Thread by @LudvigWier

Can't believe this paper is finally out!😍 It has been six years in the works - almost spanning my entire career😅 Phew.

What did we do? Why did it take so long? And is it worth the read? 🙏A personal (long) thread below👇🧵 1/10

https://twitter.com/RevEconStudies/status/1550547830443737088?s=20&t=kMnXdMuhW9TajxebzbAHMg

So - it all began six years ago when I sat in Gabriels office at Berkeley.

I was showing him some mind boggling data on tax enforcement in Denmark that me and @TTorslov had stumpled upon (we ended up writing another paper on that topic - but that's another story..) 2/10

Gabriel asked me: How much tax revenue does Denmark actually lose to tax havens?

That simple question was very difficult to answer based on the existing body of research (incl. my own earlier work). 3/10

The reason was that most of the research (incl. my own) was based on "event-studies". E.g. looking at the impact of past corp. tax cuts on profits appearing in tax havens.

From this you can estimate the profits being shifted to tax havens... but it will be an extrapolation 4/10

We really wanted an overview of the very basic questions:

1) How much profit is reported in tax havens?
2) How does that align with economic activity in tax havens?
3) In the case of misalignment - where do the profits originate from 5/10

Together with @TTorslov we began the painstaking work of teasing through national accounts and ultimately managed to compute profits reported and wages paid for all countries. 6/10

That allowed us to produce the graph below. It shows two things:
1) The profitability of local firms is surprisingly stable across the world
2) Foreign firms have on paper profitability in tax havens that is really off the charts (in case of PR it is actually not on the axis) 7

Based on this we computed a simple measure of profits shifted to tax havens as "excess profits" over and above what could be explained by economic activity or country charachteristics.

But we also wanted to know from where the profits originated from... 8/10

To do this, we used bilateral payment data on internal interest payments, royalties and other vehicles of profit shifting. This allowed us to draw a cool map of the profit journey 9/10

The work received a ton of attention (>500 citations) and we have presented it to EU-commissioners, the Danish Parliament, OECD, WB and many more.

We are so happy to now get the recognition of ReSTUD. Thank you @TTorslov and @gabriel_zucman for this amazing journey <3 10/10

P.S. go to missingprofits.world to find our updated estimates and interactive maps to see how much your country win or loses in this game for profits :)

Thank you @okoctk @YohannesBecker @NadineRiedel2 @ojblanchard1 @paulkrugman @KClausing @PikettyLeMonde @petr_jansky @gaetannicodeme @rodrikdani @alexcobham @phdskat @vestager @pierremoscovici @DBradbury1021 and more for great comments over the years @OECDtax #taxtwitter #BEPS

CC #EconTwitter