Shaking giants: tax accounting, profit shifting, and the slow art of challenging the status quo

Challenging long-standing norms is how we, as academics studying matters of taxation, make progress: by consuming, or in some cases, replicating prior studies, and reaffirming—or contradicting—their results. Otherwise our science stagnates and our voices become irrelevant to those in government and the business world who form the economic policies we track and hope to influence. Over the course of seven years attempting to correct a simple misunderstanding of an accounting standard, my colleague and I repeatedly demonstrated how an error in measuring income by jurisdiction had influenced the entire debate about the profit-shifting behavior of multinational firms and their use of tax havens. Through our lengthy and ultimately, we believe, successful challenge to the status quo, we learned several important lessons about academic research as a profession, concerning both the role of the community and the role that each individual in the system plays in the pursuit of truth and insight. Throughout the process, our goal was to enact productive change, not to provoke an argument. In that light, we believe our challenge to the status quo will have two lasting impacts: First, when using datasets that attempt to measure the income by jurisdiction of any multinational firm, researchers will now pay more attention to the underlying accounting methods used in the collection of the data. Second, our time-consuming and oftentimes frustrating experience reveals the importance of cross-disciplinary research and better communication between academic accountants and economists.