The Impact of Tax Avoidance on Profit Shifting Behavior of Multinational Companies

The aim of this study is to examine the impact of tax avoidance on the profit shifting behavior of multinational corporations. While tax avoidance is measured by the Financial Secrecy Index due to its comprehensiveness, the profit shifting behavior of multinational companies that cannot be directly detected is measured by the number of patent and trademark applications of non-residents; the data are analyzed by the Ordinary Least Squares Method. According to the results of the analysis, the effect of the Financial Secrecy Index on the number of patent and trademark applications of non-residents is significant and positive. In this case, governments should take measures against tax base erosion through profit shifting and establish mechanisms to both support the investment and strategic growth of existing companies and to monitor and investigate possible manipulations.