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<p>Corporate tax avoidance is regularly blamed for aggravating income inequalities. However, direct empirical evidence is still lacking. The present study addresses that gap by examining the effect of profit shifting on employee pay among S&amp;P 1500 companies. The results show that the impact indeed varies across occupations. Chief executive officers and chief financial officers receive higher compensation when their firm starts operating in tax havens. Non-executive employees, if anything, see their wages fall in the meantime. Furthermore, the inequality-deepening impact of firm entry into tax havens is driven by companies rewarding executives on an after-tax basis and is more pronounced in intangible-intensive companies. These new findings document the distributional consequences of profit shifting and cast light on the evolution of income inequalities, public sentiment toward globalization, and ongoing debates on international tax policy.</p>

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Profit shifting, employee pay, and inequalities

  • 期刊论文

  • 发表日期：

    2026年3月20日

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  • Baptiste Souillard

摘要

Corporate tax avoidance is regularly blamed for aggravating income inequalities. However, direct empirical evidence is still lacking. The present study addresses that gap by examining the effect of profit shifting on employee pay among S&P 1500 companies. The results show that the impact indeed varies across occupations. Chief executive officers and chief financial officers receive higher compensation when their firm starts operating in tax havens. Non-executive employees, if anything, see their wages fall in the meantime. Furthermore, the inequality-deepening impact of firm entry into tax havens is driven by companies rewarding executives on an after-tax basis and is more pronounced in intangible-intensive companies. These new findings document the distributional consequences of profit shifting and cast light on the evolution of income inequalities, public sentiment toward globalization, and ongoing debates on international tax policy.