PROFIT SHIFTING: THE PERSPECTIVE BASED ON MULTINATIONAL CORPORATION MANAGERS

Abstract

The profit shifting has been carried out by the multinational corporations around the world. During the COVID-19 pandemic, technology-based companies such as Google, Microsoft and Facebook, which is supposed to produce huge profits, they precisely shifted their profits through low-tax jurisdiction and did not pay sufficient taxes in developed countries. Due to these circumstances, the developing countries do not have sufficient income derived from taxes. For that reason, profit shifting is consistently associated in negative way. The purpose of this research is to understand the meaning of the profit shifting which is seen from multinational corporation managers’ perspective. For that purpose, this study uses qualitative approach with interpretive paradigm. This study used unstructured interview from five selective informants. Intentionalism hermeneutic approach is used to explore and dig deeper the meaning of the profit shifting from the multinational corporation managers. As the result, this study concludes that there are two meanings of profit shifting, they are: (1) profit shifting as to maximize profit, (2) profit shifting as tax planning strategy. This research is expected to provide new perspective to the academic community in understanding the profit shifting. Additionally, the result of this research proves the profit shifting can provide the positive way, especially for the multinational corporations to expand their businesses.

Keywords

• profit shifting
• transfer pricing
• multinational corporation
• intentionalism hermeneutics
• managers
• tax