Answer so far is yes

(also suggests BEPS impact has been modest to date)

So far the impact of the tax reform has basically been that firms that offshored a large portion of their profits pay a substantially lower tax. The profits are still offshore and still in low tax jurisdictions.

A reminder: the new 10.5% global minimum tax on intangibles (GILIT) is at a lower tax rate than the tax on deemed repatriation that settled firms deferred tax liability on their offshore profits (15.5%). Everybody got a tax cut, including the biggest offshorers ...